Cases on Rules 62 to 64 Special Civil Actions

FIRST DIVISION

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

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. METRO CONTAINER CORPORATION, respondent.

D E C I S I O N

KAPUNAN, J.:

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

The facts of the case are as follows:

On 26 September 1990, Ley Construction Corporation (LEYCON) contracted a loan from Rizal Commercial Banking Corporation (RCBC) in the amount of Thirty Million Pesos (P30,000,000.00). The loan was secured by a real estate mortgage over a property, located in Barrio Ugong, Valenzuela, Metro Manila (now Valenzuela City) and covered by TCT No. V-17223. LEYCON failed to settle its obligations prompting RCBC to institute an extrajudicial foreclosure proceedings against it. After LEYCONs legal attempts to forestall the action of RBCB failed, the foreclosure took place on 28 December 1992 with RCBC as the highest bidder.

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

On 26 May 1994, LEYCON filed an action for Unlawful Detainer, docketed as Civil Case No. 6202, against METROCAN before the Metropolitan Trial Court (MeTC) of Valenzuela, Branch 82.

On 27 May 1994, METROCAN filed a complaint for Interpleader, docketed as Civil Case No. 4398-V-94 before the Regional Trial Court of Valenzuela, Metro Manila, Branch 75 against LEYCON and RCBC to compel them to interplead and litigate their several claims among themselves and to determine which among them shall rightfully receive the payment of monthly rentals on the subject property. On 04 July 1995, during the pre-trial conference in Civil Case No. 4398-V-94, the trial court ordered the dismissal of the case insofar as METROCAN and

LEYCON were concerned in view of an amicable settlement they entered by virtue of which METROCAN paid back rentals to LEYCON.

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

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

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

In its Decision, promulgated on 18 October 1996, the Court of Appeals granted the petition and set aside the 12 March 1996 and 24 June 1996 orders of the RTC. The appellate court also ordered the dismissal of Civil Case No. 4398-V-94. RCBCs motion for reconsideration was denied for lack of merit in the resolution of 08 January 1997.

Hence, the present recourse.

RCBC alleged, that:

(1) THE DECISION OF THE METROPOLITAN TRIAL COURT IN THE EJECTMENT CASE BETWEEN METROCAN AND LEYCON DOES NOT AND CANNOT RENDER THE INTERPLEADER ACTION MOOT AND ACADEMIC.

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

We sustain the Court of Appeals.

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

Section 1. Interpleader when proper. - Whenever conflicting claims upon the same subject matter are or may be made against a person, who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves.

In the case before us, it is undisputed that METROCAN filed the interpleader action (Civil Case No. 4398-V-94) because it was unsure which between LEYCON and RCBC was entitled to receive the payment of monthly rentals on the subject property. LEYCON was claiming payment

http://sc.judiciary.gov.ph/jurisprudence/2001/sep2001/127913.htm#_edn1


of the rentals as lessor of the property while RCBC was making a demand by virtue of the consolidation of the title of the property in its name.

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

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

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

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

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

SO ORDERED.

Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur.Puno, J., on official leave.







Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 120060 March 9, 2000

CEBU WOMAN'S CLUB, petitioner, vs.LORETO D. DE LA VICTORIA, in his capacity as Presiding Judge of RTC, Br. 6, Cebu City, CAMSAC International, Inc. & Phanuel Señoron, respondents.

BUENA, J.:

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

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

On February 4, 1994, respondent CAMSAC entered into a "Sub-Contract Agreement" with respondent Señoron to undertake the construction of the subject building. After one year, respondent Señoron filed a complaint for "sum of money with application for a writ of preliminary injunction" against petitioner and respondent CAMSAC anchored on the "Sub-Contract Agreement" he entered with the latter. Respondent Señoron sought to prevent petitioner from paying or releasing any amount to respondent CAMSAC relative to the construction of the subject building in the event that petitioner heeds CAMSAC's request for the release of the retention fee.

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

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

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

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

SO ORDERED. 2

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

1. Respondent court acted with grave abuse of discretion, as it had no jurisdiction, to exercise "due course" authority and to motu proprio dismiss petitioner's action for interpleader.

2. Respondent court erred when it correlated the "allegation of fact" between the petitioner's complaint in Civil Case No. CEB-17126 with that of the complaint in Civil Case No. CEB-17079, and to thereafter issue baseless and unwarranted conclusions patently adverse to petitioner.

3. Although no hearing has as yet been conducted and in what may amount to be a judgment on the pleadings, respondent court's 9 March 1995 Order is replete with "conclusions of fact and law" which, if allowed to remain unchallenged, may amount to a pre-judgment of certain issues of fact and law that are yet to be substantiated.

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

A scrutiny of the issues raised in this case shows that it includes factual matters. The resolution of the interpleader case necessitates a determination of whether the other pending cases relied upon by the trial court in dismissing the former case involves the same matters covered by the latter cases. There is a need to determine whether the pending civil cases arise out of the same facts and circumstances as those involved in the interpleader case. As such, petitioner's direct resort to this

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court must fail considering that this court is not a trier of facts. 6 Besides, in a petition for review on certiorari, the trial judge should not even be made a party to the case as petitioner erroneously did. 7

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

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

ACCORDINGLY, the petition is denied for lack of merit. 1âwphi1.nêt

SO ORDERED.

Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ., concur.








THIRD DIVISION

G.R. No. 193494, March 07, 2014

LUI ENTERPRISES, INC., Petitioner, v. ZUELLIG PHARMA CORPORATION AND THE PHILIPPINE BANK OF COMMUNICATIONS, Respondents.

D E C I S I O N

LEONEN, J.:

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

This is a petition for review on certiorari of the Court of Appeals’ decision1 dated May 24, 2010 and resolution2 dated August 13, 2010 in CA–G.R. CV No. 88023. The Court of Appeals affirmed in toto the Regional Trial Court of Makati’s decision3 dated July 4, 2006.

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

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10–year contract of lease4 over a parcel of land located in Barrio Tigatto, Buhangin, Davao City. The parcel of land was covered by Transfer Certificate of Title No. T–166476 and was registered under Eli L. Lui.5

On January 10, 2003, Zuellig Pharma received a letter6 from the Philippine Bank of Communications. Claiming to be the new owner of the leased property, the bank asked Zuellig Pharma to pay rent directly to it. Attached to the letter was a copy of Transfer Certificate of Title No. 336962 under the name of the Philippine Bank of Communications.7 Transfer Certificate of Title No. 336962 was derived from Transfer Certificate of Title No. T–166476.8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications’ claim. On January 28, 2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its right to collect the leased property’s rent.9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of Communications over the rental payments, Zuellig Pharma filed a complaint10 for interpleader with the Regional Trial Court of Makati. In its complaint, Zuellig Pharma alleged that it already consigned in court P604,024.35 as rental payments. Zuellig Pharma prayed that it be allowed to consign in court its succeeding monthly rental payments and that Lui Enterprises and the Philippine Bank of Communications be ordered to litigate their conflicting claims.11

The Philippine Bank of Communications filed its answer12 to the complaint. On the other hand, Lui Enterprises filed a motion to dismiss13 on the ground that Zuellig Pharma’s alleged representative did not have authority to file the complaint for interpleader on behalf of the corporation. Under the secretary’s certificate 14 dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta was only authorized to “initiate and represent [Zuellig Pharma] in the civil proceedings for consignation of rental payments to be filed against Lui Enterprises, Inc. and/or [the Philippine Bank of Communications].”15

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

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

To support its argument, Lui Enterprises cited a writ of preliminary injunction19 dated July 2, 2003 issued by the Regional Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of Communications “[to maintain] status quo”20 with respect to the rent. By virtue of the writ of preliminary injunction, Lui Enterprises argued that it should continue collecting the rental payments from its lessees until the nullification of deed of dation in payment case was resolved. The writ of preliminary injunction dated July 2, 2003 reads: chanRoblesvirtualLawlibrary

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue, restraining and enjoining [the Philippine Bank of Communications], its agents or [representative], the Office of the Clerk of Court–Sheriff and all persons acting on their behalf, from conducting auction sale on the properties of [Lui Enterprises] in EJF–REM Case No. 6272–03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until the final termination of the case, upon plaintiff [sic] filing of a bond in the amount of P1,000,000.00 to answer for damages that the enjoined parties may sustain by reason of the injunction if the Court should finally decide that applicant is not entitled thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this Court.

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

Zuellig Pharma filed its opposition22 to the motion to dismiss. It argued that the motion to dismiss should be denied for having been filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil Procedure, a motion to dismiss should be filed within the required time given to file an answer to the complaint, which is 15 days from service of summons on the defendant.23 Summons was served on Lui Enterprises on July 4, 2003. It had until July 19, 2003 to file a motion to dismiss, but Lui Enterprises filed the motion only on July 23, 2003. 24

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

Nevertheless, Zuellig Pharma filed in court the secretary’s certificate dated August 28, 2003,27 which expressly stated that Atty. Ana L.A. Peralta was authorized to file a consignation and interpleader case on behalf of Zuellig Pharma.28

With respect to the nullification of deed of dation in payment case, Zuellig Pharma argued that its pendency did not bar the filing of the interpleader case. It was not a party to the nullification case.29

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

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

In its compliance32 dated September 15, 2003, the Philippine Bank of Communications “[joined Zuellig Pharma] in moving to declare [Lui Enterprises] in default, and in [moving for] the denial of [Lui Enterprises’] motion to dismiss.”33

The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to dismiss within the reglementary period. Thus, in its order34 dated October 6, 2003, the trial court denied Lui Enterprises’ motion to dismiss and declared it in default.35

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

Despite having been declared in default, Lui Enterprises filed the manifestation with prayer36 dated April 15, 2004. It manifested that the Regional Trial Court of Davao allegedly issued the order37 dated April 1, 2004, ordering all of Lui Enterprises’ lessees to “observe status quo with regard to the rental payments”38 and continue remitting their rental payments to Lui Enterprises while the nullification of deed of dation in payment case was being resolved. The order dated April 1, 2004 of the Regional Trial Court of Davao reads:chanRoblesvirtualLawlibrary

ORDER

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

x x x x

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

There being no objection from [the Philippine Bank of Communications], and in order to protect the right of [Lui Enterprises] respecting the subject of the action during the pendency of this case, this Court, in the exercise of its discretion hereby grants the motion.

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

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

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

It was only on October 21, 2004, or one year after the issuance of the order of default, that Lui Enterprises filed a motion to set aside order of default40 in the Makati trial court on the ground of excusable negligence. Lui Enterprises argued that its failure to file a motion to dismiss on time “was caused by the negligence of [Lui Enterprises’] former counsel.”41 This negligence was allegedly excusable because “[Lui Enterprises] was prejudiced and prevented from fairly presenting [its] case.”42

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

Zuellig Pharma filed its opposition44 to the motion to set aside order of default. It argued that a counsel’s failure to file a timely answer was inexcusable negligence which bound his client.

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

While the motion to set aside order of default was still pending for resolution, Lui Enterprises filed the manifestation and motion to dismiss46 dated April 21, 2005 in the Makati trial court. It manifested that the Davao trial court issued another order47 dated April 18, 2005 in the nullification of deed of dation in payment case. In this order, the Davao trial court directed the Philippine Bank of Communications to inform Zuellig Pharma to pay rent to Lui Enterprises while the Davao trial court’s order dated April 1, 2004 was subsisting. The order dated April 18, 2005 of the Davao trial court reads: chanRoblesvirtualLawlibrary

ORDER

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

It appears from the records that sometime in February 2003, after being threatened with a lawsuit coming from [the Philippine Bank of Communications], [Zuellig Pharma] stopped remitting its rentals to [Lui Enterprises] and instead, has reportedly deposited the monthly rentals before a Makati court for consignation.

As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Court’s ruling be contrary to or in conflict with the status quo order issued by this Court. To preclude this spectacle, Zuellig Pharma should accordingly be advised with the import of the Order dated September 14, 2004, the salient portion of which is quoted:x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs were given as they did exercise the right to collect, receive and enjoy rental payments x x x.

Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary injunction issued on June 30, 2003, it follows that plaintiff’s right to collect and receive rental payments which he enjoyed prior to the filing of this case, must be respected and protected and maintained until the case is resolved. As such, all rentals due from the above–enumerated lessees must be remitted to and collected by the Plaintiffs.

Status quo simply means the last actual peaceable uncontested status that preceded the actual controversy. (Searth Commodities Corp. v. Court of Appeals, 207 SCRA 622).

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

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

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

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

In its decision50 dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui Enterprises “[was] barred from any claim in respect of the [rental payments]”51 since it was declared in default. Thus, according to the trial court, there was no issue as to which corporation had the better right over the rental payments. 52 The trial court awarded the total consigned amount of P6,681,327.30 to the Philippine Bank of Communications and ordered Lui Enterprises to pay Zuellig Pharma P50,000.00 in attorney’s fees.53

Lui Enterprises appealed to the Court of Appeals.54

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

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

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

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

Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed Lui Enterprises’ appeal and affirmed in toto the Regional Trial Court of Makati’s decision.

Lui Enterprises filed a motion for reconsideration.60

The Court of Appeals denied Lui Enterprises’ motion for reconsideration in its resolution promulgated on

August 13, 2010.61 Hence, this petition.

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

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

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

No attorney’s fees should have been awarded to Zuellig Pharma as argued by Lui Enterprises. Zuellig Pharma filed the interpleader case despite its knowledge of the nullification of deed of dation in payment case filed in the Davao trial court where the same issue of which corporation had the better right over the rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader case in bad faith for which it was not entitled to attorney’s fees.67

The Philippine Bank of Communications filed its comment68 on the petition for review on certiorari . It argued that Lui Enterprises failed to raise any error of law and prayed that we affirm in toto the Court of Appeals’ decision.

For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of Communications’ arguments in its comment.69

The issues for our resolution are:chanRoblesvirtualLawlibrary

I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for lack of subject index, page references to the record, table of cases, textbooks and statutes cited, and the statement of issues in Lui Enterprises’ appellant’s brief;

II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprises’ motion to set aside order of default;

III. Whether the annulment of deed of dation in payment pending in the Regional Trial Court of Davao barred the subsequent filing of the interpleader case in the Regional Trial Court of Makati; and

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

Lui Enterprises’ petition for review on certiorari is without merit. However, we delete the award of attorney’s fees.

I

Lui Enterprises did not comply with therules on the contents of the appellant’sbrief

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court of Appeals may, on its own motion or that of the appellee, dismiss an appeal should the appellant’s brief lack specific requirements under Rule 44, Section 13, paragraphs (a), (c), (d), and (f): chanRoblesvirtualLawlibrary

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

x 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.

These requirements are the subject index of the matter in brief, page references to the record, and a table of cases alphabetically arranged and with textbooks and statutes cited: chanRoblesvirtualLawlibrary

Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain, in the order herein indicated, the following:chanRoblesvirtualLawlibrary

(a) A subject index of the matter in brief with a digest of the arguments and page references, and a table of cases alphabetically arranged, textbooks and statutes cited with references to the pages where they are cited;

x 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 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;

x x x x

(f) Under the heading “Argument,” the appellant’s arguments on each assignment of error with page references to the record. The authorities relied upon shall be cited by the page of the report at which the case begins and the page of the report on which the citation is found;

x x x x

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

Except for cases provided in the Constitution,70 appeal is a “purely statutory right.”71 The right to appeal “must be exercised in the manner prescribed by law”72 and requires strict compliance with the Rules of Court on appeals.73 Otherwise, the appeal shall be dismissed, and its dismissal shall not be a deprivation of due process of law.

