JURISDICTION

1. DUERO V. CA

G.R. No. 131282 January 4, 2002

GABRIEL L. DUERO, petitioner,

vs.
HON.COURT OF APPEALS, and BERNARDO A. ERADEL, respondents.

QUISUMBING, J.:

This petition for certiorari assails the Decisionl dated September 17, 1997, of the Court of Appeals in
CA-G.R. No. SP No.. 2340- UDK, entitled Bernardo Eradel vs. Non. Ermelino G. Andal, setting aside
all proceedings in Civil Case No.1075, Gabriel L. Duero vs. Bernardo Eradel, before the Branch 27 of
the Regional Trial Court of Tandag, Surigao del Sur .

The pertinent facts are as follow.

Sometime in 1988, according to petitioner, private respondent Bemardo Eradel2 entered and occupied
petitioner's land covered by Tax Declaration No. A-16-13-302, located in Baras, San Miguel, Surigao
del Sur. As shown in the tax declaration, the land had an assessed value of P5,240. When petitioner
politely informed private respondent that the land was his and requested the latter to vacate the land,
private respondent refused, but instead threatened him with bodily harm. Despite repeated demands,
private respondent remained steadfast in his refusal to leave the land.

On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of Possession and
Ownership with Damages and Attorney's Fees against private respondent and two others, namely,
Apolinario and Inocencio Ruena. Petitioner appended to the complaint the aforementioned tax
declaration. The counsel of the Ruenas asked for extension to file their Answer and was given until
July 18, 1995. Meanwhile, petitioner and the, Ruenas executed a compromise agreement, which
became the trial court's basis for a partial judgment rendered on January 12, 1996. In this agreement,
the Ruenas through their counsel, Atty. Eusebio Avila, entered into a Compromise Agreement with
herein petitioner, Gabriel Duero. Inter alia, the agreement stated that the Ruenas recognized and
bound themselves to respect the ownership and possession of Duero.3 Herein private respondent
Eradel was not a party to the agreement, and he was declared in default for failure to file his answer
to the complaint.4

Petitioner presented his evidence ex parte on February 13, 1996. On May 8, 1996, judgment was
rendered in his favor, and private respondent was ordered to peacefully vacate and turn over Lot
No.1065 Cad. 537-D to petitioner; pay petitioner P2,000 annual rental from 1988 up the time he
vacates the land, and P5,000 as attorney's fees and the cost of the suit.5 Private respondent received
a copy of the decision on May 25, 1996.
On June 10, 1996, private respondent filed a Motion for New Trial, alleging that he has been occupying
the land as a tenant of Artemio Laurente, Sr., since 1958. He explained that he turned over the
complaint and summons to Laurente in the honest belief that as landlord, the latter had a better right
to the land and was responsible to defend any adverse claim on it. However, the trial court denied the
motion for new trial.1âwphi1.nêt

Meanwhile, RED Conflict Case No.1029, an administrative case between petitioner and applicant-
contestants Romeo, Artemio and Jury Laurente, remained pending with the Office of the Regional
Director of the Department of Environment and Natural Resources in Davao City. Eventually, it was
forwarded to the DENR Regional Office in Prosperidad, Agusan del Sur .

On July 24, 1996, private respondent filed before the RTC a Petition for Relief from Judgment,
reiterating the same allegation in his Motion for New Trial. He averred that unless there is a
determination on who owned the land, he could not be made to vacate the land. He also averred that
the judgment of the trial court was void inasmuch as the heirs of Artemio Laurente, Sr., who are
indispensable parties, were not impleaded.

On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed Laurente, grandchildren
of Artemio who were claiming ownership of the land, filed a Motion for Intervention. The RTC denied
the motion.

On October 8, 1996, the trial court issued an order denying the Petition for Relief from Judgment. In a
Motion for Reconsideration of said order, private respondent alleged that the RTC had no jurisdiction
over the case, since the value of the land was only P5,240 and therefore it was under the jurisdiction
of the municipal trial court. On November 22, 1996, the RTC denied the motion for reconsideration.

On January 22, 1997, petitioner filed a Motion for Execution, which the RTC granted on January 28.
On February 18, 1997, Entry of Judgment was made of record and a writ of execution was issued by
the RTC on February 27,1997. On March 12,1997, private respondent filed his petition for certiorari
before the Court of Appeals.

The Court of Appeals gave due course to the petition, maintaining that private respondent is not
estopped from assailing the jurisdiction 'of the RTC, Branch 27 in Tandag, Surigao del Sur, when
private respondent filed with said court his Motion for Reconsideration And/Or Annulment of Judgment.
The Court of Appeals decreed as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. All proceedings in
"Gabriel L. Duero vs. Bernardo Eradel, et. al. Civil Case 1075" filed in the Court a quo, including
its Decision, Annex "E" of the petition, and its Orders and Writ of Execution and the turn over
of the property to the Private Respondent by the Sheriff of the Court a quo, are declared null
and void and hereby SET ASIDE, No pronouncement as to costs.

SO ORDERED.6

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

...THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT MA TTER OF THE
CASE.

II

...PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM QUESTIONING THE

JURISDICTION OF THE LOWER COURT EVEN AFTER IT SUCCESSFULLY SOUGHT
AFFIRMATIVE RELIEF THEREFROM.

III

...THE FAlLURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS JUSTIFIED. 7

The main issue before us is whether the Court of Appeals gravely abused its discretion when it held
that the municipal trial court had jurisdiction, and that private respondent was not estopped from
assailing the jurisdiction of the RTC after he had filed several motions before it. The secondary issue
is whether the Court of appeals erred in holding that private respondent's failure to file an answer to
the complaint was justified.

At the outset, however, we note that petitioner through counsel submitted to this Court pleadings that
contain inaccurate statements. Thus, on page 5 of his petition,8 we find that to bolster the claim that
the appellate court erred in holding that the RTC had no jurisdiction, petitioner pointed to Annex E9 of
his petition which supposedly is the Certification issued by the Municipal Treasurer of San Miguel,
Surigao, specifically containing the notation, "Note: Subject for General Revision Effective 1994." But
it appears that Annex E of his petition is not a Certification but a xerox copy of a Declaration of Real
Property. Nowhere does the document contain a notation, "Note: Subject for General Revision
Effective 1994." Petitioner also asked this Court to refer to Annex F,10 where he said the zonal value
of the disputed land was P1.40 per sq.m., thus placing the computed value of the land at the time the
complaint was filed before the RTC at P57,113.98, hence beyond the jurisdiction of the municipal court
and within the jurisdiction of the regional trial court. However, we find that these annexes are both
merely xerox copies. They are obviously without evidentiary weight or value.

Coming now to the principal issue, petitioner contends that respondent appellate court acted with
grave abuse of discretion. By "grave abuse of discretion" is meant such capricious and whimsical
exercise of judgment which is equivalent to an excess or a lack of jurisdiction. The abuse of discretion
must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform
a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an
arbitrary and despotic manner by reason of passion or hostility.11 But here we find that in its decision
holding that the municipal court has jurisdiction over the case and that private respondent was not
estopped from questioning the jurisdiction of the RTC, respondent Court of Appeals discussed the
facts on which its decision is grounded as well as the law and jurisprudence on the matter.12 Its action
was neither whimsical nor capricious.
Was private respondent estopped from questioning the jurisdiction of the RTC? In this case, we are in
agreement with the Court of Appeals that he was not. While participation in all stages of a case before
the trial court, including invocation of its authority in asking for affirmative relief, effectively bars a party
by estoppel from challenging the court's jurisdiction,13 we note that estoppel has become an equitable
defense that is both substantive and remedial and its successful invocation can bar a right and not
merely its equitable enforcement.14 Hence, estoppel ought to be applied with caution. For estoppel to
apply, the action giving rise thereto must be unequivocal and intentional because, if misapplied,
estoppel may become a tool of injustice.15

In the present case, private respondent questions the jurisdiction of RTC in Tandag, Surigao del Sur,
on legal grounds. Recall that it was petitioner who filed the complaint against private respondent and
two other parties before the said court,16 believing that the RTC had jurisdiction over his complaint.
But by then, Republic Act 769117amending BP 129 had become effective, such that jurisdiction already
belongs not to the RTC but to the MTC pursuant to said amendment. Private respondent, an
unschooled farmer, in the mistaken belief that since he was merely a tenant of the late Artemio
Laurente Sr., his landlord, gave the summons to a Hipolito Laurente, one of the surviving heirs of
Artemio Sr., who did not do anything about the summons. For failure to answer the complaint, private
respondent was declared in default. He then filed a Motion for New Trial in the same court and
explained that he defaulted because of his belief that the suit ought to be answered by his landlord. In
that motion he stated that he had by then the evidence to prove that he had a better right than petitioner
over the land because of his long, continuous and uninterrupted possession as bona-fide tenant-
lessee of the land.18 But his motion was denied. He tried an alternative recourse. He filed before the
RTC a Motion for Relief from Judgment. Again, the same court denied his motion, hence he moved
for reconsideration of the denial. In his Motion for Reconsideration, he raised for the first time the
RTC's lack of jurisdiction. This motion was again denied. Note that private respondent raised the issue
of lack of jurisdiction, not when the case was already on appeal, but when the case, was still before
the RTC that ruled him in default, denied his motion for new trial as well as for relief from judgment,
and denied likewise his two motions for reconsideration. After the RTC still refused to reconsider the
denial of private respondent's motion for relief from judgment, it went on to issue the order for entry of
judgment and a writ of execution.