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

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

In Go v. Chaves,79 Go’s 17–page appellant’s brief lacked a subject index. However, Go subsequently filed a subject index. This court excused Go’s procedural lapse since the appellant’s brief “[consisted] only of 17 pages which [the Court of Appeals] may easily peruse to apprise it of [the case] and of the relief sought.”80 This court ordered the Court of Appeals to resolve Go’s appeal “in the interest of justice.”81

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

In this case, Lui Enterprises did not substantially comply with the rules on the contents of the appellant’s brief. It admitted that its appellant’s brief lacked the required subject index, page references to the record,

and table of cases, textbooks, and statutes cited. However, it did not even correct its admitted “technical omissions”82 by filing an amended appellant’s brief with the required contents.83 Thus, this case does not allow a relaxation of the rules. The Court of Appeals did not err in dismissing Lui Enterprises’ appeal.

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

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

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

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

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

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

II

Lui Enterprises failed to show that itsfailure to answer the complaint within the required period was due to excusablenegligence

When a defendant is served with summons and a copy of the complaint, he or she is required to answer within 15 days from the day he or she was served with summons.95 The defendant may also move to dismiss the complaint “[w]ithin the time for but before filing the answer.”96

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

In either case, the court may declare the defendant in default on plaintiff’s motion and notice to defendant.98 The court shall then try the case until judgment without defendant’s participation99 and grant the plaintiff such relief as his or her complaint may warrant.100

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

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

Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer to the complaint. For a defendant without good defenses, default saves him or her “the embarrassment of openly

appearing to defend the indefensible.”110 As this court explained inGochangco v. The Court of First Instance of Negros Occidental, Branch IV:111

It does make sense for a defendant without defenses, and who accepts the correctness of the specific relief prayed for in the complaint, to forego the filing of the answer or any sort of intervention in the action at all. For even if he did intervene, the result would be the same: since he would be unable to establish any good defense, having none in fact, judgment would inevitably go against him. And this would be an acceptable result, if not being in his power to alter or prevent it, provided that the judgment did not go beyond or differ from the specific relief stated in the complaint. x x x.112 (Emphasis in the original)

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

After notice of the declaration of default but before the court renders the default judgment, the defendant may file, under oath, a motion to set aside order of default. The defendant must properly show that his or her failure to answer was due to fraud, accident,115 mistake116 or excusable negligence.117 The defendant must also have a meritorious defense. Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil Procedure provides:chanRoblesvirtualLawlibrary

Section 3. Default; declaration of. – x x x x

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

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

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

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

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

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

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

With a motion for new trial, the defendant must file the motion within the period for taking an appeal123 or within 15 days from notice of the default judgment. Although a default judgment has already been rendered, the filing of the motion for new trial tolls the reglementary period of appeal, and the default judgment cannot be executed against the defendant.

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

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

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

Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a motion to set aside order of default, motion for new trial, or a petition for relief from judgment.

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

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

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

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

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

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

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

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

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui Enterprises and the Philippine Bank of Communications to litigate their claims. Thus, “[d]eclaring the other claimant in default

would ironically defeat the very purpose of the suit.”134 The Regional Trial Court of Makati should not have declared Lui Enterprises in default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil action for interpleader if conflicting claims are made against him or her over a subject matter in which he or she has no interest. The action is brought against the claimants to compel them to litigate their conflicting claims among themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides: chanRoblesvirtualLawlibrary

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter are or may be made against a person who claims no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves.

An interpleader complaint may be filed by a lessee against those who have conflicting claims over the rent due for the property leased.135 This remedy is for the lessee to protect him or her from “double vexation in respect of one liability.”136 He or she may file the interpleader case to extinguish his or her obligation to pay rent, remove him or her from the adverse claimants’ dispute, and compel the parties with conflicting claims to litigate among themselves.

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

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

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

III

The nullification of deed in dation in payment case did not bar the filing of the interpleader case. Litis pendentia is not present in this case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the Regional Trial Court of Davao. It sought to nullify the deed of dation in payment through which the Philippine Bank of Communications acquired title over the leased property. Lui Enterprises argued that this pending nullification case barred the Regional Trial Court of Makati from hearing the interpleader case. Since the interpleader case was filed subsequently to the nullification case, the interpleader case should be dismissed.

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

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

x x x x

(e) That there is another action pending between the same parties for the same cause;

x x x x

Litis pendentia is Latin for “a pending suit.”140 It exists when “another action is pending between the same parties for the same cause of action x x x.”141 The subsequent action is “unnecessary and vexatious”142 and is

instituted to “harass the respondent [in the subsequent action].”143

The requisites of litis pendentia are:chanRoblesvirtualLawlibrary

(1) Identity of parties or at least such as represent the same interest in both actions;

(2) Identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and

(3) The identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful, amount to res judicata in the other.144

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

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed of dation in payment case and the interpleader case. Zuellig Pharma is not a party to the nullification case filed in the Davao trial court.

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

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

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals147 as authority to set aside the subsequently filed interpleader case. In this cited case, petitioner Progressive Development Corporation, Inc. entered into a lease contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus, Progressive Development Corporation, Inc. repossessed the leased premises, inventoried the movable properties inside the leased premises, and scheduled the public sale of the inventoried properties as they agreed upon in their lease contract.

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

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

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

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

As discussed, Lui Enterprises filed the nullification of deed of dation in payment to recover ownership of the leased premises. Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. There is no identity of reliefs prayed for, and the second requisite of litis pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation in payment case did not bar the filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of preliminary injunction against the Regional Trial Court of Makati. The Regional Trial Court of Davao allegedly enjoined the Regional Trial Court of Makati from taking cognizance of the interpleader case. Lui Enterprises argued that the Regional Trial Court of Makati “should have respected the orders issued by the Regional Trial Court of Davao.” 149 Lui

Enterprises cited Compania General de Tabacos de Filipinas v. Court of Appeals150 where this court allegedly held:chanRoblesvirtualLawlibrary

x x x [T]he issuance of the said writ by the RTC of Agoo, La Union not only seeks to enjoin Branch 9 of the RTC of Manila from proceedingwith the foreclosure case but also has the effect of pre–empting the latter’s order. x x x.151

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

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

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

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

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of Makati from hearing the interpleader case.

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

IV

The Court of Appeals erred in awarding attorney’s fees

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

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

(1) When exemplary damages are awarded;(2) When the defendant’s act or omission has compelled the plaintiff to

litigate with third persons or to incur expenses to protect his interest;(3) In criminal cases of malicious prosecution against the plaintiff;(4) In case of a clearly unfounded civil action or proceeding against the

plaintiff;(5) Where the defendant acted in gross and evident bad faith in refusing to

satisfy the plaintiff’s plainly valid, just and demandable claim;(6) In actions for legal support;(7) In actions for the recovery of wages of household helpers, laborers and

skilled workers;(8) In actions for indemnity under workmen’s compensation and

employer’s liability laws;(9) In a separate civil action to recover civil liability arising from a crime;(10) When at least double judicial costs are awarded;(11) In any other case where the court deems it just and equitable that

attorney’s fees and expenses of litigation should be recovered.160

Even if a party is “compelled to litigate with third persons or to incur expenses to protect his [or her] rights,”161 attorney’s fees will not be awarded if no bad faith “could be reflected in a party’s persistence in a case.”162

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

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

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

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Court of Appeals’ decision and resolution in CA–G.R. CV No. 88023 are AFFIRMED with MODIFICATION. The award of P50,000.00 attorney’s fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.


THIRD DIVISION

G.R. No. 136409 March 14, 2008

SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners, vs.DON LUIS DISON REALTY, INC., Respondent.

D E C I S I O N

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1of the Court of Appeals (CA) dated May 26, 1998 and its Resolution2 dated December 10, 1998 in CA-G.R. SP No. 37739 dismissing the petition filed by petitioners Josephine and Subhash Pasricha.

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

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

For Rooms 32/35:

From March 1, 1991 to August 31, 1991 – P5,000.00/P10,000.00




From September 1, 1991 to February 29, 1992 – P5,500.00/P11,000.00

From March 1, 1992 to February 28, 1993 – P6,050.00/P12,100.00








For Rooms 22 and 24:

Effective July 1, 1992 – P10,000.00 with an increment of 10% every two years.5

For Rooms 33 and 34:

Effective April 1, 1992 – P5,000.00 with an increment of 10% every two years.6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises – P10,000.00 with an increment of 10% every two years.7

Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and the use of telephone cables.8

The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24, 32, 33, 34 and 35 as subjects of the lease contracts.9 While the contracts were in effect, petitioners dealt with Francis Pacheco (Pacheco), then General Manager of private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms. Bautista).10 Petitioners religiously paid the monthly rentals until May 1992.11 After that, however, despite repeated demands, petitioners continuously refused to pay the stipulated rent. Consequently, respondent was constrained to refer the matter to its lawyer who, in turn, made a final demand on petitioners for the payment of the accrued rentals amounting to P916,585.58.12 Because petitioners still refused to comply, a complaint for ejectment was filed by private respondent through its representative, Ms. Bautista, before the Metropolitan Trial Court (MeTC) of Manila.13 The case was raffled to Branch XIX and was docketed as Civil Case No. 143058-CV.

Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July until November 1992, but claimed that such refusal was justified because of the internal squabble in respondent company as to the person authorized to receive payment.14 To further justify their non-payment of rent, petitioners alleged that they were prevented from using the units (rooms) subject












matter of the lease contract, except Room 35. Petitioners eventually paid their monthly rent for December 1992 in the amount of P30,000.00, and claimed that respondent waived its right to collect the rents for the months of July to November 1992 since petitioners were prevented from using Rooms 22, 24, 32, 33, and 34.15 However, they again withheld payment of rents starting January 1993 because of respondent’s refusal to turn over Rooms 36, 37 and 38. 16 To show good faith and willingness to pay the rents, petitioners alleged that they prepared the check vouchers for their monthly rentals from January 1993 to January 1994.17 Petitioners further averred in their Amended Answer18 that the complaint for ejectment was prematurely filed, as the controversy was not referred to the barangay for conciliation.

For failure of the parties to reach an amicable settlement, the pre-trial conference was terminated. Thereafter, they submitted their respective position papers.

On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for ejectment. 19 It considered petitioners’ non-payment of rentals as unjustified. The court held that mere willingness to pay the rent did not amount to payment of the obligation; petitioners should have deposited their payment in the name of respondent company. On the matter of possession of the subject premises, the court did not give credence to petitioners’ claim that private respondent failed to turn over possession of the premises. The court, however, dismissed the complaint because of Ms. Bautista’s alleged lack of authority to sue on behalf of the corporation.

Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No. 94-72515, reversed and set aside the MeTC Decision in this wise:

WHEREFORE, the appealed decision is hereby reversed and set aside and another one is rendered ordering defendants-appellees and all persons claiming rights under them, as follows:

(1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-appellant;

(2) to pay plaintiff-appellant the sum of P967,915.80 representing the accrued rents in arrears as of November 1993, and the rents on the leased premises for the succeeding months in the amounts stated in paragraph 5 of the complaint until fully paid; and

(3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorney’s fees plus the costs of this suit.

SO ORDERED.20

The court adopted the MeTC’s finding on petitioners’ unjustified refusal to pay the rent, which is a valid ground for ejectment. It, however, faulted the MeTC in dismissing the case on the ground of lack of capacity to sue. Instead, it upheld Ms. Bautista’s authority to represent respondent notwithstanding the absence of a board resolution to that effect, since her authority was implied from her power as a general manager/treasurer of the company.21

Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on certiorari.22 On March 18, 1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista for contempt; to strike down the MeTC and RTC Decisions as legal nullities; and to conduct hearings and ocular inspections or delegate the reception of evidence. Without resolving the aforesaid motion, on May 26, 1998, the CA affirmed24 the RTC Decision but deleted the award of attorney’s fees.25












Petitioners moved for the reconsideration of the aforesaid decision.26 Thereafter, they filed several motions asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding with the case allegedly because of his close association with Ms. Bautista’s uncle-in-law.27

In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The appellate court considered said motions as repetitive of their previous arguments, irrelevant and obviously dilatory.29 As to the motion for inhibition of the Honorable Justice Reyes, the same was denied, as the appellate court justice stressed that the decision and the resolution were not affected by extraneous matters.30 Lastly, the appellate court granted respondent’s motion for execution and directed the RTC to issue a new writ of execution of its decision, with the exception of the award of attorney’s fees which the CA deleted.31

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

I.

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

II.

Whether the RTC’s and the Honorable Court of Appeals’ failure and refusal to resolve the most fundamental factual issues in the instant ejectment case render said decisions void on their face by reason of the complete abdication by the RTC and the Honorable Justice Ruben Reyes of their constitutional duty not only to clearly and distinctly state the facts and the law on which a decision is based but also to resolve the decisive factual issues in any given case.

III.

Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself, despite his admission – by reason of his silence – of petitioners’ accusation that the said Justice enjoyed a $7,000.00 scholarship grant courtesy of the uncle-in-law of respondent "corporation’s" purported general manager and (2), worse, his act of ruling against the petitioners and in favor of the respondent "corporation" constitute an unconstitutional deprivation of petitioners’ property without due process of law.32

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










1999, this Court directed the parties to maintain the status quo effective immediately until further orders.

The petition lacks merit.

We uphold the capacity of respondent company to institute the ejectment case. Although the Securities and Exchange Commission (SEC) suspended and eventually revoked respondent’s certificate of registration on February 16, 1995, records show that it instituted the action for ejectment on December 15, 1993. Accordingly, when the case was commenced, its registration was not yet revoked.35 Besides, as correctly held by the appellate court, the SEC later set aside its earlier orders of suspension and revocation of respondent’s certificate, rendering the issue moot and academic.36

We likewise affirm Ms. Bautista’s capacity to sue on behalf of the company despite lack of proof of authority to so represent it. A corporation has no powers except those expressly conferred on it by the Corporation Code and those that are implied from or are incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.37 Thus, any person suing on behalf of the corporation should present proof of such authority. Although Ms. Bautista initially failed to show that she had the capacity to sign the verification and institute the ejectment case on behalf of the company, when confronted with such question, she immediately presented the Secretary’s Certificate38 confirming her authority to represent the company.

There is ample jurisprudence holding that subsequent and substantial compliance may call for the relaxation of the rules of procedure in the interest of justice.39 In Novelty Phils., Inc. v. Court of Appeals,40 the Court faulted the appellate court for dismissing a petition solely on petitioner’s failure to timely submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v. Galan, 41 we upheld the sufficiency of a petition verified by an employment specialist despite the total absence of a board resolution authorizing her to act for and on behalf of the corporation. Lastly, in China Banking Corporation v. Mondragon International Philippines, Inc,42 we relaxed the rules of procedure because the corporation ratified the manager’s status as an authorized signatory. In all of the above cases, we brushed aside technicalities in the interest of justice. This is not to say that we disregard the requirement of prior authority to act in the name of a corporation. The relaxation of the rules applies only to highly meritorious cases, and when there is substantial compliance. While it is true that rules of procedure are intended to promote rather than frustrate the ends of justice, and while the swift unclogging of court dockets is a laudable objective, we should not insist on strict adherence to the rules at the expense of substantial justice.43 Technical and procedural rules are intended to help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the rules may be allowed to attain that prime objective, for, after all, the dispensation of justice is the core reason for the existence of courts.44

As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the motion to inhibit came after the appellate court rendered the assailed decision, that is, after Justice Reyes had already rendered his opinion on the merits of the case. It is settled that a motion to inhibit shall be denied if filed after a member of the court had already given an opinion on the merits of the case, the rationale being that "a litigant cannot be permitted to speculate on the action of the court x x x (only to) raise an objection of this sort after the decision has been rendered."45 Second, it is settled that mere suspicion that a judge is partial to one of the parties is not enough; there should be evidence to substantiate the suspicion. Bias and prejudice cannot be presumed, especially when weighed against a judge’s sacred pledge under his oath of office to administer justice without regard












for any person and to do right equally to the poor and the rich. There must be a showing of bias and prejudice stemming from an extrajudicial source, resulting in an opinion on the merits based on something other than what the judge learned from his participation in the case. 46 We would like to reiterate, at this point, the policy of the Court not to tolerate acts of litigants who, for just about any conceivable reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of bias, hostility, prejudice or prejudgment.47

We now come to the more substantive issue of whether or not the petitioners may be validly ejected from the leased premises.

Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and resolved are the fact of lease and the expiration or violation of its terms.48 Specifically, the essential requisites of unlawful detainer are: 1) the fact of lease by virtue of a contract, express or implied; 2) the expiration or termination of the possessor’s right to hold possession; 3) withholding by the lessee of possession of the land or building after the expiration or termination of the right to possess; 4) letter of demand upon lessee to pay the rental or comply with the terms of the lease and vacate the premises; and 5) the filing of the action within one year from the date of the last demand received by the defendant.49

It is undisputed that petitioners and respondent entered into two separate contracts of lease involving nine (9) rooms of the San Luis Building. Records, likewise, show that respondent repeatedly demanded that petitioners vacate the premises, but the latter refused to heed the demand; thus, they remained in possession of the premises. The only contentious issue is whether there was indeed a violation of the terms of the contract: on the part of petitioners, whether they failed to pay the stipulated rent without justifiable cause; while on the part of respondent, whether it prevented petitioners from occupying the leased premises except Room 35.

This issue involves questions of fact, the resolution of which requires the evaluation of the evidence presented. The MeTC, the RTC and the CA all found that petitioners failed to perform their obligation to pay the stipulated rent. It is settled doctrine that in a civil case, the conclusions of fact of the trial court, especially when affirmed by the Court of Appeals, are final and conclusive, and cannot be reviewed on appeal by the Supreme Court.50 Albeit the rule admits of exceptions, not one of them obtains in this case.51

To settle this issue once and for all, we deem it proper to assess the array of factual findings supporting the court’s conclusion.

The evidence of petitioners’ non-payment of the stipulated rent is overwhelming. Petitioners, however, claim that such non-payment is justified by the following: 1) the refusal of respondent to allow petitioners to use the leased properties, except room 35; 2) respondent’s refusal to turn over Rooms 36, 37 and 38; and 3) respondent’s refusal to accept payment tendered by petitioners.

Petitioners’ justifications are belied by the evidence on record. As correctly held by the CA, petitioners’ communications to respondent prior to the filing of the complaint never mentioned their alleged inability to use the rooms.52 What they pointed out in their letters is that they did not know to whom payment should be made, whether to Ms. Bautista or to Pacheco.53 In their July 26 and October 30, 1993 letters, petitioners only questioned the method of computing their electric billings without, however, raising a complaint about their failure to use the rooms.54 Although petitioners stated in their December 30, 1993 letter that respondent failed to fulfill its part of the contract,55 nowhere did they specifically refer to their inability to use the leased rooms. Besides, at that time, they were already in default on their rentals for more than a year.











If it were true that they were allowed to use only one of the nine (9) rooms subject of the contract of lease, and considering that the rooms were intended for a business purpose, we cannot understand why they did not specifically assert their right. If we believe petitioners’ contention that they had been prevented from using the rooms for more than a year before the complaint for ejectment was filed, they should have demanded specific performance from the lessor and commenced an action in court. With the execution of the contract, petitioners were already in a position to exercise their right to the use and enjoyment of the property according to the terms of the lease contract. 56 As borne out by the records, the fact is that respondent turned over to petitioners the keys to the leased premises and petitioners, in fact, renovated the rooms. Thus, they were placed in possession of the premises and they had the right to the use and enjoyment of the same. They, likewise, had the right to resist any act of intrusion into their peaceful possession of the property, even as against the lessor itself. Yet, they did not lift a finger to protect their right if, indeed, there was a violation of the contract by the lessor.

What was, instead, clearly established by the evidence was petitioners’ non-payment of rentals because ostensibly they did not know to whom payment should be made. However, this did not justify their failure to pay, because if such were the case, they were not without any remedy. They should have availed of the provisions of the Civil Code of the Philippines on the consignation of payment and of the Rules of Court on interpleader.

Article 1256 of the Civil Code provides:

Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.

Consignation alone shall produce the same effect in the following cases:

x x x x

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

x x x x.

Consignation shall be made by depositing the things due at the disposal of a judicial authority, before whom the tender of payment shall be proved in a proper case, and the announcement of the consignation in other cases.57

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

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

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter are or may be made against a person who claims no interest whatever in the subject matter, or an





interest which in whole or in part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to interplead and litigate their several claims among themselves.

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

Notably, instead of availing of the above remedies, petitioners opted to refrain from making payments.

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

It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37 and 38 was to take effect only when the tenants thereof would vacate the premises. Absent a clear showing that the previous tenants had vacated the premises, respondent had no obligation to deliver possession of the subject rooms to petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and 38 as an excuse for their failure to pay the rentals due on the other rooms they occupied.1avvphil

In light of the foregoing disquisition, respondent has every right to exercise his right to eject the erring lessees. The parties’ contracts of lease contain identical provisions, to wit:

In case of default by the LESSEE in the payment of rental on the fifth (5th) day of each month, the amount owing shall as penalty bear interest at the rate of FOUR percent (4%) per month, to be paid, without prejudice to the right of the LESSOR to terminate his contract, enter the premises, and/or eject the LESSEE as hereinafter set forth;62

Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees in case of non-payment of the monthly rentals. A contract of lease is a consensual, bilateral, onerous and commutative contract by which the owner temporarily grants the use of his property to another, who undertakes to pay the rent therefor.64 For failure to pay the rent, petitioners have no right to remain in the leased premises.

WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated January 18, 1999 is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998 and its Resolution dated December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.

SO ORDERED.







THIRD DIVISION

G.R. No. 181723 August 11, 2014

ELIZABETH DEL CARMEN, Petitioner, vs.SPOUSES RESTITUTO SABORDO and MIMA MAHILUM-SABORDO, Respondents.

D E C I S I O N

PERALTA, J.:

This treats of the petition for review on certiorari assailing the Decision1 and Resolution2 of the Court of Appeals (CA), dated May 25, 2007 and January 24, 2008, respectively, in CA-G.R. CV No. 75013.

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

Sometime in 1961, the spouses Toribio and Eufrocina Suico (Suico spouses), along with several business partners, entered into a business venture by establishing a rice and com mill at Mandaue City, Cebu. As part of their capital, they obtained a loan from the Development Bank of the Philippines (DBP), and to secure the said loan, four parcels of land owned by the Suico spouses, denominated as Lots 506, 512, 513 and 514, and another lot owned by their business partner, Juliana Del Rosario, were mortgaged. Subsequently, the Suico spouses and their business partners failed to pay their loan obligations forcing DBP to foreclose the mortgage. After the Suico spouses and their partners failed to redeem the foreclosed properties, DBP consolidated its ownership over the same. Nonetheless, DBP later allowed the Suico spouses and Reginald and Beatriz Flores (Flores spouses), as substitutes for Juliana Del Rosario, to repurchase the subject lots by way of a conditional sale for the sum ofP240,571.00. The Suico and Flores spouses were able to pay the downpayment and the first monthly amortization, but no monthly installments were made thereafter.

http://www.lawphil.net/judjuris/juri2014/aug2014/gr_181723_2014.html#fnt2


Threatened with the cancellation of the conditional sale, the Suico and Flores spouses sold their rights over the said properties to herein respondents Restituto and Mima Sabordo, subject to the condition that the latter shall pay the balance of the sale price. On September 3, 1974, respondents and the Suico and Flores spouses executed a supplemental agreement whereby they affirmed that what was actually sold to respondents were Lots 512 and 513, while Lots 506 and 514 were given to them as usufructuaries. DBP approved the sale of rights of the Suico and Flores spouses in favor of herein respondents. Subsequently, respondents were able to repurchase the foreclosed properties of the Suico and Flores spouses.

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

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

On appeal, the CA, in its Decision3 in CA-G.R. CV No. 13785, dated April 24, 1990, modified the RTC decision by giving the Suico spouses until October 31, 1990 within which to exercise their option to purchase or redeem the subject lots from respondents by paying the sum of P127,500.00. The dispositive portion of the CADecision reads as follows:

x x x x

For reasons given, judgment is hereby rendered modifying the dispositive portion of [the] decision of the lower court to read:

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

2) Within said period, the defendants-appellees shall continue to have usufructuary rights on the coconut trees on Lots Nos. 506 and 514, Escalante Cadastre, Negros Occidental;

3) The Writ of Preliminary Injunction dated August 12, 1977 shall be effective untildefendants-appellees shall have exercised their option to purchase within said period by paying or reimbursing to the plaintiff-appellant the aforesaid amount.

No pronouncement as to costs.

SO ORDERED.4

In a Resolution5 dated February 13, 1991, the CA granted the Suico spouses an additional period of 90 days from notice within which to exercise their option to purchase or redeem the disputed lots.

In the meantime, Toribio Suico (Toribio) died leaving his widow, Eufrocina, and several others, includingherein petitioner, as legal heirs. Later, they discovered that respondents mortgaged Lots




506 and 514 with Republic Planters Bank (RPB) as security for a loan which, subsequently, became delinquent.

Thereafter, claiming that theyare ready with the payment of P127,500.00, but alleging that they cannot determine as to whom such payment shall be made, petitioner and her co-heirs filed a Complaint6 with the RTC of San Carlos City, Negros Occidental seeking to compel herein respondents and RPB to interplead and litigate between themselves their respective interests on the abovementioned sum of money. 1âwphi1 The Complaint also prayed that respondents be directed to substitute Lots 506 and 514 with other real estate properties as collateral for their outstanding obligation with RPB and that the latter be ordered toaccept the substitute collateral and release the mortgage on Lots 506 and 514. Upon filing of their complaint, the heirs of Toribio deposited the amount ofP127,500.00 with the RTC of San Carlos City, Branch 59.

Respondents filed their Answer7 with Counterclaim praying for the dismissal of the above Complaint on the grounds that (1) the action for interpleader was improper since RPB isnot laying any claim on the sum ofP127,500.00; (2) that the period withinwhich the complainants are allowed to purchase Lots 506 and 514 had already expired; (3) that there was no valid consignation, and (4) that the case is barred by litis pendenciaor res judicata.

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

On December 5, 2001, the RTC rendered judgment, dismissing the Complaint of petitioner and her co-heirs for lack of merit.8 Respondents' Counterclaim was likewise dismissed.

Petitioner and her co-heirs filed an appeal with the CA contending that the judicial deposit or consignation of the amount of P127,500.00 was valid and binding and produced the effect of payment of the purchase price of the subject lots.

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

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

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

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

Petitioner's main contention is that the consignation which she and her co-heirs made was a judicial deposit based on a final judgment and, as such, does not require compliance with the requirements of Articles 125611 and 125712 of the Civil Code.

The petition lacks merit. At the outset, the Court quotes withapproval the discussion of the CA regarding the definition and nature of consignation, to wit: … consignation [is] the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. It should be distinguished from








tender of payment which is the manifestation by the debtor to the creditor of his desire to comply with his obligation, with the offer of immediate performance.Tender is the antecedent of consignation, thatis, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes the obligation.13

In the case of Arzaga v. Rumbaoa,14 which was cited by petitioner in support of his contention, this Court ruled that the deposit made with the court by the plaintiff-appellee in the saidcase is considered a valid payment of the amount adjudged, even without a prior tender of payment thereof to the defendants-appellants,because the plaintiff-appellee, upon making such deposit, expressly petitioned the court that the defendants-appellees be notified to receive the tender of payment.This Court held that while "[t]he deposit, by itself alone, may not have been sufficient, but with the express terms of the petition, there was full and complete offer of payment made directly to defendants-appellants."15 In the instant case, however, petitioner and her co-heirs, upon making the deposit with the RTC, did not ask the trial court that respondents be notified to receive the amount that they have deposited. In fact, there was no tender of payment. Instead, what petitioner and her co-heirs prayed for is thatrespondents and RPB be directed to interplead with one another to determine their alleged respective rights over the consigned amount; that respondents be likewise directed to substitute the subject lots with other real properties as collateral for their loan with RPB and that RPB be also directed to accept the substitute real properties as collateral for the said loan. Nonetheless,the trial court correctly ruled that interpleader is not the proper remedy because RPB did notmake any claim whatsoever over the amount consigned by petitioner and her co-heirs with the court.

In the cases of Del Rosario v. Sandico16 and Salvante v. Cruz,17 likewise cited as authority by petitioner, this Court held that, for a consignation or deposit with the court of an amount due on a judgment to be considered as payment, there must beprior tender to the judgment creditor who refuses to accept it. The same principle was reiterated in the later case of Pabugais v. Sahijwani.18 As stated above, tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the latter accept the same.19 In the instant case, the Court finds no cogent reason to depart from the findings of the CA and the RTC that petitioner and her co-heirs failed to make a prior valid tender of payment to respondents.

It is settled that compliance with the requisites of a valid consignation is mandatory. 20 Failure to comply strictly with any of the requisites will render the consignation void. One of these requisites is a valid prior tender of payment.21

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

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals, dated May 25, 2007, and its Resolution dated January 24, 2008, both in CA-G.R. CV No. 75013, are AFFIRMED.










SO ORDERED.

Republic of the PhilippinesSUPREME COURT

THIRD DIVISION

G.R. No. 144101 September 16, 2005

ANTONIO P. TAMBUNTING, JR. and COMMERCIAL HOUSE OF FINANCE, INC., Petitioners, vs.SPOUSES EMILIO SUMABAT and ESPERANZA BAELLO, Respondent.

D E C I S I O N

CORONA, J.:

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

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

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

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

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

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

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

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

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

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

An action for declaratory relief should be filed by a person interested under a deed, will, contract or other written instrument, and whose rights are affected by a statute, executive order, regulation or ordinance before breach or violation thereof.1 The purpose of the action is to secure an authoritative

http://www.lawphil.net/judjuris/juri2005/sep2005/gr_144101_2005.html#fnt1

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

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

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

Nonetheless, the petition must fail.

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

An action to enforce a right arising from a mortgage should be enforced within ten years from the time the right of action accrues.6 Otherwise, it will be barred by prescription and the mortgage creditor will lose his rights under the mortgage.

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

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

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

WHEREFORE, the petition is hereby DENIED.






Costs against petitioners.

SO ORDERED.