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

Indeed, "...the trial court was duty-bound to take judicial notice of the parameters of its jurisdiction and
its failure to do so, makes its decision a 'lawless' thing."25

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

In holding that estoppel did not prevent private respondent from questioning the RTC's jurisdiction, the
appellate court reiterated the doctrine that estoppel must be applied only in exceptional cases, as its
misapplication could result in a miscarriage of justice. Here, we find that petitioner, who claims
ownership of a parcel of land, filed his complaint before a court without appropriate jurisdiction.
Defendant, a farmer whose tenancy status is still pending before the proper administrative agency
concerned, could have moved for dismissal of the case on jurisdictional grounds. But the farmer as
defendant therein could not be expected to know the nuances of jurisdiction and related issues. This
farmer, who is now the private respondent, ought not to be penalized when he claims that he made
an honest mistake when he initially submitted his motions before the RTC, before he realized that the
controversy was outside the RTC's cognizance but within the jurisdiction of the municipal trial court.
To hold him in estoppel as the RTC did would amount to foreclosing his avenue to obtain a proper
resolution of his case. Furthermore, if the RTC's order were to be sustained, he would be evicted from
the land prematurely, while RED Conflict Case No.1029 would remain unresolved. Such eviction on a
technicality if allowed could result in an injustice, if it is later found that he has a legal right to till the
land he now occupies as tenant-lessee.1âwphi1.nêt

Having determined that there was no grave abuse of discretion by the appellate court in ruling that
private respondent was not estopped from questioning the jurisdiction of the RTC, we need not tarry
to consider in detail the second issue. Suffice it to say that, given the circumstances in this case, no
error was committed on this score by respondent appellate court. Since the RTC had no jurisdiction
over the case, private respondent had justifiable reason in law not to file an answer, aside from the
fact that he believed the suit was properly his landlord's concern.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals
is AFFIRMED. The decision of the Regional Trial Court in Civil Case No.1075 entitled Gabriel L. Duero
vs. Bernardo Eradel, its Order that private respondent turn over the disputed land to petitioner, and
the Writ of Execution it issued, are ANNULLED and SET ASIDE. Costs against petitioner .
SO ORDERED.

2. DONATO V. CA

ANTONIO T. DONATO, petitioner,

vs.
COURT OF APPEALS, FILOMENO ARCEPE, TIMOTEO BARCELONA, IGNACIO BENDOL,
THELMA P. BULICANO, ROSALINDA CAPARAS, ROSITA DE COSTO, FELIZA DE GUZMAN,
LETICIA DE LOS REYES, ROGELIO GADDI, PAULINO GAJARDO, GERONIMO IMPERIAL,
HOMER IMPERIAL, ELVIRA LESLIE, CEFERINO LUGANA, HECTOR PIMENTEL, NIMFA
PIMENTEL, AURELIO G. ROCERO, ILUMINADA TARA, JUANITO VALLESPIN, and NARCISO
YABUT, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a "petition for review on certiorari" filed on July 17, 1997 which should be a petition for
certiorari under Rule 65 of the Rules of Court. It assails the Resolutions1 dated March 21, 1997 and
June 23, 1997 issued by the Court of Appeals in CA-G.R. SP No. 41394.2

The factual background of the case is as follows:

Petitioner Antonio T. Donato is the registered owner of a real property located at Ciriaco Tuason Street,
San Andres, Manila, covered by Transfer Certificate of Title No. 131793 issued by the Register of
Deeds of the City of Manila on November 24, 1978. On June 7, 1994, petitioner filed a complaint
before the Metropolitan Trial Court (Branch 26) of Manila (MeTC) for forcible entry and unlawful
detainer against 43 named defendants and "all unknown occupants" of the subject property.3

Petitioner alleges that: private respondents had oral contracts of lease that expired at the end of each
month but were impliedly renewed under the same terms by mere acquiescence or tolerance;
sometime in 1992, they stopped paying rent; on April 7, 1994, petitioner sent them a written demand
to vacate; the non-compliance with said demand letter constrained him to file the ejectment case
against them.4

Of the 43 named defendants, only 20 (private respondents,5 for brevity) filed a consolidated Answer
dated June 29, 1994 wherein they denied non-payment of rentals. They contend that they cannot be
evicted because the Urban Land Reform Law guarantees security of tenure and priority right to
purchase the subject property; and that there was a negotiation for the purchase of the lots occupied
by them but when the negotiation reached a passive stage, they decided to continue payment of
rentals and tendered payment to petitioner’s counsel and thereafter initiated a petition for consignation
of the rentals in Civil Case No. 144049 while they await the outcome of the negotiation to purchase.
Following trial under the Rule on Summary Procedure, the MeTC rendered judgment on September
19, 1994 against the 23 non-answering defendants, ordering them to vacate the premises occupied
by each of them, and to pay jointly and severally ₱10,000.00 per month from the date they last paid
their rent until the date they actually vacate, plus interest thereon at the legal rate allowed by law, as
well as ₱10,000.00 as attorney’s fees and the costs of the suit. As to the 20 private respondents, the
MeTC issued a separate judgment6 on the same day sustaining their rights under the Land Reform
Law, declaring petitioner’s cause of action as not duly warranted by the facts and circumstances of
the case and dismissing the case without prejudice.

Not satisfied with the judgment dismissing the complaint as against the private respondents, petitioner
appealed to the Regional Trial Court (Branch 47) of Manila (RTC).7 In a Decision8 dated July 5, 1996,
the RTC sustained the decision of the MeTC.

Undaunted, petitioner filed a petition for review with the Court of Appeals (CA for brevity), docketed as
CA-G.R. SP No. 41394. In a Resolution dated March 21, 1997, the CA dismissed the petition on two
grounds: (a) the certification of non-forum shopping was signed by petitioner’s counsel and not by
petitioner himself, in violation of Revised Circular No. 28-91;9 and, (b) the only annex to the petition is
a certified copy of the questioned decision but copies of the pleadings and other material portions of
the record as would support the allegations of the petition are not annexed, contrary to Section 3,
paragraph b, Rule 6 of the Revised Internal Rules of the Court of Appeals (RIRCA).10

On April 17, 1997, petitioner filed a Motion for Reconsideration,11 attaching thereto a photocopy of the
certification of non-forum shopping duly signed by petitioner himself12 and the relevant records of the
MeTC and the RTC.13 Five days later, or on April 22, 1997, petitioner filed a Supplement14 to his motion
for reconsideration submitting the duly authenticated original of the certification of non-forum shopping
signed by petitioner.15

In a Resolution16 dated June 23, 1997 the CA denied petitioner’s motion for reconsideration and its
supplement, ruling that "petitioner’s subsequent compliance did not cure the defect in the instant
petition."17

Hence, the present petition anchored on the following grounds:

I.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE PETITION BASED

ON HYPER-TECHNICAL GROUNDS BECAUSE:

A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SUPREME COURT CIRCULAR

NO. 28-91. MORE, PETITIONER SUBSEQUENTLY SUBMITTED DURING THE PENDENCY
OF THE PROCEEDINGS A DULY AUTHENTICATED CERTIFICATE OF NON-FORUM
SHOPPING WHICH HE HIMSELF SIGNED AND EXECUTED IN THE UNITED STATES.

B. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SECTION 3, RULE 6 OF THE

REVISED INTERNAL RULES OF THE COURT OF APPEALS. MORE, PETITIONER
 SUBSEQUENTLY SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS
COPIES OF THE RELEVANT DOCUMENTS IN THE CASES BELOW.

C. PETITIONER HAS A MERITORIOUS APPEAL, AND HE STANDS TO LOSE

SUBSTANTIAL PROPERTY IF THE APPEAL IS NOT GIVEN DUE COURSE. THE RULES
OF PROCEDURE MUST BE LIBERALLY CONSTRUED TO DO SUBSTANTIAL JUSTICE.

II.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT ALL THE
ELEMENTS OF UNLAWFUL DETAINER ARE PRESENT IN THE CASE AT BAR.

III.

RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT THE RTC MANILA, BRANCH
47, COMMITTED REVERSIBLE ERROR IN AFFIRMING THE FINDING OF MTC MANILA, BRANCH
26, THAT PRIVATE RESPONDENTS CANNOT BE EJECTED FROM THE SUBJECT PROPERTY
WITHOUT VIOLATING THEIR SECURITY OF TENURE EVEN IF THE TERM OF THE LEASE IS
MONTH-TO-MONTH WHICH EXPIRES AT THE END OF EACH MONTH. IN THIS REGARD,

A. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT TENANTS UNDER P.D. 1517
MAY BE EVICTED FOR NON-PAYMENT OF RENT, TERMINATION OF LEASE OR OTHER
GROUNDS FOR EJECTMENT.

B. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED "PRIORITY
RIGHT TO BUY THE LOT THEY OCCUPY" DOES NOT APPLY WHERE THE LANDOWNER
DOES NOT INTEND TO SELL THE SUBJECT PROPERTY, AS IN THE CASE AT BAR.

C. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN RULING THAT THE SUBJECT PROPERTY IS
LOCATED WITHIN A ZONAL IMPROVEMENT AREA OR APD.

D. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT PRIVATE RESPONDENTS’
NON-COMPLIANCE WITH THE CONDITIONS UNDER THE LAW RESULT IN THE WAIVER
OF PROTECTION AGAINST EVICTION.

E. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT PRIVATE RESPONDENTS
CANNOT BE ENTITLED TO PROTECTION UNDER P.D. 2016 SINCE THE GOVERNMENT
HAS NO INTENTION OF ACQUIRING THE SUBJECT PROPERTY.

F. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN FINDING THAT THERE IS AN ON-GOING
 NEGOTIATION FOR THE SALE OF THE SUBJECT PROPERTY AND THAT IT RENDERS
THE EVICTION OF PRIVATE RESPONDENTS PREMATURE.

G. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT THE RTC MANILA
COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE ALLEGED CASE FOR
CONSIGNATION DOES NOT BAR THE EVICTION OF PRIVATE RESPONDENTS.

IV.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS

SHOULD PAY PETITIONER A REASONABLE COMPENSATION FOR THEIR USE AND
OCCUPANCY OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT LEAST ₱10,000.00 PER
MONTH FROM THE DATE THEY LAST PAID RENT UNTIL THE TIME THEY ACTUALLY VACATE
THE SAME, WITH LEGAL INTEREST AT THE MAXIMUM RATE ALLOWED BY LAW UNTIL PAID.

V.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS

SHOULD PAY PETITIONER ATTORNEY’S FEES AND EXPENSES OF LITIGATION OF AT LEAST
₱20,000.00, PLUS COSTS.18

Petitioner submits that a relaxation of the rigid rules of technical procedure is called for in view of the
attendant circumstances showing that the objectives of the rule on certification of non-forum shopping
and the rule requiring material portions of the record be attached to the petition have not been glaringly
violated and, more importantly, the petition is meritorious.

The proper recourse of an aggrieved party from a decision of the CA is a petition for review
on certiorari under Rule 45 of the Rules of Court. However, if the error, subject of the recourse, is one
of jurisdiction, or the act complained of was perpetrated by a court with grave abuse of discretion
amounting to lack or excess of jurisdiction, the proper remedy available to the aggrieved party is a
petition for certiorari under Rule 65 of the said Rules. As enunciated by the Court in Fortich vs.
Corona:19

Anent the first issue, in order to determine whether the recourse of petitioners is proper or not, it is
necessary to draw a line between an error of judgment and an error of jurisdiction. An error of judgment
is one which the court may commit in the exercise of its jurisdiction, and which error is reviewable only
by an appeal. On the other hand, an error of jurisdiction is one where the act complained of was issued
by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of
discretion which is tantamount to lack or in excess of jurisdiction. This error is correctible only by the
extraordinary writ of certiorari.20 (Emphasis supplied).

Inasmuch as the present petition principally assails the dismissal of the petition on ground of
procedural flaws involving the jurisdiction of the court a quo to entertain the petition, it falls within the
ambit of a special civil action for certiorari under Rule 65 of the Rules of Court.
At the time the instant petition for certiorari was filed, i.e., on July 17, 1997, the prevailing rule is the
newly promulgated 1997 Rules of Civil Procedure. However, considering that the CA Resolution being
assailed was rendered on March 21, 1997, the applicable rule is the three-month reglementary period,
established by jurisprudence.21 Petitioner received notice of the assailed CA Resolution dismissing his
petition for review on April 4, 1997. He filed his motion reconsideration on April 17, 1997, using up
only thirteen days of the 90-day period. Petitioner received the CA Resolution denying his motion on
July 3, 1997 and fourteen days later, or on July 17, 1997, he filed a motion for 30-day extension of
time to file a "petition for review" which was granted by us; and petitioner duly filed his petition on
August 15, 1997, which is well-within the period of extension granted to him.

We now go to the merits of the case.

We find the instant petition partly meritorious.

The requirement regarding the need for a certification of non-forum shopping in cases filed before the
CA and the corresponding sanction for non-compliance thereto are found in the then prevailing
Revised Circular No. 28-91.22 It provides that the petitioner himself must make the certification against
forum shopping and a violation thereof shall be a cause for the summary dismissal of the multiple
petition or complaint. The rationale for the rule of personal execution of the certification by the
petitioner himself is that it is only the petitioner who has actual knowledge of whether or not he has
initiated similar actions or proceedings in other courts or tribunals; even counsel of record may be
unaware of such fact.23 The Court has ruled that with respect to the contents of the certification, the
rule on substantial compliance may be availed of. This is so because the requirement of strict
compliance with the rule regarding the certification of non-forum shopping simply underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its requirements
completely disregarded, but it does not thereby interdict substantial compliance with its provisions
under justifiable circumstances.24

The petition for review filed before the CA contains a certification against forum shopping but said
certification was signed by petitioner’s counsel. In submitting the certification of non-forum shopping
duly signed by himself in his motion for reconsideration,25 petitioner has aptly drawn the Court’s
attention to the physical impossibility of filing the petition for review within the 15-day reglementary
period to appeal considering that he is a resident of 1125 South Jefferson Street, Roanoke, Virginia,
U.S.A. were he to personally accomplish and sign the certification.

We fully agree with petitioner that it was physically impossible for the petition to have been prepared
and sent to the petitioner in the United States, for him to travel from Virginia, U.S.A. to the nearest
Philippine Consulate in Washington, D.C., U.S.A., in order to sign the certification before the Philippine
Consul, and for him to send back the petition to the Philippines within the 15-day reglementary period.
Thus, we find that petitioner has adequately explained his failure to personally sign the certification
which justifies relaxation of the rule.

We have stressed that the rules on forum shopping, which were precisely designed to promote and
facilitate the orderly administration of justice, should not be interpreted with such absolute literalness
as to subvert its own ultimate and legitimate objective26 which is simply to prohibit and penalize the
evils of forum-shopping.27 The subsequent filing of the certification duly signed by the petitioner himself
should thus be deemed substantial compliance, pro hac vice.

In like manner, the failure of the petitioner to comply with Section 3, paragraph b, Rule 6 of the RIRCA,
that is, to append to his petition copies of the pleadings and other material portions of the records as
would support the petition, does not justify the outright dismissal of the petition. It must be emphasized
that the RIRCA gives the appellate court a certain leeway to require parties to submit additional
documents as may be necessary in the interest of substantial justice. Under Section 3, paragraph d
of Rule 3 of the RIRCA,28 the CA may require the parties to complete the annexes as the court deems
necessary, and if the petition is given due course, the CA may require the elevation of a complete
record of the case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA.29 At any rate, petitioner
attached copies of the pleadings and other material portions of the records below with his motion for
reconsideration.30 In Jaro vs. Court of Appeals,31 the Court reiterated the doctrine laid down in Cusi-
Hernandez vs. Diaz32 and Piglas-Kamao vs. National Labor Relations Commission33 that subsequent
submission of the missing documents with the motion for reconsideration amounts to substantial
compliance which calls for the relaxation of the rules of procedure. We find no cogent reason to depart
from this doctrine.

Truly, in dismissing the petition for review, the CA had committed grave abuse of discretion amounting
to lack of jurisdiction in putting a premium on technicalities at the expense of a just resolution of the
case.

Needless to stress, "a litigation is not a game of technicalities."34 When technicality deserts its function
of being an aid to justice, the Court is justified in exempting from its operations a particular
case.35 Technical rules of procedure should be used to promote, not frustrate justice. While the swift
unclogging of court dockets is a laudable objective, granting substantial justice is an even more urgent
ideal.36

The Court’s pronouncement in Republic vs. Court of Appeals37 is worth echoing: "cases should be
determined on the merits, after full opportunity to all parties for ventilation of their causes and defenses,
rather than on technicality or some procedural imperfections. In that way, the ends of justice would be
better served."38 Thus, what should guide judicial action is that a party litigant is given the fullest
opportunity to establish the merits of his action or defense rather than for him to lose life, honor or
property on mere technicalities.39 This guideline is especially true when the petitioner has satisfactorily
explained the lapse and fulfilled the requirements in his motion for reconsideration,40 as in this case.

In addition, petitioner prays that we decide the present petition on the merits without need of remanding
the case to the CA. He insists that all the elements of unlawful detainer are present in the case. He
further argues that the alleged "priority right to buy the lot they occupy" does not apply where the
landowner does not intend to sell the subject property, as in the case; that respondents cannot be
entitled to protection under P.D. No. 2016 since the government has no intention of acquiring the
subject property, nor is the subject property located within a zonal improvement area; and, that
assuming that there is a negotiation for the sale of the subject property or a pending case for
consignation of rentals, these do not bar the eviction of respondents.
We are not persuaded. We shall refrain from ruling on the foregoing issues in the present petition for
certiorari. The issues involved are factual issues which inevitably require the weighing of evidence.
1âw phi 1

These are matters that are beyond the province of this Court in a special civil action for certiorari.
These issues are best addressed to the CA in the petition for review filed before it. As an appellate
court, it is empowered to require parties to submit additional documents, as it may find necessary, or
to receive evidence, to promote the ends of justice, pursuant to the last paragraph of Section 9, B.P.
Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, to wit:

The Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within
its original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings.

WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated March 21, 1997 and June
23, 1997 of the Court of Appeals in CA-G.R. SP No. 41394 are REVERSED and SET ASIDE. The
case is REMANDED to the Court of Appeals for further proceedings in CA-G.R. No. 41394, entitled,
"Antonio T. Donato vs. Hon. Judge of the Regional Trial Court of Manila, Branch 47, Filomeno Arcepe,
et al."

SO ORDERED.

3. GONZAGA V. CA

G.R. No. 144025 December 27, 2002

SPS. RENE GONZAGA and LERIO GONZAGA, petitioners,

vs.
HON. COURT OF APPEALS, Second Division, Manila,
HON. QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo City,
and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as Manager, respondents.

DECISION

CORONA, J.:

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

The records disclose that, sometime in 1970, petitioner-spouses purchased a parcel of land from
private respondent Lucky Homes, Inc., situated in Iloilo and containing an area of 240 square meters.
Said lot was specifically denominated as Lot No. 19 under Transfer Certificate of Title (TCT) No. 28254
and was mortgaged to the Social Security System (SSS) as security for their housing loan. Petitioners
then started the construction of their house, not on Lot No. 19 but on Lot No. 18, as private respondent
mistakenly identified Lot No. 18 as Lot No. 19. Upon realizing its error, private respondent, through its
general manager, informed petitioners of such mistake but the latter offered to buy Lot No. 18 in order
to widen their premises. Thus, petitioners continued with the construction of their house. However,
petitioners defaulted in the payment of their housing loan from SSS. Consequently, Lot No. 19 was
foreclosed by SSS and petitioners’ certificate of title was cancelled and a new one was issued in the
name of SSS. After Lot No. 19 was foreclosed, petitioners offered to swap Lot Nos. 18 and 19 and
demanded from private respondent that their contract of sale be reformed and another deed of sale
be executed with respect to Lot No. 18, considering that their house was built therein. However, private
respondent refused. This prompted petitioners to file, on June 13, 1996, an action for reformation of
contract and damages with the Regional Trial Court of Iloilo City, Branch 36, which was docketed as
Civil Case No. 17115.

On January 15, 1998, the trial court2 rendered its decision dismissing the complaint for lack of merit
and ordering herein petitioners to pay private respondent the amount of P10,000 as moral damages
and another P10,000 as attorney’s fees. The pertinent conclusion of the trial court reads as follows:

"Aware of such fact, the plaintiff nonetheless continued to stay in the premises of Lot 18 on the
proposal that he would also buy the same. Plaintiff however failed to buy Lot 18 and likewise defaulted
in the payment of his loan with the SSS involving Lot 19. Consequently Lot 19 was foreclosed and
sold at public auction. Thereafter TCT No. T-29950 was cancelled and in lieu thereof TCT No. T-86612
(Exh. ‘9’) was issued in favor of SSS. This being the situation obtaining, the reformation of instruments,
even if allowed, or the swapping of Lot 18 and Lot 19 as earlier proposed by the plaintiff, is no longer
feasible considering that plaintiff is no longer the owner of Lot 19, otherwise, defendant will be losing
Lot 18 without any substitute therefore (sic). Upon the other hand, plaintiff will be unjustly enriching
himself having in its favor both Lot 19 which was earlier mortgaged by him and subsequently
foreclosed by SSS, as well as Lot 18 where his house is presently standing.

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

On June 22, 1998, a writ of execution was issued by the trial court. Thus, on September 17, 1998,
petitioners filed an urgent motion to recall writ of execution, alleging that the court a quo had no
jurisdiction to try the case as it was vested in the Housing and Land Use Regulatory Board (HLURB)
pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). Conformably,
petitioners filed a new complaint against private respondent with the HLURB. Likewise, on June 30,
1999, petitioner-spouses filed before the Court of Appeals a petition for annulment of judgment,
premised on the ground that the trial court had no jurisdiction to try and decide Civil Case No. 17115.

In a decision rendered on December 29, 1999, the Court of Appeals denied the petition for annulment
of judgment, relying mainly on the jurisprudential doctrine of estoppel as laid down in the case of Tijam
vs. Sibonghanoy.4
Their subsequent motion for reconsideration having been denied, petitioners filed this instant petition,
contending that the Court of Appeals erred in dismissing the petition by applying the principle of
estoppel, even if the Regional Trial Court, Branch 36 of Iloilo City had no jurisdiction to decide Civil
Case No. 17115.

At the outset, it should be stressed that petitioners are seeking from us the annulment of a trial court
judgment based on lack of jurisdiction. Because it is not an appeal, the correctness of the judgment is
not in issue here. Accordingly, there is no need to delve into the propriety of the decision rendered by
the trial court.

Petitioners claim that the recent decisions of this Court have already abandoned the doctrine laid down
in Tijam vs. Sibonghanoy.5 We do not agree. In countless decisions, this Court has consistently held
that, while an order or decision rendered without jurisdiction is a total nullity and may be assailed at
any stage, active participation in the proceedings in the court which rendered the order or decision will
bar such party from attacking its jurisdiction. As we held in the leading case of Tijam vs. Sibonghanoy:6

"A party may be estopped or barred from raising a question in different ways and for different reasons.
Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches.

xxx

"It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against
his opponent and, after obtaining or failing to obtain such relief, repudiate, or question that same
jurisdiction x x x x [T]he question whether the court had jurisdiction either of the subject matter of the
action or of the parties was not important in such cases because the party is barred from such
conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but
for the reason that such a practice can not be tolerated –– obviously for reasons of public policy."

Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of Appeals;7 Ang Ping
vs. Court of Appeals;8 Salva vs. Court of Appeals;9 National Steel Corporation vs. Court of
Appeals;10 Province of Bulacan vs. Court of Appeals;11 PNOC Shipping and Transport Corporation vs.
Court of Appeals,12 this Court affirmed the rule that a party’s active participation in all stages of the
case before the trial court, which includes invoking the court’s authority to grant affirmative relief,
effectively estops such party from later challenging that same court’s jurisdiction.

In the case at bar, it was petitioners themselves who invoked the jurisdiction of the court a quo by
instituting an action for reformation of contract against private respondents. It appears that, in the
proceedings before the trial court, petitioners vigorously asserted their cause from start to finish. Not
even once did petitioners ever raise the issue of the court’s jurisdiction during the entire proceedings
which lasted for two years. It was only after the trial court rendered its decision and issued a writ of
execution against them in 1998 did petitioners first raise the issue of jurisdiction ─ and it was only
because said decision was unfavorable to them. Petitioners thus effectively waived their right to
question the court’s jurisdiction over the case they themselves filed.

Petitioners should bear the consequence of their act. They cannot be allowed to profit from their
omission to the damage and prejudice of the private respondent. This Court frowns upon the
undesirable practice of a party submitting his case for decision and then accepting the judgment but
only if favorable, and attacking it for lack of jurisdiction if not.13

Public policy dictates that this Court must strongly condemn any double-dealing by parties who are
disposed to trifle with the courts by deliberately taking inconsistent positions, in utter disregard of the
elementary principles of justice and good faith.14 There is no denying that, in this case, petitioners
never raised the issue of jurisdiction throughout the entire proceedings in the trial court. Instead, they
voluntarily and willingly submitted themselves to the jurisdiction of said court. It is now too late in the
day for them to repudiate the jurisdiction they were invoking all along.

WHEREFORE, the petition for review is hereby DENIED.