SECOND DIVISION

G.R. No. 137538 September 3, 2001

OFFICE OF THE OMBUDSMAN, petitioner, vs.HON. FRANCISCO B. IBAY, in his capacity as Presiding Judge of the Regional Trial Court, Makati City, Branch 135, UNION BANK OF THE PHILIPPINES, and LOURDES T. MARQUEZ, in her capacity as Branch Manager of UBP Julia Vargas Branch, respondents.1âwphi1.nêt

R E S O L U T I O N

QUISUMBING, J.:

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

The factual antecedents of this case are as follows: lawphil.net

Sometime in 1998, petitioner conducted an investigation on the alleged "scam" on the Public Estates Authority-Amari Coastal Bay Development Corporation. The case, entitled Fact-Finding and Intelligence Bureau vs. Amadeo Lagdameo, et al., was docketed as OMB-0-97-0411. Initial result of the investigation revealed that the alleged anomaly was committed through the issuance of checks which were subsequently deposited in several financial institutions. On April 29, 1998, petitioner issued an Order directing private respondent Lourdes Marquez, branch manager of Union Bank of the Philippines branch at Julia Vargas Avenue, Pasig City, to produce several bank documents for inspection relative to Account Nos. 011-37270-5, 240-020718, 245-30317-3 and 245-303318-1, reportedly maintained in the said branch. The documents referred to include bank account

application forms, signature cards, transactions history, bank statements, bank ledgers, debit and credit memos, deposit and withdrawal slips, application for purchase of manager's checks, used manager's checks and check microfilms. The inspection would be done "in camera" wherein the bank records would be examined without bringing the documents outside the bank premises. Its purpose was to identify the specific bank records prior to the issuance of the required information not in any manner needed in or relevant to the investigation.1

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

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

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

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

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

The only question raised by petitioner for resolution is whether or not public respondent acted without jurisdiction and/or with grave abuse of discretion in entertaining the cited petition for declaratory relief.

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

Section 14 of R.A. 6770 provides: lawphil.net

Restrictions. – No writ of injunction shall be issued by any court to delay an investigation being conducted by the Ombudsman under this Act, unless there is a prima facie evidence that the subject matter of the investigation is outside the jurisdiction of the Office of the Ombudsman.

No court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman, except the Supreme Court, on pure question of law.

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

Section 1. Who may file petition. – Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder.

x x x x x x x x x

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

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

In any event, the relief being sought by private respondent in her action for declaratory relief before the RTC of Makati City has been squarely addressed by our decision in Marquez vs. Desierto.8 In that case, we ruled that before an in camera inspection of bank accounts may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, and the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. In the present case, since there is no pending litigation yet before a court of competent authority, but only an investigation by the Ombudsman on the so-called "scam", any order for the opening of the bank account for inspection is clearly premature and legally unjustified. 1âwphi1.nêt

WHEREFORE, the instant petition is DISMISSED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

EN BANC

G.R. No. 161400 September 2, 2005

ZENAIDA ORTEGA, represented by Her Attorney-in Fact OCTAVIO ALVAREZ and/or ZEMVE ORTEGA ALVAREZ, Petitioners, vs.THE QUEZON CITY GOVERNMENT, THE NATIONAL HOUSING AUTHORITY & THE NATIONAL HOME MORTGAGE CORP., Respondent.

D E C I S I O N

CARPIO MORALES, J.:

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

Proposed Ordinance No. 2002-07 (PO 2002-07) was filed on January 10, 2002 before the City Council. PO 2002-07 sought to approve "the Subdivision Plan of Samahang Kapitbahayan ng Barangay Vasra (Samahang Kapitbahayan), a Socialized Housing Project (B.P. Blg. 220) with seventeen (17) lots (Community Mortgage Program) containing [a total] area of Six Hundred Sixty Seven (667) square meters, covered by Original Certificate of Title No. 735, owned by the City

Government of Quezon City (Vendor) located at a portion of [an] easement [in] Barangay Vasra, Quezon City, Metro Manila, as applied for by the Samahang Kapitbahayan ng Barangay Vasra (Vendee) subject to the conditions prescribed under Quezon City Ordinance No. SP-56, S-93 and Batas Pambansa Blg. 220."1

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

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

The provisions of the assailed ordinance read:

SECTION 1. A parcel of land which may be considered an accretion/excess lot and previously conceived and referred to in proposed ordinance no. PO 2002-07 and proposed ordinance no. PO 2002-13 as portion of easement, situated between Block 14. Psd-39577 of the original subdivision plan and Culiat Creek, Barangay Vasra, Quezon City, is hereby classified as residential or converted from its original classification to residential for distribution or for sale to its informal settlers.

SECTION 2. This Ordinance shall take effect immediately upon its approval.5

Petitioner, who claims to be the rightful owner of the land subject of the ordinance, alleges that in enacting the ordinance, her various letter-protests to the City Council against proposed Resolutions No. 2002-13, 2002-07 and 2002-2396 were not heeded in the City Council, thus violating her constitutional rights to due process and equal protection of the law.

Petitioner further claims that the lot referred to in the ordinance overlaps her properties as their technical descriptions in Transfer Certificates of Title Nos. RT-70472 (296026) and N-152137 issued in her name show;7and that assuming that there exists accretion or easement of the Culiat Creek, she, being the owner of the adjoining land, is the rightful owner thereof following Articles 457 8 and Article 6209 of the Civil Code.

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

By Comment12 filed on April 14, 2004, the Quezon City Government, through the Office of the City Attorney, alleges that the present petition is premature and raises questions of fact which entail reception of evidence; and that petitioner has not yet established her right of ownership over the property referred to in the ordinance, whereas its clear right thereover is evidenced by Original Certificate of Title No. 735 issued in its name.13














The NHA, by Comment14 filed on May 17, 2004, prayed for the dismissal of the petition, pointing out that the petition is actually one for declaratory relief under Section 1, Rule 63 of the Rules of Court over which this Court has no original jurisdiction.

The NHMFC, by Comment15 filed on June 17, 2004, alleged that it is not a party to any of the transactions with any of the parties in the present case. It nevertheless adopted the comment of the Quezon City government that the petition is premature and alleges facts which still need to be proven.16

The petition must be dismissed.

Article VIII, Section 5 of the Constitution provides:

SECTION 5. The Supreme Court shall have the following powers:

x x x

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

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.

x x x (Emphasis and underscoring supplied).

This Court can thus only review, revise, reverse, modify on appeal or certiorari final judgments and orders oflower courts in all cases in which the constitutionality or validity of, among other things, an ordinance is in question. Foremost, therefore, is that there must be first a final judgment rendered by an inferior court17 before this Court can assume jurisdiction over a case of this nature.

Verily, this Court does not conduct original and full trial of a main factual issue like what petitioner is raising in the present petition.18 It does not analyze or weigh evidence brought before it at the first instance, otherwise, it would preempt the primary function of the lower court to try the case on the merits, receive evidence, and decide the case definitively.19 Its jurisdiction in cases which assail the validity of an ordinance is limited to reviewing or revising final judgments or orders of lower courts and applying the law based on their findings of facts brought before it.20

In another vein, if this petition was to be considered as one for declaratory relief, as observed by the OSG, it is not embraced within the original jurisdiction of this Court.21 Rule 63 of the Rules of Court provides:

SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance , or any other government regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising from, and for a declaration of his rights or duties, thereunder .

An action for the reformation of an instrument, or to quiet title to real property or remove clouds therefrom, or to consolidate ownership under Article 1607 of the Civil Code may be brought under this Rule.









x x x

SEC. 4. Local government ordinances. – In any action involving the validity of a local government ordinance, the corresponding prosecutor or attorney of the local government unit involved shall be similarly notified and entitled to be heard. (Emphasis and underscoring supplied)

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

As reflected above, petitioner’s assertion that the invalidity of the ordinance is premised on her claim that she has a better right to the parcel of land referred to in the ordinance is a factual issue.

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

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

WHEREFORE, the petition is hereby DISMISSED.

Costs against the petitioner.

SO ORDERED.






THIRD DIVISION

G.R. No. 126911 April 30, 2003

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

CARPIO MORALES, J.:

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

Prior to May 22, 1997, respondents had, individually or jointly with each other, 71 certificates of time deposits denominated as "Golden Time Deposits" (GTD) with an aggregate face value of P1,115,889.96.1

On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 5052 prohibiting MBC to do business in the Philippines, and placing its assets and affairs under receivership. The Resolution, however, was not

served on MBC until Tuesday the following week, or on May 26, 1987, when the designated Receiver took over.3

On May 25, 1987, the next banking day following the issuance of the MB Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of P40,000.00 or less under the names of herein respondents individually or jointly with each other. 4 Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total amount of P320,000.00.5

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

On February 11, 1988, PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to the PDIC7 that there was massive conversion and substitution of trust and deposit accounts on May 25, 1987 at MBC-Iloilo.8 The pertinent portions of the report stated:

xxx xxx xxx

On May 25, 1987 (Monday) or a day prior to the official announcement and take-over by CB of the assets and liabilities of The Manila Banking Corporation, the Iloilo Branch was found to have recorded an unusually heavy movements in terms of volume and amount for all types of deposits and trust accounts. It appears that the impending receivership of TMBC was somehow already known to many depositors on account of the massive withdrawals paid on this day which practically wiped out the branch's entire cash position. . . .

xxx xxx xxx

. . . The intention was to maximize the availment of PDIC coverage limited to P40,000 by spreading out big accounts to as many certificates under various nominees. . . .9

xxx xxx xxx

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

In their Answer filed on October 24, 1991 and Amended Answer11 filed on January 9, 1992, respondents set up acounterclaim against PDIC whereby they asked for payment of their insured deposits.12

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

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the bank as the term is defined under Section 3 (f) of R.A. No. 3591, as amended;

2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the Abads for the value of the remaining 20 GTDs, the other 8 having been paid already by TMBC Iloilo on May 25,1987;

3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value of 3 GTDs it paid on February 11, 1988, and the amounts it may have paid the Abads pursuant to the Order of this Court dated September 8, 1992;

4. Ordering PDIC to pay immediately the Abads the balance of its admitted liability as contained in the aforesaid Order of September 8, 1992, should there be any, subject to liquidation when this case shall have been finally decide; and

5. Ordering PDIC to pay legal interest on the remaining insured deposits of the Abads from February 11, 1988 until they are fully paid.

SO ORDERED.

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

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

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

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

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

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

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

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

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

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

Petitioner's position does not persuade.

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

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

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

That no actual money in bills and/or coins was handed by respondents to MBC does not mean that the transactions on the new GTDs did not involve money and that there was no consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior to May 26, 198722 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand — more than double the outstanding balance of respondent's 71 GTDs — at the start of the banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no cash to cover the new GTDs of respondents and conclude that there was no consideration for said GTDs.

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

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

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

Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which makes necessary some special regulation. But the identity between their fundamental nature is such that the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to supplement the provisions of the peculiar rules governing special civil actions.26

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

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

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

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

SO ORDERED.

SUPREME COURTManila

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

http://www.lawphil.net/judjuris/juri2007/may2007/gr_169466_2007.html#fnt1

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. 11843 dated August 26, 1977 (INP Law, hereinafter) issued to professionalize the INP and promote career development therein.

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

SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC).

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 86 10 of the same law provides for the assumption by the PNP of the police functions of the INP and its absorption by the former, including its appropriations, funds, records, equipment, etc., as well as its personnel.11 And to govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases:

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 3822explicitly 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,27wherein 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.




EN BANC

G.R. No. 141386 November 29, 2001

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

YNARES-SANTIAGO, J.:

May the salaries and personnel-related benefits of public school teachers appointed by local chief executives in Connection with the establishment and maintenance of extension classes; as well as the expenses for college scholarship grants, be charged to the Special Education Fund (SEF) of the local government unit concerned?

The instant petition for review, which raises a pure question of law, seeks to annul and set aside the decision1 of the Regional Trial Court of Cebu, Branch 20, in a petition for declaratory relief, docketed as Civil Case No. CEB-24422.

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

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

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

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

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

Declaring, further, respondents audit findings on pages 36 and 37 in the Annual Audit Report on the Province of Cebu: for the year ending December 31, 1999 as null and void.3

Hence, the instant petition by the Commission on Audit.

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

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

(a) the organization and operation of such number of extension classes as may be needed to accommodate all children of school age desiring to enter Grade I, including the creation of positions of classroom teachers, head teachers and principals for such extension classes x x x;

(b) the programming of the construction and repair of elementary school buildings, acquisition of sites, and the construction and repair of workshops and similar buildings and accessories thereof to house laboratory, technical and similar equipment and apparatus needed by public schools offering practical arts, home economics and vocational courses,

giving priority to elementary schools on the basis of the actual needs and total requirements of the country x x x;

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

(d) preparation, printing and/or purchase of textbooks, teacher's guides. forms and pamphlets x x x;

(e) the purchase and/or improvement, repair and refurbishing of machinery, laboratory, technical and similar equipment and apparatus, including spare parts needed by the Bureau of Vocational Education and secondary schools offering courses;

(f) the establishment of printing plant to be used exclusively for the printing needs of the Department of Education and the improvement of regional printing plants in the vocational schools;

(g) the purchase of teaching materials such as work books, atlases, flip charts, science and mathematics teaching aids, and simple laboratory devices for elementary and secondary classes;

(h) the implementation of the existing program for citizenship development in barrio high schools, folk schools and adult education classes;

(i) the undertaking of education research, including that of the Board of National Education;

(j) the granting of government scholarships to poor but deserving students under Republic Act Numbered Four Thousand Ninety; and

(k) the promotion of physical education, such as athletic meets. (Emphasis supplied)

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

SEC. 235. Additional Levy on Real Property for the Special Education Fund (SEF). — A province or city or a municipality within the Metropolitan Manila Area, may levy and collect an annual tax of one percent (1%) on the assessed value of real property which shall be in addition to the basic real property tax. The proceeds thereof shall exclusively accrue to the Special Education Fund (SEF).

SEC. 272. Application of Proceeds of the Additional One Percent SEF Tax. — The proceeds from the additional one percent (1%) tax on real properly accruing to the SEF shall be automatically released to the local school boards: Provided, That, in case of provinces, the proceeds shall be divided equally between the provincial and municipal school boards: Provided, however, That the proceeds shall be allocated for the operation and maintenance of public schools, construction and repair of school buildings, facilities and equipment, educational research, purchase of books and periodicals, and sports development as determined and approved by the local school board. (Emphasis supplied)

SEC. 100. Meeting and Quorum; Budget

xxx xxx xxx

(c) The annual school board budget shall give priority to the following:

(1) Construction, repair, and maintenance of school buildings and other facilities of public elementary and secondary schools;

(2) Establishment and maintenance of extension classes where necessary; and

(3) Sports activities at the division, district, municipal, and barangay levels. (Emphasis supplied)

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

Moreover, petitioner claims that since what is allowed for local school boards to determine under Section 995 of the Local Government Code is only the "annual supplementary budgetary needs; for the operation and maintenance of public schools," as well as the "supplementary local cost to meet such needs," the budget of the local school boards for the establishment and maintenance of extension classes should be construed to refer only to the upkeep and maintenance of public school building, facilities and similar expenses other than personnel-related benefits. This is because, petitioner argued, the maintenance and operation of public schools pertain principally to the DECS.

The contentions are without merit. It is a basic precept in statutory construction that the intent of the legislature is the controlling factor in the interpretation of a statute.6 In this connection, the following portions of the deliberations of the Senate on the second reading of the Local Government Code on July 30, 1990 are significant:

Senator Guingona. Mr. President.

The President. Senator Guingona is recognized.

Senator Guingona. Just for clarification, Mr. President. In this transfer, will it include everything eventually — lock, stock and barrel, including curriculum?

Senator Pimentel. Mr. President, our stand in the Committee is to respect the decision of the National Government in terms of curriculum.

Senator Guingona. But, supposing the Local Education Board wishes to adopt a certain curriculum for that particular region?

Senator Pimentel. Mr. President, pursuant to the wording of the proposed transfer of this elementary school system to local government units, what are specifically covered here are merely the construction, repair, and maintenance of elementary school buildings and other structures connected with public elementary school education, payment of salaries, emoluments, allowances et cetera, procurement of books, other teaching materials and equipment needed for the proper implementation of the program. There is nothing here that

will indicate that the local government will have any right to- alter the curriculum. (Emphasis supplied)

Senator Guingona. Thank you, Mr. President.

Similarly instructive are the foregoing deliberations in the House of Representatives on August 16, 1990:

INTERPELLATION OF MS. RAYMUNDO

(Continuation)

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

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

Undoubtedly, the aforecited exchange of views clearly demonstrates that the legislature intended the SEF to answer for the compensation of teachers handling extension classes.

Furthermore, the pertinent portion of the repealing clause of the Local Government Code, provides:

SEC. 534. Repealing Clause. — x x x

(c) The provisions of . . . Sections 3, a (3) and b (2) of Republic Act No. 5447, regarding the Special Education Fund . . . are hereby repealed and rendered of no force and effect.

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

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

services and the corresponding compensation of these teachers are necessary and indispensable to the establishment and maintenance of extension classes.

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

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

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

Pursuant to Section 1, Rule 6311 of the 1997 Rules of Civil Procedure, a petition for declaratory relief may be filed before there is a breach or violation. The Solicitor General claims that the Notices of Suspension issued by the COA to the respondent province amounted to a breach or violation, and therefore, the petition for declaratory relief should have been denied by the trial court.

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

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

SO ORDERED.


EN BANC

G.R. No. 160031 December 18, 2008

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

D E C I S I O N

NACHURA, J.:

Assailed in this Rule 45 petition are the June 30, 20031 and the September 12, 20032 Orders of the Regional Trial Court (RTC) of Manila, Branch 14 in Civil Case No. 02-104585.

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

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SEC. 90. Practice of Profession.–

(a) All governors, city and municipal mayors are prohibited from practicing their profession or engaging in any occupation other than the exercise of their functions as local chief executives.

(b) Sanggunian members may practice their professions, engage in any occupation, or teach in schools except during session hours: Provided, That sanggunian members who are members of the Bar shall not:

(1) Appear as counsel before any court in any civil case wherein a local government unit or any office, agency, or instrumentality of the government is the adverse party;

(2) Appear as counsel in any criminal case wherein an officer or employee of the national or local government is accused of an offense committed in relation to his office;

(3) Collect any fee for their appearance in administrative proceedings involving the local government unit of which he is an official; and

(4) Use property and personnel of the Government except when the sanggunian member concerned is defending the interest of the Government.

(c) Doctors of medicine may practice their profession even during official hours of work only on occasions of emergency: Provided, That the officials concerned do not derive monetary compensation therefrom. [Underscoring supplied.]

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

To strengthen its point, petitioner later amended its petition to implead as additional respondents then Lipa City Mayor Vilma Santos, then Pampanga Provincial Governor Lito Lapid, and then Parañaque City Mayor Joey Marquez.5

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

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

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






I.

THE REGIONAL TRIAL COURT SERIOUSLY ERRED IN DISMISSING PETITIONER’S PETITION FOR DECLARATORY RELIEF ON PURELY TECHNICAL GROUNDS.

II.

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

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

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

Petitioner likewise contends that the petition for declaratory relief should have been converted by the trial court into an action for prohibition, considering that, in their pleadings, Governor Lapid and Mayor Marquez offered justifications for their actions–financial constraints and freedom of expression.12 Petitioner therefore prays that should the Court declares the respondents local chief executives as unable to lawfully engage in their professions as actors, it must also prohibit them from pursuing the same during their incumbency.13

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

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

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








which is being sought has already been breached by the respondents. Declaratory relief cannot thus be availed of.16

WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.

SO ORDERED.


THIRD DIVISION

G.R. No. 150806 January 28, 2008

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners, vs.BATHALA MARKETING INDUSTRIES, INC., respondent.

D E C I S I O N

NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Decision1 of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its Resolution2 dated November 19, 2001. The assailed Decision affirmed with modification the Decision3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No. 98-411.

Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by its president Ramon H. Garcia, renewed its Contract of Lease4 with Ponciano L. Almeda (Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to lease a portion of the Almeda Compound, located at 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25 square meters, for a monthly rental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner terminated as

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provided in the contract.5 The contract of lease contained the following pertinent provisions which gave rise to the instant case:

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

SEVENTH - In case an extraordinary inflation or devaluation of Philippine Currency should supervene, the value of Philippine peso at the time of the establishment of the obligation shall be the basis of payment;6

During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with petitioners. In a letter7dated December 29, 1997, petitioners advised respondent that the former shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response, respondent contended that VAT may not be imposed as the rentals fixed in the contract of lease were supposed to include the VAT therein, considering that their contract was executed on May 1, 1997 when the VAT law had long been in effect.8

On January 26, 1998, respondent received another letter from petitioners informing the former that its monthly rental should be increased by 73% pursuant to condition No. 7 of the contract and Article 1250 of the Civil Code. Respondent opposed petitioners' demand and insisted that there was no extraordinary inflation to warrant the application of Article 1250 in light of the pronouncement of this Court in various cases.9

Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but continued to pay the stipulated amount set forth in their contract.

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

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

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

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









WHEREFORE, premises considered, this Court renders judgment on the case as follows:

1) declaring that plaintiff is not liable for the payment of Value-Added Tax (VAT) of 10% of the rent for [the] use of the leased premises;

2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no [extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to justify the same;

3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the months of January, February and March, 1999; and

4) holding defendants liable to plaintiff for the amount of P1,107,348.69, said amount representing the balance of plaintiff's rental deposit still with defendants.

SO ORDERED.13

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

Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC decision. The fallo reads:

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

No pronouncement as to costs.

SO ORDERED.14

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

Petitioners now come before this Court raising the following issues:

I.

WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR.

II.



WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR.

III.

WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.

IV.

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

V.

WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.

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

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

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

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

We do not agree.

After petitioners demanded payment of adjusted rentals and in the months that followed, respondent complied with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein. Respondent religiously fulfilled its obligations to petitioners even during the



pendency of the present suit. There is no showing that respondent committed an act constituting a breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief.

Petitioners claim that the instant petition is not proper because a separate action for rescission, ejectment and damages had been commenced before another court; thus, the construction of the subject contractual provisions should be ventilated in the same forum.

We are not convinced.

It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation17 we held that the petition for declaratory relief should be dismissed in view of the pendency of a separate action for unlawful detainer. However, we cannot apply the same ruling to the instant case. In Panganiban, the unlawful detainer case had already been resolved by the trial court before the dismissal of the declaratory relief case; and it was petitioner in that case who insisted that the action for declaratory relief be preferred over the action for unlawful detainer. Conversely, in the case at bench, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, itself initiated the suspension of the proceedings pending the resolution of the action for declaratory relief.

We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol18 where the declaratory relief action was dismissed because the issue therein could be threshed out in the unlawful detainer suit. Yet, again, in that case, there was already a breach of contract at the time of the filing of the declaratory relief petition. This dissimilar factual milieu proscribes the Court from applying Teodoro to the instant case.

Given all these attendant circumstances, the Court is disposed to entertain the instant declaratory relief action instead of dismissing it, notwithstanding the pendency of the ejectment/rescission case before the trial court. The resolution of the present petition would write finis to the parties' dispute, as it would settle once and for all the question of the proper interpretation of the two contractual stipulations subject of this controversy.

Now, on the substantive law issues.

Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental adjustment allegedly brought about by extraordinary inflation or devaluation. Both the trial court and the appellate court found no merit in petitioners' claim. We see no reason to depart from such findings.

As to the liability of respondent for the payment of VAT, we cite with approval the ratiocination of the appellate court, viz.:

Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to pass it on to the lessee or absorb the same. Beginning January 1, 1996, the lease of real property in the ordinary course of business, whether for commercial or residential use, when the gross annual receipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding the mandatory payment of the 10% VAT by the lessor, the actual shifting of the said tax burden upon the lessee is clearly optional on the part of the lessor, under the terms of the statute. The word "may" in the statute, generally speaking, denotes that it is directory in nature. It is generally permissive only and operates to confer discretion. In this case, despite the applicability of the rule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting the lessor the option to pass on to the lessee the 10% VAT, to existing contracts of lease as of



January 1, 1996, the original lessor, Ponciano L. Almeda did not charge the lessee-appellee the 10% VAT nor provided for its additional imposition when they renewed the contract of lease in May 1997. More significantly, said lessor did not actually collect a 10% VAT on the monthly rental due from the lessee-appellee after the execution of the May 1997 contract of lease. The inevitable implication is that the lessor intended not to avail of the option granted him by law to shift the 10% VAT upon the lessee-appellee. x x x.19

In short, petitioners are estopped from shifting to respondent the burden of paying the VAT.

Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision clearly states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a "new tax" in May 1997, as to fall within the coverage of the sixth stipulation.

Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation.

Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of extraordinary inflation or deflation. They insist that the doctrine pronounced in Del Rosario v. The Shell Company, Phils. Limited20 should apply.

Essential to contract construction is the ascertainment of the intention of the contracting parties, and such determination must take into account the contemporaneous and subsequent acts of the parties. This intention, once ascertained, is deemed an integral part of the contract.21

While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation" as compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties used the term "devaluation," they really did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code provision.

That this is the intention of the parties is evident from petitioners' letter22 dated January 26, 1998, where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners made explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim. Thus, the application of Del Rosario is not warranted. Rather, jurisprudential rules on the application of Article 1250 should be considered.

Article 1250 of the Civil Code states:

In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.

Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding increase in business transaction. There is inflation when there is an increase in the volume of money and credit relative to available goods, resulting in a substantial and continuing rise in the general price level.23 In a number of cases, this Court had provided a discourse on what constitutes extraordinary inflation, thus:






[E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.24

The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We would like to stress that the erosion of the value of the Philippine peso in the past three or four decades, starting in the mid-sixties, is characteristic of most currencies. And while the Court may take judicial notice of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied. 25

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its Resolution dated November 19, 2001, are AFFIRMED.

SO ORDERED.


EN BANC

G.R. No. 184915 June 30, 2009

NILO T. PATES, Petitioner, vs.COMMISSION ON ELECTIONS and EMELITA B. ALMIRANTE, Respondents.

R E S O L U T I O N

BRION, J.:

Our Resolution of November 11, 2008 dismissed the petition in caption pursuant to Section 3, Rule 64 of the Rules of Court which provides:

SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial.



taking into account the following material antecedents:

a. February 1, 2008 – The COMELEC First Division issued its Resolution (assailed in the petition);

b. February 4, 2008 – The counsel for petitioner Nilo T. Pates (petitioner) received a copy of the February 1, 2008 Resolution;

c. February 8, 2008 – The petitioner filed his motion for reconsideration (MR) of the February 1, 2008 Resolution (4 days from receipt of the February 1, 2008 Resolution)

d. September 18, 2008 – The COMELEC en banc issued a Resolution denying the petitioner’s MR (also assailed in the petition).

e. September 22, 2008 – The petitioner received the COMELEC en banc Resolution of September 18, 2008

Under this chronology, the last day for the filing of a petition for certiorari, i.e., 30 days from notice of the final COMELEC Resolution, fell on a Saturday (October 18, 2008), as the petitioner only had the remaining period of 26 days to file his petition, after using up 4 days in preparing and filing his Motion for Reconsideration. Effectively, the last day for filing was October 20, 2008 – the following Monday or the first working day after October 18, 2008. The petitioner filed his petition with us on October 22, 2008 or two days late; hence, our Resolution of dismissal of November 11, 2008.

The Motion for Reconsideration

The petitioner asks us in his "Urgent Motion for Reconsideration with Reiteration for the Issuance of a Temporary Restraining Order" to reverse the dismissal of his petition, arguing that the petition was seasonably filed under the fresh period rule enunciated by the Supreme Court in a number of cases decided beginning the year 2005. The "fresh period" refers to the original period provided under the Rules of Court counted from notice of the ruling on the motion for reconsideration by the tribunal below, without deducting the period for the preparation and filing of the motion for reconsideration.

He claims that, historically, the fresh period rule was the prevailing rule in filing petitions for certiorari. This Court, he continues, changed this rule when it promulgated the 1997 Rules of Civil Procedure and Circular No. 39-98, which both provided for the filing of petitions within the remainder of the original period, the "remainder" being the original period less the days used up in preparing and filing a motion for reconsideration. He then points out that on September 1, 2000 or only three years after, this Court promulgated A.M. No. 00-02-03-SC bringing back the fresh period rule. According to the petitioner, the reason for the change, which we supposedly articulated in Narzoles v. National Labor Relations Commission,1 was the tremendous confusion generated by Circular No. 39-98.

The fresh period rule, the petitioner further asserts, was subsequently applied by this Court in the following cases:

(1) Neypes v. Court of Appeals2 which thenceforth applied the fresh

eriod rule to ordinary appeals of decisions of the Regional Trial Court to the Court of Appeals;

(2) Spouses de los Santos v. Vda. de Mangubat3 reiterating Neypes;

http://www.lawphil.net/judjuris/juri2009/jun2009/gr_184915_2009.html#fnt3



(3) Active Realty and Development Corporation v. Fernandez4 which, following Neypes, applied the fresh period rule to ordinary appeals from the decisions of the Municipal Trial Court to the Regional Trial Court; and

(4) Romero v. Court of Appeals5 which emphasized that A.M. No. 00-02-03-SC is a curative statute that may be applied retroactively.

A reading of the ruling in these cases, the petitioner argues, shows that this Court has consistently held that the order or resolution denying the motion for reconsideration or new trial is considered as the final order finally disposing of the case, and the date of its receipt by a party is the correct reckoning point for counting the period for appellate review.

The Respondent’s Comment

We asked the respondents to comment on the petitioner’s motion for reconsideration. The Office of the Solicitor General (OSG), citing Section 5, Rule 65 of the Rules of Court and its related cases, asked via a "Manifestation and Motion" that it be excused from filing a separate comment. We granted the OSG’s manifestation and motion.

For her part, respondent Emelita B. Almirante (respondent Almirante) filed a comment stating that: (1) we are absolutely correct in concluding that the petition was filed out of time; and (2) the petitioner’s reliance on Section 4, Rule 65 of the Rules of Court (as amended by A.M. No. 00-02-03-SC) is totally misplaced, as Rule 64, not Rule 65, is the vehicle for review of judgments and final orders or resolutions of the COMELEC. Respondent Almirante points out that Rule 64 and Rule 65 are different; Rule 65 provides for a 60-day period for filing petitions forcertiorari, while Rule 64 provides for 30 days.

OUR RULING

We do not find the motion for reconsideration meritorious.

A. As a Matter of Law

Section 7, Article IX-A of the Constitution provides that unless otherwise provided by the Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Court on certiorari by the aggrieved party within 30 days from receipt of a copy thereof. For this reason, the Rules of Court provide for a separate rule (Rule 64) specifically applicable only to decisions of the COMELEC and the Commission on Audit. This Rule expressly refers to the application of Rule 65 in the filing of a petition for certiorari, subject to the exception clause – "except as hereinafter provided."6

Even a superficial reading of the motion for reconsideration shows that the petitioner has not challenged our conclusion that his petition was filed outside the period required by Section 3, Rule 64; he merely insists that the fresh period rule applicable to a petition for certiorari under Rule 65 should likewise apply to petitions for certiorariof COMELEC rulings filed under Rule 64.

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the latter rule. They exist as separate rules for substantive reasons as discussed below. Procedurally, the most patent difference between the two – i.e., the exception that Section 2, Rule 64 refers to – is Section 3 which provides for a special period for the filing of petitions for certiorari from decisions or rulings of the COMELEC en banc. The period is 30 days from notice of the decision or ruling (instead of the




60 days that Rule 65 provides), with the intervening period used for the filing of any motion for reconsideration deductible from the originally-granted 30 days (instead of the fresh period of 60 days that Rule 65 provides).