SO ORDERED.

4. ESCOBAL V GARCHITORENA

G.R. No. 124644 February 5, 2004

ARNEL ESCOBAL, petitioner,

vs
HON. FRANCIS GARCHITORENA, Presiding Justice of the Sandiganbayan, Atty. Luisabel
Alfonso-Cortez, Executive Clerk of Court IV of the Sandiganbayan, Hon. David C. Naval,
Presiding Judge of the Regional Trial Court of Naga City, Branch 21, Luz N. Nueca, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and
preliminary injunction filed by Arnel Escobal seeking the nullification of the remand by the Presiding
Justice of the Sandiganbayan of the records of Criminal Case No. 90-3184 to the Regional Trial Court
(RTC) of Naga City, Branch 21.

The petition at bench arose from the following milieu:

The petitioner is a graduate of the Philippine Military Academy, a member of the Armed Forces
of the Philippines and the Philippine Constabulary, as well as the Intelligence Group of the
Philippine National Police. On March 16, 1990, the petitioner was conducting surveillance
operations on drug trafficking at the Sa Harong Café Bar and Restaurant located along Barlin
St., Naga City. He somehow got involved in a shooting incident, resulting in the death of one
Rodney Rafael N. Nueca. On February 6, 1991, an amended Information was filed with the
RTC of Naga City, Branch 21, docketed as Criminal Case No. 90-3184 charging the petitioner
and a certain Natividad Bombita, Jr. alias "Jun Bombita" with murder. The accusatory portion
of the amended Information reads:
 That on or about March 16, 1990, in the City of Naga, Philippines, and within the jurisdiction
of this Honorable Court by virtue of the Presidential Waiver, dated June 1, 1990, with intent to
kill, conspiring and confederating together and mutually helping each other, did, then and
there, willfully, unlawfully and feloniously attack, assault and maul one Rodney Nueca and
accused 2Lt Arnel Escobal armed with a caliber .45 service pistol shoot said Rodney Nueca
thereby inflicting upon him serious, mortal and fatal wounds which caused his death, and as a
consequence thereof, complainant LUZ N. NUECA, mother of the deceased victim, suffered
actual and compensatory damages in the amount of THREE HUNDRED SIXTY-SEVEN
THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine Currency,
and moral and exemplary damages in the amount of ONE HUNDRED THIRTY-FIVE
THOUSAND (P135,000.00) PESOS, Philippine Currency.1

On March 19, 1991, the RTC issued an Order preventively suspending the petitioner from the service
under Presidential Decree No. 971, as amended by P.D. No. 1847. When apprised of the said order,
the General Headquarters of the PNP issued on October 6, 1992 Special Order No. 91, preventively
suspending the petitioner from the service until the case was terminated.2

The petitioner was arrested by virtue of a warrant issued by the RTC, while accused Bombita remained
at large. The petitioner posted bail and was granted temporary liberty.

When arraigned on April 9, 1991,3 the petitioner, assisted by counsel, pleaded not guilty to the offense
charged. Thereafter, on December 23, 1991, the petitioner filed a Motion to Quash4 the Information
alleging that as mandated by Commonwealth Act No. 408,5 in relation to Section 1, Presidential
Decree No. 1822 and Section 95 of R.A. No. 6975, the court martial, not the RTC, had jurisdiction over
criminal cases involving PNP members and officers.

Pending the resolution of the motion, the petitioner on June 25, 1993 requested the Chief of the PNP
for his reinstatement. He alleged that under R.A. No. 6975, his suspension should last for only 90
days, and, having served the same, he should now be reinstated. On September 23, 1993,6 the PNP
Region V Headquarters wrote Judge David C. Naval requesting information on whether he issued an
order lifting the petitioner’s suspension. The RTC did not reply. Thus, on February 22, 1994, the
petitioner filed a motion in the RTC for the lifting of the order of suspension. He alleged that he had
served the 90-day preventive suspension and pleaded for compassionate justice. The RTC denied the
motion on March 9, 1994.7 Trial thereafter proceeded, and the prosecution rested its case. The
petitioner commenced the presentation of his evidence. On July 20, 1994, he filed a Motion to
Dismiss8the case. Citing Republic of the Philippines v. Asuncion, et al.,9 he argued that since he
committed the crime in the performance of his duties, the Sandiganbayan had exclusive jurisdiction
over the case.

On October 28, 1994, the RTC issued an Order10 denying the motion to dismiss. It, however, ordered
the conduct of a preliminary hearing to determine whether or not the crime charged was committed by
the petitioner in relation to his office as a member of the PNP.

In the preliminary hearing, the prosecution manifested that it was no longer presenting any evidence
in connection with the petitioner’s motion. It reasoned that it had already rested its case, and that its
evidence showed that the petitioner did not commit the offense charged in connection with the
performance of his duties as a member of the Philippine Constabulary. According to the prosecution,
they were able to show the following facts: (a) the petitioner was not wearing his uniform during the
incident; (b) the offense was committed just after midnight; (c) the petitioner was drunk when the crime
was committed; (d) the petitioner was in the company of civilians; and, (e) the offense was committed
in a beerhouse called "Sa Harong Café Bar and Restaurant."11

For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990, he was at the Sa
Harong Café Bar and Restaurant at Barlin St., Naga City, to conduct surveillance on alleged drug
trafficking, pursuant to Mission Order No. 03-04 issued by Police Superintendent Rufo R. Pulido. The
petitioner adduced in evidence the sworn statements of Benjamin Cariño and Roberto Fajardo who
corroborated his testimony that he was on a surveillance mission on the aforestated date.12

On July 31, 1995, the trial court issued an Order declaring that the petitioner committed the crime
charged while not in the performance of his official function. The trial court added that upon the
enactment of R.A. No. 7975,13 the issue had become moot and academic. The amendatory law
transferred the jurisdiction over the offense charged from the Sandiganbayan to the RTC since the
petitioner did not have a salary grade of "27" as provided for in or by Section 4(a)(1), (3) thereof. The
trial court nevertheless ordered the prosecution to amend the Information pursuant to the ruling in
Republic v. Asuncion14 and R.A. No. 7975. The amendment consisted in the inclusion therein of an
allegation that the offense charged was not committed by the petitioner in the performance of his
duties/functions, nor in relation to his office.
lawphi1.nêt

The petitioner filed a motion for the reconsideration15 of the said order, reiterating that based on his
testimony and those of Benjamin Cariño and Roberto Fajardo, the offense charged was committed by
him in relation to his official functions. He asserted that the trial court failed to consider the exceptions
to the prohibition. He asserted that R.A. No. 7975, which was enacted on March 30, 1995, could not
be applied retroactively.16

The petitioner further alleged that Luz Nacario Nueca, the mother of the victim, through counsel,
categorically and unequivocably admitted in her complaint filed with the People’s Law Enforcement
Board (PLEB) that he was on an official mission when the crime was committed.

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

The RTC ordered the public prosecutor to file a Re-Amended Information and to allege that the offense
charged was committed by the petitioner in the performance of his duties/functions or in relation to his
office; and, conformably to R.A. No. 7975, to thereafter transmit the same, as well as the complete
records with the stenographic notes, to the Sandiganbayan, to wit:

WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and RECONSIDERED,
and it is hereby declared that after preliminary hearing, this Court has found that the offense
 charged in the Information herein was committed by the accused in his relation to his function
and duty as member of the then Philippine Constabulary.

Conformably with R.A. No. 7975 and the ruling of the Supreme Court in Republic v. Asuncion,
et al., G.R. No. 180208, March 11, 1994:

(1) The City Prosecutor is hereby ordered to file a Re-Amended Information alleging
that the offense charged was committed by the Accused in the performance of his
duties/functions or in relation to his office, within fifteen (15) days from receipt hereof;

(2) After the filing of the Re-Amended Information, the complete records of this case,
together with the transcripts of the stenographic notes taken during the entire
proceedings herein, are hereby ordered transmitted immediately to the Honorable
Sandiganbayan, through its Clerk of Court, Manila, for appropriate proceedings.17

On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the Executive Clerk of Court
IV, Atty. Luisabel Alfonso-Cortez, to return the records of Criminal Case No. 90-3184 to the court of
origin, RTC of Naga City, Branch 21. It reasoned that under P.D. No. 1606, as amended by R.A. No.
7975,18 the RTC retained jurisdiction over the case, considering that the petitioner had a salary grade
of "23." Furthermore, the prosecution had already rested its case and the petitioner had commenced
presenting his evidence in the RTC; following the rule on continuity of jurisdiction, the latter court
should continue with the case and render judgment therein after trial.

Upon the remand of the records, the RTC set the case for trial on May 3, 1996, for the petitioner to
continue presenting his evidence. Instead of adducing his evidence, the petitioner filed a petition for
certiorari, assailing the Order of the Presiding Justice of the Sandiganbayan remanding the records of
the case to the RTC.

The threshold issue for resolution is whether or not the Presiding Justice of the Sandiganbayan
committed a grave abuse of his discretion amounting to excess or lack of jurisdiction in ordering the
remand of the case to the RTC.

The petitioner contends that when the amended information was filed with the RTC on February 6,
1991, P.D. No. 1606 was still in effect. Under Section 4(a) of the decree, the Sandiganbayan had
exclusive jurisdiction over the case against him as he was charged with homicide with the imposable
penalty of reclusion temporal, and the crime was committed while in the performance of his duties. He
further asserts that although P.D. No. 1606, as amended by P.D. No. 1861 and by R.A. No. 7975
provides that crimes committed by members and officers of the PNP with a salary grade below "27"
committed in relation to office are within the exclusive jurisdiction of the proper RTC, the amendment
thus introduced by R.A. No. 7975 should not be applied retroactively. This is so, the petitioner asserts,
because under Section 7 of R.A. No. 7975, only those cases where trial has not begun in the
Sandiganbayan upon the effectivity of the law should be referred to the proper trial court.

The private complainant agrees with the contention of the petitioner. In contrast, the Office of the
Special Prosecutor contends that the Presiding Justice of the Sandiganbayan acted in accordance
with law when he ordered the remand of the case to the RTC. It asserts that R.A. No. 7975 should be
applied retroactively. Although the Sandiganbayan had jurisdiction over the crime committed by the
petitioner when the amended information was filed with the RTC, by the time it resolved petitioner’s
motion to dismiss on July 31, 1995, R.A. No. 7975 had already taken effect. Thus, the law should be
given retroactive effect.

The Ruling of the Court

The respondent Presiding Justice acted in accordance with law and the rulings of this Court when he
ordered the remand of the case to the RTC, the court of origin.

The jurisdiction of the court over criminal cases is determined by the allegations in the Information or
the Complaint and the statute in effect at the time of the commencement of the action, unless such
statute provides for a retroactive application thereof. The jurisdictional requirements must be alleged
in the Information.19 Such jurisdiction of the court acquired at the inception of the case continues until
the case is terminated.20

Under Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the Sandiganbayan had exclusive
jurisdiction in all cases involving the following:

(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised
Penal Code;

(2) Other offenses or felonies committed by public officers and employees in relation to their
office, including those employed in government-owned or controlled corporations, whether
simple or complexed with other crimes, where the penalty prescribed by law is higher than
prision correccional or imprisonment for six (6) years, or a fine of P6,000.00 ….21

However, for the Sandiganbayan to have exclusive jurisdiction under the said law over crimes
committed by public officers in relation to their office, it is essential that the facts showing the intimate
relation between the office of the offender and the discharge of official duties must be alleged in the
Information. It is not enough to merely allege in the Information that the crime charged was committed
by the offender in relation to his office because that would be a conclusion of law.22 The amended
Information filed with the RTC against the petitioner does not contain any allegation showing the
intimate relation between his office and the discharge of his duties. Hence, the RTC had jurisdiction
over the offense charged when on November 24, 1995, it ordered the re-amendment of the Information
to include therein an allegation that the petitioner committed the crime in relation to office. The trial
court erred when it ordered the elevation of the records to the Sandiganbayan. It bears stressing that
R.A. No. 7975 amending P.D. No. 1606 was already in effect and under Section 2 of the law:

In cases where none of the principal accused are occupying positions corresponding to salary
grade "27" or higher, as prescribed in the said Republic Act No. 6758, or PNP officers
occupying the rank of superintendent or higher, or their equivalent, exclusive jurisdiction
thereof shall be vested in the proper Regional Trial Court, Metropolitan Trial Court, Municipal
Trial Court, and Municipal Circuit Trial Court, as the case may be, pursuant to their respective
jurisdiction as provided in Batas Pambansa Blg. 129.
Under the law, even if the offender committed the crime charged in relation to his office but occupies
a position corresponding to a salary grade below "27," the proper Regional Trial Court or Municipal
Trial Court, as the case may be, shall have exclusive jurisdiction over the case. In this case, the
petitioner was a Police Senior Inspector, with salary grade "23." He was charged with homicide
punishable by reclusion temporal. Hence, the RTC had exclusive jurisdiction over the crime charged
conformably to Sections 20 and 32 of Batas Pambansa Blg. 129, as amended by Section 2 of R.A.
No. 7691.

The petitioner’s contention that R.A. No. 7975 should not be applied retroactively has no legal basis.
It bears stressing that R.A. No. 7975 is a substantive procedural law which may be applied
retroactively.23

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No pronouncement as to costs.

SO ORDERED.

5. AGAN JR. V. PHIL INTERNATIONAL AIR TERMINAL, CO. INC.

G.R. No. 155001 May 5, 2003

DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL

ANTONIO B. BOÑE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON,
CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO,
MIASCOR WORKERS UNION - NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and
SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of
Transportation and Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS
CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT
SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR
AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS
CORPORATION, petitioners-in-intervention,

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

G.R. No. 155547 May 5, 2003

SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners,

vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity
as Head of the Department of Transportation and Communications, and SECRETARY SIMEON
A. DATUMANONG, in his capacity as Head of the Department of Public Works and
Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON
VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST ABAYON,
and BENASING O. MACARANBON, respondents-intervenors,

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

G.R. No. 155661 May 5, 2003

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN,

LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD SCHLOBOM,
ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN
NG PILIPINAS (SMPP), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT
AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY
LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and
Communications, respondents.

PUNO, J.:

Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the
Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and the
Department of Transportation and Communications (DOTC) and its Secretary from implementing the
following agreements executed by the Philippine Government through the DOTC and the MIAA and
the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement signed
on July 12, 1997, (2) the Amended and Restated Concession Agreement dated November 26, 1999,
(3) the First Supplement to the Amended and Restated Concession Agreement dated August 27,
1999, (4) the Second Supplement to the Amended and Restated Concession Agreement dated
September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession
Agreement dated June 22, 2001 (collectively, the PIATCO Contracts).

The facts are as follows:

In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a
comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether
the present airport can cope with the traffic development up to the year 2010. The study
consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future
requirements, proposed master plans and development plans; and second, presentation of
the preliminary design of the passenger terminal building. The ADP submitted a Draft Final
Report to the DOTC in December 1989.
 Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun,
Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V.
Ramos to explore the possibility of investing in the construction and operation of a new
international airport terminal. To signify their commitment to pursue the project, they formed
the Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and
Exchange Commission (SEC) on September 15, 1993.

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

On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids
and Awards Committee (PBAC) for the implementation of the NAIA IPT III project.

On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National
Economic and Development Authority (NEDA). A revised proposal, however, was forwarded by the
DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment Coordinating
Council (NEDA ICC) – Technical Board favorably endorsed the project to the ICC – Cabinet Committee
which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996,
the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an
invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance
with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3)
sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain
the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope
the Financial Proposal of the proponent.

On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents
and the submission of the comparative bid proposals. Interested firms were permitted to obtain the
Request for Proposal Documents beginning June 28, 1996, upon submission of a written application
and payment of a non-refundable fee of P50,000.00 (US$2,000).

The Bid Documents issued by the PBAC provided among others that the proponent must have
adequate capability to sustain the financing requirement for the detailed engineering, design,
construction, operation, and maintenance phases of the project. The proponent would be evaluated
based on its ability to provide a minimum amount of equity to the project, and its capacity to secure
external financing for the project.

On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference
on July 29, 1996.

On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The
following amendments were made on the Bid Documents:
 a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial
proposal an additional percentage of gross revenue share of the Government, as follows:

i. First 5 years 5.0%

ii. Next 10 years 7.5%
iii. Next 10 years 10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge.
Proponent may offer an Annual Guaranteed Payment which need not be of equal amount, but
payment of which shall start upon site possession.

c. The project proponent must have adequate capability to sustain the financing requirement
for the detailed engineering, design, construction, and/or operation and maintenance phases
of the project as the case may be. For purposes of pre-qualification, this capability shall be
measured in terms of:

i. Proof of the availability of the project proponent and/or the consortium to provide the
minimum amount of equity for the project; and

ii. a letter testimonial from reputable banks attesting that the project proponent and/or
the members of the consortium are banking with them, that the project proponent
and/or the members are of good financial standing, and have adequate resources.

d. The basis for the prequalification shall be the proponent's compliance with the minimum
technical and financial requirements provided in the Bid Documents and the IRR of the BOT
Law. The minimum amount of equity shall be 30% of the Project Cost.

e. Amendments to the draft Concession Agreement shall be issued from time to time. Said
amendments shall only cover items that would not materially affect the preparation of the
proponent's proposal.