Thus, as a matter of law, our ruling of November 11, 2008 to dismiss the petition for late filing cannot but be correct. This ruling is not without its precedent; we have previously ordered a similar dismissal in the earlier case of Domingo v. Commission on Elections.7 The Court, too, has countless times in the past stressed that the Rules of Court must be followed. Thus, we had this to say in Fortich v. Corona:8

Procedural rules, we must stress, should be treated with utmost respect and due regard since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. The requirement is in pursuance to the bill of rights inscribed in the Constitution which guarantees that "all persons shall have a right to the speedy disposition of their before all judicial, quasi-judicial and administrative bodies," the adjudicatory bodies and the parties to a case are thus enjoined to abide strictly by the rules. While it is true that a litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice. There have been some instances wherein this Court allowed a relaxation in the application of the rules, but this flexibility was "never intended to forge a bastion for erring litigants to violate the rules with impunity." A liberal interpretation and application of the rules of procedure can be resorted to only in proper cases and under justifiable causes and circumstances. (Emphasis supplied)

As emphasized above, exceptional circumstances or compelling reasons may have existed in the past when we either suspended the operation of the Rules or exempted a particular case from their application.9 But, these instances were the exceptions rather than the rule, and we invariably took this course of action only upon a meritorious plea for the liberal construction of the Rules of Court based on attendant exceptional circumstances. These uncommon exceptions allowed us to maintain the stability of our rulings, while allowing for the unusual cases when the dictates of justice demand a correspondingly different treatment.

Under this unique nature of the exceptions, a party asking for the suspension of the Rules of Court comes to us with the heavy burden of proving that he deserves to be accorded exceptional treatment. Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of why the party-litigant failed to comply with the rules and by a justification for the requested liberal construction.10

Significantly, the petitioner presented no exceptional circumstance or any compelling reason to warrant the non-application of Section 3, Rule 64 to his petition. He failed to explain why his filing was late. Other than his appeal to history, uniformity, and convenience, he did not explain why we should adopt and apply the fresh period rule to an election case.

To us, the petitioner’s omissions are fatal, as his motion does not provide us any reason specific to his case why we should act as he advocates.

B. As a Matter of Policy

In harking back to the history of the fresh period rule, what the petitioner apparently wants – for reasons of uniformity and convenience – is the simultaneous amendment of Section 3, Rule 64 and the application of his proposed new rule to his case. To state the obvious, any amendment of this provision is an exercise in the power of this Court to promulgate rules on practice and procedure as





provided by Section 5(5), Article VIII of the Constitution. Our rulemaking, as every lawyer should know, is different from our adjudicatory function. Rulemaking is an act of legislation, directly assigned to us by the Constitution, that requires the formulation of policies rather than the determination of the legal rights and obligations of litigants before us. As a rule, rulemaking requires that we consult with our own constituencies, not necessarily with the parties directly affected in their individual cases, in order to ensure that the rule and the policy that it enunciates are the most reasonable that we can promulgate under the circumstances, taking into account the interests of everyone – not the least of which are the constitutional parameters and guidelines for our actions. We point these out as our adjudicatory powers should not be confused with our rulemaking prerogative.lavvphil

We acknowledge that the avoidance of confusion through the use of uniform standards is not without its merits. We are not unmindful, too, that no less than the Constitution requires that "motions for reconsideration of [division] decisions shall be decided by the Commission en banc."11 Thus, the ruling of the Commission en bancon reconsideration is effectively a new ruling rendered separately and independently from that made by a division.

Counterbalanced against these reasons, however, are other considerations no less weighty, the most significant of which is the importance the Constitution and this Court, in obedience to the Constitution, accord to elections and the prompt determination of their results. lawphil Section 3, Article IX-C of the Constitution expressly requires that the COMELEC’s rules of procedure should expedite the disposition of election cases. This Court labors under the same command, as our proceedings are in fact the constitutional extension of cases that start with the COMELEC.

Based on these considerations, we do not find convenience and uniformity to be reasons sufficiently compelling to modify the required period for the filing of petitions for certiorari under Rule 64. While the petitioner is correct in his historical data about the Court’s treatment of the periods for the filing of the different modes of review, he misses out on the reason why the period under Section 3, Rule 64 has been retained. The reason, as made clear above, is constitutionally-based and is no less than the importance our Constitution accords to the prompt determination of election results. This reason far outweighs convenience and uniformity. We significantly note that the present petition itself, through its plea for the grant of a restraining order, recognizes the need for haste in deciding election cases.

C. Our Liberal Approach

Largely for the same reason and as discussed below, we are not inclined to suspend the rules to come to the rescue of a litigant whose counsel has blundered by reading the wrong applicable provision. The Rules of Court are with us for the prompt and orderly administration of justice; litigants cannot, after resorting to a wrong remedy, simply cry for the liberal construction of these rules. 12 Our ruling in Lapid v. Laurea13 succinctly emphasized this point when we said:

Members of the bar are reminded that their first duty is to comply with the rules of procedure, rather than seek exceptions as loopholes. Technical rules of procedure are not designed to frustrate the ends of justice. These are provided to effect the prompt, proper and orderly disposition of cases and, thus, effectively prevent the clogging of court dockets. Utter disregard of these rules cannot justly be rationalized by harking on the policy of liberal construction. [Emphasis supplied.]

We add that even for this Court, liberality does not signify an unbridled exercise of discretion. It has its limits; to serve its purpose and to preserve its true worth, it must be exercised only in the most appropriate cases.14





WHEREFORE, premises considered, we DENY the motion for reconsideration for lack of merit. Our Resolution of November 11, 2008 is hereby declared FINAL. Let entry of judgment be made in due course.

SO ORDERED.


EN BANC

G.R. No. 193808 June 26, 2012

LUISK. LOKIN, JR. and TERESITA F. PLANAS, Petitioners, vs.COMMISSION ON ELECTIONS (COMELEC), CITIZENS’ BATTLE AGAINST CORRUPTION PARTY LIST represented by VIRGINIA S. JOSE SHERWIN N. TUGNA, and CINCHONA CRUZ-GONZALES, Respondents,

D E C I S I O N

SERENO, J.:

The present petition having been flied beyond the reglementary period, Rule 64 of the Rules of Court compels a dismissal on this basis alone. Despite petitioner's inexplicable disregard of basic concepts, this Court deems it appropriate to reiterate the specific procedure for the review of judgments made by the Commission on Elections (COMELEC) as laid down in Rule 64, and how it is differentiated from the more general remedy afforded by Rule 65.

On 5 July 2010, the COMELEC First Division issued a Resolution1 expunging the Certificate of Nomination which included herein petitioners as representatives of the party-list group known as Citizens’ Battle Against Corruption (CIBAC). The COMELEC en banc affirmed the said Resolution,


prompting Luis Lokin, Jr. and Teresita F. Planas to file the present Petition for Certiorari. Petitioners allege grave abuse of discretion on the part of the COMELEC in issuing both Resolutions, praying that they be recognized as the legitimate nominees of CIBAC party-list, and that petitioner Lokin, Jr. be proclaimed as the CIBAC party-list representative to the House of Representatives.

Respondent CIBAC party-list is a multi-sectoral party registered2 under Republic Act No. (R.A.) 7941, otherwise known as the Party- List System Act. As stated in its constitution and bylaws, the platform of CIBAC is to fight graft and corruption and to promote ethical conduct in the country’s public service.3 Under the leadership of the National Council, its highest policymaking and governing body, the party participated in the 2001, 2004, and 2007 elections.4 On 20 November 2009, two different entities, both purporting to represent CIBAC, submitted to the COMELEC a "Manifestation of Intent to Participate in the Party-List System of Representation in the May 10, 2010 Elections." The first Manifestation5 was signed by a certain Pia B. Derla, who claimed to be the party’s acting secretary-general. At 1:30 p.m. of the same day, another Manifestation6 was submitted by herein respondents Cinchona Cruz-Gonzales and Virginia Jose as the party’s vice-president and secretary-general, respectively.

On 15 January 2010, the COMELEC issued Resolution No. 87447giving due course to CIBAC’s Manifestation, "WITHOUT PREJUDICE …TO the determination which of the two factions of the registered party-list/coalitions/sectoral organizations which filed two (2) manifestations of intent to participate is the official representative of said party-list/coalitions/sectoral organizations xxx."8

On 19 January 2010, respondents, led by President and Chairperson Emmanuel Joel J. Villanueva, submitted the Certificate of Nomination9 of CIBAC to the COMELEC Law Department. The nomination was certified by Villanueva and Virginia S. Jose. On 26 March 2010, Pia Derla submitted a second Certificate of Nomination,10which included petitioners Luis Lokin, Jr. and Teresita Planas as party-list nominees. Derla affixed to the certification her signature as "acting secretary-general" of CIBAC.

Claiming that the nomination of petitioners Lokin, Jr. and Planas was unauthorized, respondents filed with the COMELEC a "Petition to Expunge From The Records And/Or For Disqualification," seeking to nullify the Certificate filed by Derla. Respondents contended that Derla had misrepresented herself as "acting secretary-general," when she was not even a member of CIBAC; that the Certificate of Nomination and other documents she submitted were unauthorized by the party and therefore invalid; and that it was Villanueva who was duly authorized to file the Certificate of Nomination on its behalf.11

In the Resolution dated 5 July 2010, the COMELEC First Division granted the Petition, ordered the Certificate filed by Derla to be expunged from the records, and declared respondents’ faction as the true nominees of CIBAC.12Upon Motion for Reconsideration separately filed by the adverse parties, the COMELEC en banc affirmed the Division’s findings. In a per curiam Resolution dated 31 August 2010,13 the Commission reiterated that Pia Derla was unable to prove her authority to file the said Certificate, whereas respondents presented overwhelming evidence that Villanueva deputized CIBAC Secretary General Virginia Jose to submit the Certificate of Nomination pursuant to CIBAC’s Constitution and bylaws.

Petitioners now seek recourse with this Court in accordance with Rules 64 and 65 of the Rules of Court, raising these issues: I) Whether the authority of Secretary General Virginia Jose to file the party’s Certificate of Nomination is an intra-corporate matter, exclusively cognizable by special commercial courts, and over which the COMELEC has no jurisdiction; and II) Whether the COMELEC erred in granting the Petition for Disqualification and recognizing respondents as the properly authorized nominees of CIBAC party-list.













As earlier stated, this Court denies the petition for being filed outside the requisite period. The review by this Court of judgments and final orders of the COMELEC is governed specifically by Rule 64 of the Rules of Court, which states:

Sec. 1. Scope. This rule shall govern the review of judgments and final orders or resolutions of the Commission on Elections and the Commission on Audit.

Sec. 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided.

The exception referred to in Section 2 of this Rule refers precisely to the immediately succeeding provision, Section 3 thereof,14 which provides for the allowable period within which to file petitions for certiorari from judgments of both the COMELEC and the Commission on Audit. Thus, while Rule 64 refers to the same remedy of certiorari as the general rule in Rule 65, they cannot be equated, as they provide for different reglementary periods.15 Rule 65 provides for a period of 60 days from notice of judgment sought to be assailed in the Supreme Court, while Section 3 expressly provides for only 30 days, viz:

SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial.

Petitioner received a copy of the first assailed Resolution on 12 July 2010. Upon the Motion for Reconsideration filed by petitioners on 15 July 2010, the COMELEC en banc issued the second assailed Resolution on 31 August 2010. This per curiam Resolution was received by petitioners on 1 September 2010.16 Thus, pursuant to Section 3 above, deducting the three days it took petitioners to file the Motion for Reconsideration, they had a remaining period of 27 days or until 28 September 2010 within which to file the Petition for Certiorari with this Court.

However, petitioners filed the present Petition only on 1 October 2010, clearly outside the required period. In Pates v. Commission on Elections and Domingo v. Commission on Elections,17 we have established that the fresh-period rule used in Rule 65 does not similarly apply to the timeliness of petitions under Rule 64. In Pates, this Court dismissed the

Petition for Certiorari on the sole ground that it was belatedly filed, reasoning thus:

x x x. While it is true that a litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice. There have been some instances wherein this Court allowed a relaxation in the application of the rules, but this flexibility was "never intended to forge a bastion for erring litigants to violate the rules with impunity."

x x x x x x x x x

Under this unique nature of the exceptions, a party asking for the suspension of the Rules of Court comes to us with the heavy burden of proving that he deserves to be accorded exceptional treatment. Every plea for a liberal construction of the Rules must at least be accompanied by an





explanation of why the party-litigant failed to comply with the rules and by a justification for the requested liberal construction.

x x x x x x x x x

x x x. Section 3, Article IX-C of the Constitution expressly requires that the COMELEC’s rules of procedure should expedite the disposition of election cases. This Court labors under the same command, as our proceedings are in fact the constitutional extension of cases that start with the COMELEC.

Based on these considerations, we do not find convenience and uniformity to be reasons sufficiently compelling to modify the required period for the filing of petitions for certiorari under Rule 64. While the petitioner is correct in his historical data about the Court’s treatment of the periods for the filing of the different modes of review, he misses out on the reason why the period under Section 3, Rule 64 has been retained. The reason, as made clear above, is constitutionally-based and is no less than the importance our Constitution accords to the prompt determination of election results.18 x x x. (Emphasis supplied, footnotes omitted.)

In this case, petitioners do not even attempt to explain why the Petition was filed out of time. Clearly, they are aware of the applicable period for filing, as they themselves invoke the remedy under Rule 64 in conjunction with Rule 65. Hence, there is no acceptable reason for their failure to comply with the proper procedure. But even if this Court were to apply liberality and take cognizance of the late Petition, the arguments therein are flawed. The COMELEC has jurisdiction over cases pertaining to party leadership and the nomination of party-list representatives.

Petitioners contend that the COMELEC never should have taken cognizance of respondents’ Petition to Expunge and/or for Disqualification. They have reached this conclusion by characterizing the present matter as an intra-corporate dispute and, thus, cognizable only by special commercial courts, particularly the designated commercial court in this case, the Regional Trial Court in Pasig City.19 Pia Derla purportedly filed the Certificate of Nomination pursuant to the authority granted by the Board of Trustees of the "CIBAC Foundation, Inc.," the non-stock entity that is registered with the Securities and Exchange Commission (SEC).20

Thus, petitioners insist that the group that participated in the party-list system in the 2004 and 2007 elections was the SEC-registered entity, and not the National Council, which had allegedly become defunct since 2003. That was the year when CIBAC Foundation, Inc. was established and registered with the SEC.21 On the other hand, respondents counter that the foundation was established solely for the purpose of acting as CIBAC’s legal and financial arm, as provided by the party’s Constitution and bylaws. It was never intended to substitute for, or oust CIBAC, the party-list itself.22

Even as petitioners insisted on the purely intra-corporate nature of the conflict between "CIBAC Foundation" and the CIBAC Sectoral Party, they submitted their Certificate of Nomination and Manifestation of Intent to participate in the party-list elections. Precisely, petitioners were seeking the COMELEC’s approval of their eligibility to participate in the upcoming party-list elections. In effect, they invoke its authority under the Party-List System Act.23 Contrary to their stance that the present dispute stemmed from an intra-corporate matter, their submissions even recognize the COMELEC’s constitutional power to enforce and administer all laws relative to the conduct of an election, plebiscite, initiative, referendum, and recall.24 More specifically, as one of its constitutional functions, the COMELEC is also tasked to "register, after sufficient publication, political parties, organizations, or coalitions which, in addition to other requirements, must present their platform or program of government."25









In any case, the COMELEC’s jurisdiction to settle the struggle for leadership within the party is well established. This singular power to rule upon questions of party identity and leadership is exercised by the COMELEC as an incident to its enforcement powers. In Laban ng Demokratikong Pilipino v. Commission on Elections,26 the Court held:

x x x. Corollary to the right of a political party "to identify the people who constitute the association and to select a standard bearer who best represents the party’s ideologies and preference" is the right to exclude persons in its association and to not lend its name and prestige to those which it deems undeserving to represent its ideals. A certificate of candidacy makes known to the COMELEC that the person therein mentioned has been nominated by a duly authorized political group empowered to act and that it reflects accurately the sentiment of the nominating body. A candidate’s political party affiliation is also printed followed by his or her name in the certified list of candidates. A candidate misrepresenting himself or herself to be a party’s candidate, therefore, not only misappropriates the party’s name and prestige but foists a deception upon the electorate, who may unwittingly cast its ballot for him or her on the mistaken belief that he or she stands for the party’s principles. To prevent this occurrence, the COMELEC has the power and the duty to step in and enforce the law not only to protect the party but, more importantly, the electorate, in line with the Commission’s broad constitutional mandate to ensure orderly elections.27 (Emphasis supplied.)