On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made.
Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the
PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the
BOT Law, only the proposed Annual Guaranteed Payment submitted by the challengers would be
revealed to AEDC, and that the challengers' technical and financial proposals would remain
confidential. The PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the
Bid Documents was merely indicative and that other revenue sources may be included by the
proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those fees
and charges denominated as Public Utility Fees would be subject to regulation, and those charges
which would be actually deemed Public Utility Fees could still be revised, depending on the outcome
of PBAC's query on the matter with the Department of Justice.
In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's
responses were as follows:

1. It is difficult for Paircargo and Associates to meet the required minimum equity requirement
as prescribed in Section 8.3.4 of the Bid Documents considering that the capitalization of each
member company is so structured to meet the requirements and needs of their current
respective business undertaking/activities. In order to comply with this equity requirement,
Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint
Venture to just execute an agreement that embodies a commitment to infuse the required
capital in case the project is awarded to the Joint Venture instead of increasing each
corporation's current authorized capital stock just for prequalification purposes.

In prequalification, the agency is interested in one's financial capability at the time of

prequalification, not future or potential capability.

A commitment to put up equity once awarded the project is not enough to establish that
"present" financial capability. However, total financial capability of all member companies of
the Consortium, to be established by submitting the respective companies' audited financial
statements, shall be acceptable.

2. At present, Paircargo is negotiating with banks and other institutions for the extension of a
Performance Security to the joint venture in the event that the Concessions Agreement (sic)
is awarded to them. However, Paircargo is being required to submit a copy of the draft
concession as one of the documentary requirements. Therefore, Paircargo is requesting that
they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and
the AEDC at the soonest possible time.

A copy of the draft Concession Agreement is included in the Bid Documents. Any material
changes would be made known to prospective challengers through bid bulletins. However, a
final version will be issued before the award of contract.

The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents
(Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the
required Bid Security.

On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc.
(Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank)
(collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On September
23, 1996, the PBAC opened the first envelope containing the prequalification documents of the
Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the
Paircargo Consortium.

On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the
Paircargo Consortium, which include:
 a. The lack of corporate approvals and financial capability of PAIRCARGO;

b. The lack of corporate approvals and financial capability of PAGS;

c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount
that Security Bank could legally invest in the project;

d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for

prequalification purposes; and

e. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement
in the operation of a public utility.

The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised
by the latter, and that based on the documents submitted by Paircargo and the established
prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to
undertake the project. The Secretary of the DOTC approved the finding of the PBAC.

The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium
which contained its Technical Proposal.

On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial
capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections
1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries. On October
7, 1996, AEDC again manifested its objections and requested that it be furnished with excerpts of the
PBAC meeting and the accompanying technical evaluation report where each of the issues they raised
were addressed.

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

Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the
Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to
match the said bid, otherwise, the project would be awarded to Paircargo.

As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado
Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's failure
to match the proposal.
On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport
Terminals Co., Inc. (PIATCO).

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its
objections as regards the prequalification of PIATCO.

On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of
the NEDA-ICC.

On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity
of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the Chairman of
the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman
of the PBAC Technical Committee.

On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a no-
objection basis, of the BOT agreement between the DOTC and PIATCO. As the ad
referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted the
agreement.

On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.

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

On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession
Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that were amended by
the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of completion"; Sec. 2.05 pertaining
to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the franchise given to
the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of its interest in the
Development Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's insurance; Sec.
5.10 with respect to the temporary take-over of operations by GRP; Sec. 5.16 pertaining to the taxes,
duties and other imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the periodic
adjustment of public utility fees and charges; the entire Article VIII concerning the provisions on the
termination of the contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in
case a dispute or controversy arises between the parties to the agreement.

Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First
Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and the
Third Supplement on June 22, 2001 (collectively, Supplements).
The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross
Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds
for the upkeep, maintenance, repair and/or replacement of all airport facilities and equipment which
are owned or operated by MIAA; and further providing additional special obligations on the part of
GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also
provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and
Terminal III in lieu of the proposed access tunnel crossing Runway 13/31; the swapping of obligations
between GRP and PIATCO regarding the improvement of Sales Road; and the changes in the
timetable. It also amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees;
Sec. 6.02 of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA
referring to the Payments of Percentage Share in Gross Revenues.

The Second Supplement to the ARCA contained provisions concerning the clearing, removal,
demolition or disposal of subterranean structures uncovered or discovered at the site of the
construction of the terminal by the Concessionaire. It defined the scope of works; it provided for the
procedure for the demolition of the said structures and the consideration for the same which the GRP
shall pay PIATCO; it provided for time extensions, incremental and consequential costs and losses
consequent to the existence of such structures; and it provided for some additional obligations on the
part of PIATCO as regards the said structures.

Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the
construction of the surface road connecting Terminals II and III.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I
and II, had existing concession contracts with various service providers to offer international airline
airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft
maintenance and provisions, cargo handling and warehousing, and other services, to several
international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATA-
Wings Aviation Systems Corp., and the MacroAsia Group. Miascor, DNATA and MacroAsia, together
with Philippine Airlines (PAL), are the dominant players in the industry with an aggregate market share
of 70%.

On September 17, 2002, the workers of the international airline service providers, claiming that they
stand to lose their employment upon the implementation of the questioned agreements, filed before
this Court a petition for prohibition to enjoin the enforcement of said agreements.2

On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion
for intervention and a petition-in-intervention.

On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed
a similar petition with this Court.3

On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of
the various agreements.4
On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes,
Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast
Abayon and Benasing O. Macaranbon, moved to intervene in the case as Respondents-Intervenors.
They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying
for the dismissal of the petitions.

During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November
29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacañang Palace, stated that
she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as)
null and void."5

Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The
Office of the Solicitor General and the Office of the Government Corporate Counsel filed their
respective Comments in behalf of the public respondents.

On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the Court
then resolved in open court to require the parties to file simultaneously their respective Memoranda in
amplification of the issues heard in the oral arguments within 30 days and to explore the possibility of
arbitration or mediation as provided in the challenged contracts.

In their consolidated Memorandum, the Office of the Solicitor General and the Office of the
Government Corporate Counsel prayed that the present petitions be given due course and that
judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements
thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and
Regulations.

On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO
commenced arbitration proceedings before the International Chamber of Commerce, International
Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the
Government of the Republic of the Philippines acting through the DOTC and MIAA.

In the present cases, the Court is again faced with the task of resolving complicated issues made
difficult by their intersecting legal and economic implications. The Court is aware of the far reaching
fall out effects of the ruling which it makes today. For more than a century and whenever the exigencies
of the times demand it, this Court has never shirked from its solemn duty to dispense justice and
resolve "actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction."6 To be sure, this Court will not begin to do otherwise today.

We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will
bar the resolution of the instant controversy.

Petitioners' Legal Standing to File

the present Petitions

a. G.R. Nos. 155001 and 155661

In G.R. No. 155001 individual petitioners are employees of various service providers7 having separate
concession contracts with MIAA and continuing service agreements with various international airlines
to provide in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and
provisions, cargo handling and warehousing and other services. Also included as petitioners are labor
unions MIASCOR Workers Union-National Labor Union and Philippine Airlines Employees
Association. These petitioners filed the instant action for prohibition as taxpayers and as parties whose
rights and interests stand to be violated by the implementation of the PIATCO Contracts.

Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine
laws engaged in the business of providing in-flight catering, passenger handling, ramp and ground
support, aircraft maintenance and provisions, cargo handling and warehousing and other services to
several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors allege
that as tax-paying international airline and airport-related service operators, each one of them stands
to be irreparably injured by the implementation of the PIATCO Contracts. Each of the petitioners-
intervenors have separate and subsisting concession agreements with MIAA and with various
international airlines which they allege are being interfered with and violated by respondent PIATCO.

In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa
Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive bargaining
agent of all the employees in MIAA. Petitioners anchor their petition for prohibition on the nullity of the
contracts entered into by the Government and PIATCO regarding the build-operate-and-transfer of the
NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to protect
in the implementation of the PIATCO Contracts.

Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which
directly contravene numerous provisions of the Constitution, specific provisions of the BOT Law and
its Implementing Rules and Regulations, and public policy. Petitioners contend that the DOTC and the
MIAA, by entering into said contracts, have committed grave abuse of discretion amounting to lack or
excess of jurisdiction which can be remedied only by a writ of prohibition, there being no plain, speedy
or adequate remedy in the ordinary course of law.