Similar to the present case, Laban delved into the issue of leadership for the purpose of determining which officer or member was the duly authorized representative tasked with filing the Certificate of Nomination, pursuant to its Constitution and bylaws, to wit:

The only issue in this case, as defined by the COMELEC itself, is who as between the Party Chairman and the Secretary General has the authority to sign certificates of candidacy of the official candidates of the party. Indeed, the petitioners’ Manifestation and Petition before the

COMELEC merely asked the Commission to recognize only those certificates of candidacy signed by petitioner Sen. Angara or his authorized representative, and no other.28

In the 2010 case Atienza v. Commission on Elections,29 it was expressly settled that the COMELEC possessed the authority to resolve intra-party disputes as a necessary tributary of its constitutionally mandated power to enforce election laws and register political parties. The Court therein cited Kalaw v. Commission on Elections and Palmares v. Commission on Elections, which uniformly upheld the COMELEC’s jurisdiction over intra-party disputes:

The COMELEC’s jurisdiction over intra-party leadership disputes has already been settled by the Court. The Court ruled in Kalaw v. Commission on Elections that the COMELEC’s powers and functions under Section 2, Article IX-C of the Constitution, "include the ascertainment of the identity of the political party and its legitimate officers responsible for its acts." The Court also declared in another case that the COMELEC’s power to register political parties necessarily involved the determination of the persons who must act on its behalf. Thus, the COMELEC may resolve an intra-party leadership dispute, in a proper case brought before it, as an incident of its power to register political parties.30

Furthermore, matters regarding the nomination of party-list representatives, as well as their individual qualifications, are outlined in the Party-List System Law. Sections 8 and 9 thereof state: Sec. 8. Nomination of Party-List Representatives. Each registered party, organization or coalition shall submit to the COMELEC not later than forty-five (45) days before the election a list of names, not less than five (5), from which party-list representatives shall be chosen in case it obtains the required number of votes.






A person may be nominated in one (1) list only. Only persons who have given their consent in writing may be named in the list. The list shall not include any candidate for any elective office or a person who has lost his bid for an elective office in the immediately preceding election. No change of names or alteration of the order of nominees shall be allowed after the same shall have been submitted to the COMELEC except in cases where the nominee dies, or withdraws in writing his nomination, becomes incapacitated in which case the name of the substitute nominee shall be placed last in the list. Incumbent sectoral representatives in the House of Representatives who are nominated in the party-list system shall not be considered resigned.

Sec. 9. Qualifications of Party-List Nominees. No person shall be nominated as party-list representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of the Philippines for a period of not less than one (1)year immediately preceding the day of the election, able to read and write, a bona fide member of the party or organization which he seeks to represent for at least ninety (90) days preceding the day of the election, and is at least twenty-five (25) years of age on the day of the election.

By virtue of the aforesaid mandate of the Party-List Law vesting the COMELEC with jurisdiction over the nomination of party-list representatives and prescribing the qualifications of each nominee, the COMELEC promulgated its "Rules on Disqualification Cases Against Nominees of Party-List Groups/ Organizations Participating in the 10 May 2010 Automated National and Local Elections."31 Adopting the same qualifications of party-list nominees listed above, Section 6 of these Rules also required that:

The party-list group and the nominees must submit documentary evidence in consonance with the Constitution, R.A. 7941 and other laws to duly prove that the nominees truly belong to the marginalized and underrepresented sector/s, the sectoral party, organization, political party or coalition they seek to represent, which may include but not limited to the following:

a. Track record of the party-list group/organization showing active participation of the nominee/s in the undertakings of the party-list group/organization for the advancement of the marginalized and underrepresented sector/s, the sectoral party, organization, political party or coalition they seek to represent;

b. Proofs that the nominee/s truly adheres to the advocacies of the party-list group/organizations (prior declarations, speeches, written articles, and such other positive actions on the part of the nominee/s showing his/her adherence to the advocacies of the party-list group/organizations);

c. Certification that the nominee/s is/are a bona fide member of the party-list group/ organization for at least ninety (90) days prior to the election; and

d. In case of a party-list group/organization seeking representation of the marginalized and underrepresented sector/s, proof that the nominee/s is not only an advocate of the party-list/organization but is/are also a bona fide member/s of said marginalized and underrepresented sector.

The Law Department shall require party-list group and nominees to submit the foregoing documentary evidence if not complied with prior to the effectivity of this resolution not later than three (3) days from the last day of filing of the list of nominees.

Contrary to petitioners’ stance, no grave abuse of discretion is attributable to the COMELEC First Division and the COMELEC en banc. 1âwphi1 The tribunal correctly found that Pia Derla’s alleged authority


as "acting secretary-general" was an unsubstantiated allegation devoid of any supporting evidence. Petitioners did not submit any documentary evidence that Derla was a member of CIBAC, let alone the representative authorized by the party to submit its Certificate of Nomination.32 The COMELEC ruled:

A careful perusal of the records readily shows that Pia B. Derla, who has signed and submitted, as the purported Acting Secretary General of CIBAC, the Certificates of Nomination of Respondents, has no authority to do so. Despite Respondents’ repeated claim that Ms. Derla is a member and officer of CIBAC, they have not presented any proof in support of the same. We are at a loss as to the manner by which Ms. Derla has assumed the post, and We see nothing but Respondents’ claims and writings/certifications by Ms. Derla herself that point to that alleged fact. Surely, We cannot rely on these submissions, as they are the very definition of self-serving declarations.

On the other hand…We cannot help but be convinced that it was Emmanuel Joel J. Villanueva, as the Party President and Chairman, who had been given the sole authority, at least for the 10 May 2010 Elections, to submit the list of nominees for the Party. The records would show that, in accordance with the Party’s Constitution and by-laws, its National Council, the highest policymaking and governing body of the Party, met on 12 November 2009 and there being a quorum, then proceeded to elect its new set of officers, which included Mr. Villanueva as both Party President and Party Chairman, and Virginia S. Jose as Party Secretary General. During the same meeting, the Party’s New Electoral Congress, which as per the CIBAC’s Constitution and By-Laws, was also composed of the National Council Members and had the task of choosing the nominees for the Party in the Party-List Elections, unanimously ruled to delegate to the Party President such latter function. This set of facts, which had not been belied by concrete contrary evidence, weighed heavily against Respondents and favorably for Petitioner.33

Pia Derla, who is not even a member of CIBAC, is thus a virtual stranger to the party-list, and clearly not qualified to attest to petitioners as CIBAC nominees, or certify their nomination to the COMELEC. Petitioners cannot use their registration with the SEC as a substitute for the evidentiary requirement to show that the nominees, including Derla, are bona fide members of the party. Petitioners Planas and Lokin, Jr. have not even presented evidence proving the affiliation of the so-called Board of Trustees to the CIBAC Sectoral Party that is registered with COMELEC.

Petitioners cannot draw authority from the Board of Trustees of the SEC-registered entity, because the Constitution of CIBAC expressly mandates that it is the National Council, as the governing body of CIBAC, that has the power to formulate the policies, plans, and programs of the Party, and to issue decisions and resolutions binding on party members and officers.34 Contrary to petitioners’ allegations, the National Council of CIBAC has not become defunct, and has certainly not been replaced by the Board of Trustees of the SEC-registered entity. The COMELEC carefully perused the documents of the organization and outlined the process followed by the National Council before it complied with its task of choosing the party’s nominees.This was based on the "Minutes of Meeting of CIBAC Party-List National Council" held on 12 November 2009, which respondents attached to their Memorandum.35

For its part, the COMELEC en banc also enumerated the documentary evidence that further bolstered respondents’ claim that it is Chairman Villanueva and Secretary General Virginia Jose who were duly authorized to submit the Certificate of Nomination to the COMELEC.36 These include:

a. The Joint Affidavit of Resolutions of the CIBAC National Council and the National Electoral Congress of CIBAC dated 12 November 2009;






b. Certificate of Deputization and Delegation of Authority issued to CIBAC Secretary-General Virginia S. Jose by the CIBAC President;

c. Constitution and By-Laws of CIBAC as annexed to its Petition for Registration as Sectoral Organization Under the Party-List System filed by CIBAC on 13 November 2000; and

d. Manifestation dated 8 January 2010 by CIBAC’s Secretary General Virginia S. Jose providing the official list of officers of CIBAC.37

WHEREFORE , finding no grave abuse of discretion on the part of the COMELEC in issuing the assailed Resolutions, the instant Petition is DISMISSED. This Court AFFIRMS the judgment of the COMELEC expunging from its records the Certificate of Nomination filed on 26 March 2010 by Pia B. Derla. The nominees, as listed in the Certificate of Nomination filed on 19 January 2010 by Emmanuel Joel J. Villanueva, President and Chairman of Citizens’ Battle Against Corruption (CIBAC) Party List, are recognized as the legitimate nominees of the said party.

SO ORDERED.


EN BANC

G.R. No. 188818 May 31, 2011

TOMAS R. OSMEÑA, in his personal capacity and in his capacity as City Mayor of Cebu City, Petitioner, vs.THE COMMISSION ON AUDIT, Respondent.

D E C I S I O N

BRION, J.:

Before the Court is the Petition for Certiorari1 filed by Tomas R. Osmeña, former mayor of the City of Cebu, under Rule 64 of the Rules of Court. The petition seeks the reversal of the May 6, 2008 Decision2 and the June 8, 2009 Resolution3 of the respondent Commission on Audit (COA), which disallowed the damages, attorney’s fees and litigation expenses awarded in favor of two construction companies in the collection cases filed against the City of Cebu, and made these charges the personal liability of Osmeña for his failure to comply with the legal requirements for the disbursement of public funds.

BACKGROUND FACTS





The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for the games, the City engaged the services of WT Construction, Inc. (WTCI) and Dakay Construction and Development Company (DCDC) to construct and renovate the Cebu City Sports Complex. Osmeña, then city mayor, was authorized by the Sangguniang Panlungsod (Sanggunian) of Cebu to represent the City and to execute the construction contracts.

While the construction was being undertaken, Osmeña issued a total of 20 Change/Extra Work Orders to WTCI, amounting to P35,418,142.42 (about 83% of the original contract price), and to DCDC, amounting toP15,744,525.24 (about 31% of the original contract price). These Change/Extra Work Orders were not covered by any Supplemental Agreement, nor was there a prior authorization from the Sanggunian. Nevertheless, the work proceeded on account of the "extreme urgency and need to have a suitable venue for the Palaro."4 The Palaro was successfully held at the Cebu City Sports Complex during the first six months of 1994.

Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the construction and renovation of the sports complex. A Sanggunian member, Councilor Augustus Young, sponsored a resolution authorizing Osmeña to execute the supplemental agreements with WTCI and DCDC to cover the extra work performed, but the other Sanggunian members refused to pass the resolution. Thus, the extra work completed by WTCI and DCDC was not covered by the necessary appropriation to effect payment, prompting them to file two separate collection cases before the Regional Trial Court (RTC) of Cebu City (Civil Case Nos. CEB-170045 and CEB-171556 ). The RTC found the claims meritorious, and ordered the City to pay for the extra work performed.The RTC likewise awarded damages, litigation expenses and attorney’s fees in the amount ofP2,514,255.40 to WTCI7 and P102,015.00 to DCDC.8 The decisions in favor of WTCI and DCDC were affirmed on appeal, subject to certain modifications as to the amounts due, and have become final. To satisfy the judgment debts, the Sanggunian finally passed the required appropriation ordinances.

During post-audit, the City Auditor issued two notices disallowing the payment of litigation expenses, damages, and attorney’s fees to WTCI and DCDC.9 The City Auditor held Osmeña, the members of the Sanggunian, and the City Administrator liable for the P2,514,255.40 and P102,015.00 awarded to WTCI and DCDC, respectively, as damages, attorney’s fees, and interest charges. These amounts, the City Auditor concluded, wereunnecessary expenses for which the public officers should be held liable in their personal capacities pursuant to the law.

Osmeña and the members of the Sanggunian sought reconsideration of the disallowance with the COA Regional Office, which, through a 2nd Indorsement dated April 30, 2003,10 modified the City Auditor’s Decision by absolving the members of the sanggunian from any liability. It declared that the payment of the amounts awarded as damages and attorney’s fees should solely be Osmeña’s liability, as it was him who ordered the change or extra work orders without the supplemental agreement required by law, or the prior authorization from the Sanggunian. The Sanggunian members cannot be held liable for refusing to enact the necessary ordinance appropriating funds for the judgment award because they are supposed to exercise their own judgment and discretion in the performance of their functions; they cannot be mere "rubber stamps" of the city mayor.

The COA Regional Office’s Decision was sustained by the COA’s National Director for Legal and Adjudication (Local Sector) in a Decision dated January 16, 2004.11 Osmeña filed an appeal against this Decision.









On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of disallowance.12 Osmeña received a copy of the Decision on May 23, 2008. Eighteen days after or on June 10, 2008, Osmeña filed a motion for reconsideration of the May 6, 2008 COA Decision.

The COA denied Osmeña’s motion via a Resolution dated June 8, 2009.13 The Office of the Mayor of Cebu City received the June 8, 2009 Resolution of the COA on June 29, 2009. A day before, however, Osmeña left for the United States of America for his check-up after his cancer surgery in April 2009 and returned to his office only on July 15, 2009. Thus, it was only on July 27, 2009 that Osmeña filed the present petition for certiorari under Rule 64 to assail the COA’s Decision of May 6, 2008 and Resolution of June 8, 2009.

THE PETITION

Rule 64 of the Rules of Court governs the procedure for the review of judgments and final orders or resolutions of the Commission on Elections and the COA. Section 3 of the same Rule provides for a 30-day period, counted from the notice of the judgment or final order or resolution sought to be reviewed, to file the petition for certiorari. The Rule further states that the filing of a motion for reconsideration of the said judgment or final order or resolution interrupts the 30-day period.

Osmeña filed his motion for reconsideration, of the COA’s May 6, 2008 Decision, 18 days from his receipt thereof, leaving him with 12 days to file a Rule 64 petition against the COA ruling. He argues that the remaining period should be counted not from the receipt of the COA’s June 8, 2009 Resolution by the Office of the Mayor of Cebu City on June 29, 2009, but from the time he officially reported back to his office on July 15, 2009, after his trip abroad. Since he is being made liable in his personal capacity, he reasons that the remaining period should be counted from his actual knowledge of the denial of his motion for reconsideration. Corollary, he needed time to hire a private counsel who would review his case and prepare the petition.

Osmeña pleads that his petition be given due course for the resolution of the important issues he raised. The damages and interest charges were awarded on account of the delay in the payment of the extra work done by WTCI and DCDC, which delay Osmeña attributes to the refusal of the Sanggunian to appropriate the necessary amounts. Although Osmeña acknowledges the legal necessity for a supplemental agreement for any extra work exceeding 25% of the original contract price, he justifies the immediate execution of the extra work he ordered (notwithstanding the lack of the supplemental agreement) on the basis of the extreme urgency to have the construction and repairs on the sports complex completed in time for the holding of the Palaro. He claims that the contractors themselves did not want to embarrass the City and, thus, proceeded to perform the extra work even without the supplemental agreement.

Osmeña also points out that the City was already adjudged liable for the principal sum due for the extra work orders and had already benefitted from the extra work orders by accepting and using the sports complex for the Palaro. For these reasons, he claims that all consequences of the liability imposed, including the payment of damages and interest charges, should also be shouldered by the City and not by him.

THE COURT’S RULING

Relaxation of procedural rules to give effect to a party’s right to appeal

Section 3, Rule 64 of the Rules of Court states:



SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial. [Emphasis ours.]

Several times in the past, we emphasized that procedural rules should be treated with utmost respect and due regard, since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. From time to time, however, we have recognized exceptions to the Rules but only for the most compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends of justice. Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of why the party-litigant failed to comply with the Rules and by a justification for the requested liberal construction.14 Where strong considerations of substantive justice are manifest in the petition, this Court may relax the strict application of the rules of procedure in the exercise of its legal jurisdiction.15

Osmeña cites the mandatory medical check-ups he had to undergo in Houston, Texas after his cancer surgery in April 2009 as reason for the delay in filing his petition for certiorari. Due to his weakened state of health, he claims that he could not very well be expected to be bothered by the affairs of his office and had to focus only on his medical treatment. He could not require his office to attend to the case as he was being charged in his personal capacity.

We find Osmeña’s reasons sufficient to justify a relaxation of the Rules. Although the service of the June 8, 2009 Resolution of the COA was validly made on June 29, 2009 through the notice sent to the Office of the Mayor of Cebu City,16 we consider July 15, 2009 – the date he reported back to office – as the effective date when he was actually notified of the resolution, and the reckoning date of the period to appeal. If we were to rule otherwise, we would be denying Osmeña of his right to appeal the Decision of the COA, despite the merits of his case.

Moreover, a certiorari petition filed under Rule 64 of the Rules of Court must be verified, and a verification requires the petitioner to state under oath before an authorized officer that he has read the petition and that the allegations therein are true and correct of his personal knowledge. Given that Osmeña was out of the country to attend to his medical needs, he could not comply with the requirements to perfect his appeal of the Decision of the COA.

While the Court has accepted verifications executed by a petitioner’s counsel who personally knows the truth of the facts alleged in the pleading, this was an alternative not available to Osmeña, as he had yet to secure his own counsel. Osmeña could not avail of the services of the City Attorney, as the latter is authorized to represent city officials only in their official capacity.17 The COA pins liability for the amount of damages paid to WTCI and DCDC on Osmeña in his personal capacity, pursuant to Section 103 of Presidential Decree No. 1445 (PD 1445).18

Thus, the reckoning date to count the remaining 12 days to file his Rule 64 petition should be counted from July 15, 2009, the date Osmeña had actual knowledge of the denial of his motion for reconsideration of the Decision of the COA and given the opportunity to competently file an appeal thereto before the Court. The present petition, filed on July 27, 2009, was filed within the reglementary period.

Personal liability for expenditures of government fund when made in violation of law






The Court’s decision to adopt a liberal application of the rules stems not only from humanitarian considerations discussed earlier, but also on our finding of merit in the petition.

Section 103 of PD 1445 declares that "[e]xpenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor." Notably, the public official’s personal liability arises only if the expenditure of government funds was made in violation of law. In this case, the damages were paid to WTCI and DCDC pursuant to final judgments rendered against the City for its unreasonable delay in paying its obligations. The COA, however, declared that the judgments, in the first place, would not be rendered against the City had it not been for the change and extra work orders that Osmeña made which (a) it considered as unnecessary, (b) were without the Sanggunian’s approval, and (c) were not covered by a supplemental agreement.

The term "unnecessary," when used in reference to expenditure of funds or uses of property, is relative. In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al.,19 we ruled that "[c]ircumstances of time and place, behavioural and ecological factors, as well as political, social and economic conditions, would influence any such determination. x x x [T]ransactions under audit are to be judged on the basis of not only the standards of legality but also those of regularity, necessity, reasonableness and moderation." The 10-page letter of City Administrator Juan Saul F. Montecillo to the Sanggunian explained in detail the reasons for each change and extra work order; most of which were made to address security and safety concerns that may arise not only during the holding of the Palaro, but also in other events and activities that may later be held in the sports complex. Comparing this with the COA’s general and unsubstantiated declarations that the expenses were "not essential"20 and not "dictated by the demands of good government,"21 we find that the expenses incurred for change and extra work orders were necessary and justified.

The COA considers the change and extra work orders illegal, as these failed to comply with Section III, C1 of the Implementing Rules and Regulations of Presidential Decree No. 1594,22 which states that:

5. Change Orders or Extra Work Orders may be issued on a contract upon the approval of competent authorities provided that the cumulative amount of such Change Orders or Extra Work Orders does not exceed the limits of the former's authority to approve original contracts.

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where the works involved are inseparable from the original scope of the project in which case negotiation with the incumbent contractor may be allowed, subject to approval by the appropriate authorities. [Emphases ours.]

Reviewing the facts of the case, we find that the prevailing circumstances at the time the change and extra work orders were executed and completed indicate that the City of Cebu tacitly approved these orders, rendering a supplemental agreement or authorization from the Sanggunian unnecessary. 1âwphi1

The Pre-Qualification, Bids and Awards Committee (PBAC), upon the recommendation of the Technical Committee and after a careful deliberation, approved the change and extra work orders. It bears pointing out that two members of the PBAC were members of the Sanggunian as well – Rodolfo Cabrera (Chairman, Committee on Finance) and Ronald Cuenco (Minority Floor Leader). A COA representative was also present during the deliberations of the PBAC. None of these officials voiced any objection to the lack of a prior authorization from the Sanggunian or a supplemental agreement. The RTC Decision in fact mentioned that the Project Post Completion Report and





Acceptance was approved by an authorized representative of the City of Cebu on September 21, 1994.23 "[a]s the projects had been completed, accepted and used by the [City of Cebu]," the RTC ruled that there is "no necessity of [executing] a supplemental agreement."24 Indeed, as we declared in Mario R. Melchor v. COA,25 a supplemental agreement to cover change or extra work orders is not always mandatory, since the law adopts the permissive word "may." Despite its initial refusal, the Sanggunian was eventually compelled to enact the appropriation ordinance in order to satisfy the RTC judgments. Belated as it may be, the enactment of the appropriation ordinance, nonetheless, constitutes as sufficient compliance with the requirements of the law. It serves as a confirmatory act signifying the Sanggunian’s ratification of all the change and extra work orders issued by Osmeña. In National Power Corporation (NPC) v. Hon. Rose Marie Alonzo-Legasto, etc., et al.,26 the Court considered the compromise agreement between the NPC and the construction company as a ratification of the extra work performed, without prior approval from the NPC’s Board of Directors.

As in Melchor,27 we find it "unjust to order the petitioner to shoulder the expenditure when the government had already received and accepted benefits from the utilization of the [sports complex]," especially considering that the City incurred no substantial loss in paying for the additional work and the damages awarded. Apparently, the City placed in a time deposit the entire funds allotted for the construction and renovation of the sports complex. The interest that the deposits earned amounted to P12,835,683.15, more than enough to cover the damages awarded to WTCI (P2,514,255.40) and the DCDC (P102,015.00). There was "no showing that [the] petitioner was ill-motivated, or that [the petitioner] had personally profited or sought to profit from the transactions, or that the disbursements have been made for personal or selfish ends."28 All in all, the circumstances showed that Osmeña issued the change and extra work orders for the City’s successful hosting of the Palaro, and not for any other "nefarious endeavour."29

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioner’s Petition for Certiorari filed under Rule 64 of the Rules of Court. The respondent’s Decision of May 6, 2008 and Resolution of June 8, 2009 are SET ASIDE.

SO ORDERED.

ARTURO D. BRIONAssociate Justice

WE CONCUR:









EN BANC

G.R. No. 168296 January 31, 2007

FELOMINO V. VILLAGRACIA, Petitioner, vs.COMMISSION ON ELECTIONS and RENATO V. DE LA PUNTA, Respondents.

D E C I S I O N

PUNO, CJ:

At bar is a Petition for Certiorari under Rule 64 of the Rules of Court with Urgent Prayer for Issuance of Temporary Restraining Order. Petitioner was proclaimed as winning candidate for the position of Punong Barangay in Barangay Caawigan, Talisay, Camarines Norte, in the July 15, 2002 barangay elections by a margin of six (6) votes.

Private respondent filed an election protest with the Municipal Trial Court of Talisay, Camarines Norte, under Election Case No. 001-2002. After the revision of ballots, the trial court invalidated thirty-four (34) of the ballots for being marked. All 34 marked ballots were deducted from the votes of petitioner.

On December 3, 2003, the trial court adjudged private respondent as the true winner and nullified the proclamation of petitioner, viz.:

WHEREFORE, the Court finds the Protestant Renato dela Punta as the duly elected Punong Barangay of Caawigan, Talisay, Camarines Norte with the total valid vote[s] of 187 or a winning margin of 26 votes.

The earlier proclamation made by the Barangay Board of Canvassers of Precinct No. 15-A and 15-A-2 and 15-A-1 of Barangay Caawigan, Talisay, Camarines Norte is declared null and void.1

Petitioner appealed the decision with the First Division of the Commission on Elections (COMELEC) raising for the first time on appeal the issue that the trial court lacked jurisdiction over the election protest for failure of private respondent to pay the correct filing fees.

The First Division, through its Resolution2 dated September 9, 2004, set aside the decision of the trial court and dismissed the election protest of private respondent for lack of jurisdiction, viz.:

The payment credited to the general fund which could be considered as filing fee is incomplete considering that Section 6 of Rule 37 of the [COMELEC] Rules on Procedure requires that it should be One Hundred (P100.00) Pesos. Hence, the trial court could not have acquired jurisdiction over the [private respondent’s] case.3

Private respondent moved for reconsideration. In an Order4 dated October 7, 2004, the First Division elevated the motion for reconsideration to the COMELEC En Banc.

On June 1, 2005, the COMELEC En Banc promulgated its questioned Resolution granting the motion for reconsideration and reinstating the decision of the trial court. It issued a writ of execution5 on July 22, 2005 ordering petitioner to vacate his post as Punong Barangay of Barangay Caawigan, Talisay, Camarines Norte, in favor of private respondent.

Hence, this petition raising the following issues:

I

WHETHER THE COMMISSION ON ELECTIONS (COMELEC, FOR SHORT) GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT APPLYING THE SOLLER DOCTRINE IN THE INSTANT CASE[.]

II

WHETHER THE COMELEC ERRED IN CONCLUDING THAT THE USE OF THE WORDS "JOKER", "QUEEN", "ALAS", AND "KAMATIS", IN MORE THAN ONE BALLOT WOULD CONSTITUTE MARKED BALLOTS.6

Petitioner contends that had public respondent followed the doctrine in Soller v. COMELEC,7 it would have sustained the ruling of the First Division that the trial court lacked jurisdiction to hear the election protest due to private respondent’s failure to pay the correct filing fees.

We disagree. The Soller case is not on all fours with the case at bar. In Soller, petitioner therein filed with the trial court a motion to dismiss private respondent’s protest on the ground of, among others, lack of jurisdiction. In the case at bar, petitioner actively participated in the proceedings and








voluntarily submitted to the jurisdiction of the trial court. It was only after the trial court issued its decision adverse to petitioner that he raised the issue of jurisdiction for the first time on appeal with the COMELEC’s First Division.8

While it is true that a court acquires jurisdiction over a case upon complete payment of the prescribed filing fee, the rule admits of exceptions, as when a party never raised the issue of jurisdiction in the trial court. As we stated in Tijam v. Sibonghanoy, et al., viz.:9

xxx [I]t is too late for the loser to question the jurisdiction or power of the court. xxx [I]t is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.

It was therefore error on the part of the COMELEC’s First Division to indiscriminately apply Soller to the case at bar. As correctly pointed out by public respondent in its questioned Resolution, viz.:1avvphi1.net

xxx. Villagracia never assailed the proceedings of the trial court for lack of jurisdiction during the proceedings therein. Instead, he filed an Answer to the Protest on 2 August 2002 and then actively participated during the hearings and revision of ballots and subsequently filed his Formal Offer of Exhibits. The issue on the filing fees was never raised until the Decision adverse to his interest was promulgated by the trial court and only on [a]ppeal to the COMELEC. Necessarily, we apply the case of Alday vs. FGU Insurance Corporation where the Supreme Court instructed that "although the lack of jurisdiction of a court may be raised at any stage of the action, a party may be estopped from raising such questions if he has actively taken part in the very proceedings which he questions, belatedly objecting to the court’s jurisdiction in the event that the judgment or order subsequently rendered is adverse to him." Villagracia is therefore estopped from questioning the jurisdiction of the trial court only on [a]ppeal.10

As to the second issue, petitioner contends that in order to invalidate a ballot for being marked, it must appear that the voter has placed the mark to identify the ballot.11 Petitioner argues that the appearance of the words "Joker," "Alas," "Queen" and "Kamatis" in more than one ballot cannot identify the ballot of a voter so as to violate the secrecy of votes. Thus, the votes should be counted in his favor.12

There are 34 marked ballots in the case at bar. Fourteen (14) ballots are marked with the word "Joker"; six (6) ballots with the word "Alas"; seven (7) ballots with the word "Queen"; and, seven (7) ballots with the word "Kamatis." These ballots were all deducted by the trial court from the votes of petitioner. While each of these words appears in more than one ballot and may not identify a particular voter, it is not necessary that the marks in a ballot should be able to specifically identify a particular voter.13 We have ruled that the distinction should always be between marks that were apparently carelessly or innocently made, which do not invalidate the ballot, and marks purposely placed thereon by the voter with a view to possible future identification, which invalidates it. The marks which shall be considered sufficient to invalidate the ballot are those which the voter himself deliberately placed on his ballot for the purpose of identifying it thereafter.14

In the case at bar, the marks indicate no other intention than to identify the ballots. The observation of public respondent on the appearance of the marks on the questioned ballots is apropos, viz.:

xxx. We take notice of the fact that these marks were all written in the number 7 slot of the list of Kagawad for Sangguniang Barangay. We further take notice that all these marks appear only in ballots wherein the Punong Barangay voted thereon is Jun Villagracia, the proclaimed winning candidate and herein [petitioner]. It is therefore indubitable that these ballots are indeed marked ballots.15









Finally, the present action is one of certiorari under Rule 64 of the Rules of Court where questions of fact cannot be raised. The familiar rule is that findings of fact of the [COMELEC] supported by substantial evidence shall be final and non-reviewable.16 There is no reason to depart from this rule.

IN VIEW WHEREOF, the petition is DISMISSED. The prayer for a Temporary Restraining Order is DENIED for being moot. The questioned Resolution of the COMELEC En Banc dated June 1, 2005 in EAC No. 1-2004 isAFFIRMED.

Costs against petitioner.

SO ORDERED.


Cases on Rules 62 to 64 Special Civil Actions

Documents

Transcript of Cases on Rules 62 to 64 Special Civil Actions