In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which
grant PIATCO the exclusive right to operate a commercial international passenger terminal within the
Island of Luzon, except those international airports already existing at the time of the execution of the
agreement. The contracts further provide that upon the commencement of operations at the NAIA IPT
III, the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals
I and II as international passenger terminals. With respect to existing concession agreements between
MIAA and international airport service providers regarding certain services or operations, the 1997
Concession Agreement and the ARCA uniformly provide that such services or operations will not be
carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except
through a separate agreement duly entered into with PIATCO.8

With respect to the petitioning service providers and their employees, upon the commencement of
operations of the NAIA IPT III, they allege that they will be effectively barred from providing
international airline airport services at the NAIA Terminals I and II as all international airlines and
passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be compelled
to contract with PIATCO alone for such services, with no assurance that subsisting contracts with
MIAA and other international airlines will be respected. Petitioning service providers stress that despite
the very competitive market, the substantial capital investments required and the high rate of fees,
they entered into their respective contracts with the MIAA with the understanding that the said
contracts will be in force for the stipulated period, and thereafter, renewed so as to allow each of the
petitioning service providers to recoup their investments and obtain a reasonable return thereon.

Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the
other hand allege that with the closure of the NAIA Terminals I and II as international passenger
terminals under the PIATCO Contracts, they stand to lose employment.

The question on legal standing is whether such parties have "alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination of difficult constitutional
questions."9 Accordingly, it has been held that the interest of a person assailing the constitutionality of
a statute must be direct and personal. He must be able to show, not only that the law or any
government act is invalid, but also that he sustained or is in imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It
must appear that the person complaining has been or is about to be denied some right or privilege to
which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason
of the statute or act complained of.10

We hold that petitioners have the requisite standing. In the above-mentioned cases, petitioners have
a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts.
They stand to lose their source of livelihood, a property right which is zealously protected by the
Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-intervenors
and service contracts between international airlines and petitioners-intervenors stand to be nullified or
terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice
brought about by the PIATCO Contracts on petitioners and petitioners-intervenors in these cases are
legitimate interests sufficient to confer on them the requisite standing to file the instant petitions.

b. G.R. No. 155547

In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of
Representatives, citizens and taxpayers. They allege that as members of the House of
Representatives, they are especially interested in the PIATCO Contracts, because the contracts
compel the Government and/or the House of Representatives to appropriate funds necessary to
comply with the provisions therein.11 They cite provisions of the PIATCO Contracts which require
disbursement of unappropriated amounts in compliance with the contractual obligations of the
Government. They allege that the Government obligations in the PIATCO Contracts which compel
government expenditure without appropriation is a curtailment of their prerogatives as legislators,
contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except in
pursuance of an appropriation made by law."12
Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by
parties who have been personally injured by the operation of a law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are not
unmindful of the cases of Imus Electric Co. v. Municipality of Imus13 and Gonzales v.
Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately
demandable, public interest demands that we take a more liberal view in determining whether
the petitioners suing as legislators, taxpayers and citizens have locus standi to file the instant
petition. In Kilosbayan, Inc. v. Guingona,15 this Court held "[i]n line with the liberal policy of this
Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters,
and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to
question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
government agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are concerned . . .
(this Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". . .
even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised."18 In view of the serious legal questions involved
and their impact on public interest, we resolve to grant standing to the petitioners.

Other Procedural Matters

Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases
as factual issues are involved which this Court is ill-equipped to resolve. Moreover, PIATCO alleges
that submission of this controversy to this Court at the first instance is a violation of the rule on
hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court with
respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts,
resort must first be had before the trial courts.

After a thorough study and careful evaluation of the issues involved, this Court is of the view that the
crux of the instant controversy involves significant legal questions. The facts necessary to resolve
these legal questions are well established and, hence, need not be determined by a trial court.

The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the
cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the
appropriate courts or where exceptional and compelling circumstances justify availment of a remedy
within and calling for the exercise of this Court's primary jurisdiction.19

It is easy to discern that exceptional circumstances exist in the cases at bar that call for the
relaxation of the rule. Both petitioners and respondents agree that these cases are of transcendental
importance as they involve the construction and operation of the country's premier international
airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the
proper legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing
Rules and Regulations. Thus, considering the nature of the controversy before the Court, procedural
bars may be lowered to give way for the speedy disposition of the instant cases.

Legal Effect of the Commencement

of Arbitration Proceedings by

PIATCO

There is one more procedural obstacle which must be overcome. The Court is aware that arbitration
proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance of respondent
PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust this Court of its
jurisdiction over the cases at bar.

In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration clause in
the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable,
this Court affirmed the trial court's decision denying petitioner's Motion to Suspend Proceedings
pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts
produce legal effect between the parties, their assigns and heirs, only the parties to the Distributorship
Agreement are bound by its terms, including the arbitration clause stipulated therein. This Court ruled
that arbitration proceedings could be called for but only with respect to the parties to the contract in
question. Considering that there are parties to the case who are neither parties to the Distributorship
Agreement nor heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr.
v. Laperal Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing arbitration
as to some of the parties on the one hand and trial for the others on the other hand would, in effect,
result in multiplicity of suits, duplicitous procedure and unnecessary delay.22 Thus, we ruled that
the interest of justice would best be served if the trial court hears and adjudicates the case in a single
and complete proceeding.

It is established that petitioners in the present cases who have presented legitimate interests in the
resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be
bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit
to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the
present controversy, including those raised by petitioners, cannot be made before an arbitral
tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This
objective would not be met if this Court were to allow the parties to settle the cases by arbitration as
there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will
not be equipped to resolve.

Now, to the merits of the instant controversy.

Is PIATCO a qualified bidder?

Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly pre-
qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo Consortium failed to
meet the financial capability required under the BOT Law and the Bid Documents. They allege that in
computing the ability of the Paircargo Consortium to meet the minimum equity requirements for the
project, the entire net worth of Security Bank, a member of the consortium, should not be
considered.
PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996 issued
by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is found to have
a combined net worth of P3,900,000,000.00, sufficient to meet the equity requirements of the project.
The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to President
Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it
does not have the financial resources to put up the required minimum equity of P2,700,000,000.00.
This contention is based on the restriction under R.A. No. 337, as amended or the General Banking
Act that a commercial bank cannot invest in any single enterprise in an amount more than 15% of its
net worth. In the said Memorandum, Undersecretary Cal opined:

The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial
capability will be evaluated based on total financial capability of all the member companies of
the [Paircargo] Consortium. In this connection, the Challenger was found to have a combined
net worth of P3,926,421,242.00 that could support a project costing approximately P13 Billion.

It is not a requirement that the net worth must be "unrestricted." To impose that as a
requirement now will be nothing less than unfair.

The financial statement or the net worth is not the sole basis in establishing financial capability.
As stated in Bid Bulletin No. 3, financial capability may also be established by testimonial
letters issued by reputable banks. The Challenger has complied with this requirement.

To recap, net worth reflected in the Financial Statement should not be taken as the amount of
the money to be used to answer the required thirty percent (30%) equity of the challenger but
rather to be used in establishing if there is enough basis to believe that the challenger can
comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the
conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-qualification
(Section 5.4 of the same document).23

Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall
be awarded to the bidder "who, having satisfied the minimum financial, technical,
organizational and legal standards" required by the law, has submitted the lowest bid and
most favorable terms of the project.24 Further, the 1994 Implementing Rules and Regulations
of the BOT Law provide:

Section 5.4 Pre-qualification Requirements.

xxx xxx xxx

c. Financial Capability: The project proponent must have adequate capability to sustain the
financing requirements for the detailed engineering design, construction and/or operation and
maintenance phases of the project, as the case may be. For purposes of pre-qualification, this
capability shall be measured in terms of (i) proof of the ability of the project proponent
and/or the consortium to provide a minimum amount of equity to the project, and (ii) a
letter testimonial from reputable banks attesting that the project proponent and/or
members of the consortium are banking with them, that they are in good financial
 standing, and that they have adequate resources. The government agency/LGU
concerned shall determine on a project-to-project basis and before pre-qualification, the
minimum amount of equity needed. (emphasis supplied)

Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending
the financial capability requirements for pre-qualification of the project proponent as follows:

6. Basis of Pre-qualification

The basis for the pre-qualification shall be on the compliance of the proponent to the minimum
technical and financial requirements provided in the Bid Documents and in the IRR of the BOT
Law, R.A. No. 6957, as amended by R.A. 7718.

The minimum amount of equity to which the proponent's financial capability will be based shall
be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified
in Section 3.6.4 of the Bid Documents. This is to correlate with the required debt-to-equity
ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt portion of the
project financing should not exceed 70% of the actual project cost.

Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to the
unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to
undertake the project in the minimum amount of 30% of the project cost through (i) proof of the
ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable
banks attesting that the project proponent or members of the consortium are banking with them, that
they are in good financial standing, and that they have adequate resources.

As the minimum project cost was estimated to be US$350,000,000.00 or roughly

P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it had
the ability to provide the minimum equity for the project in the amount of at least P2,755,095,000.00.

Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of
P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial Statements as of 1995
indicate that it has approximately P26,735,700.00 to invest as its equity for the project. 27 Security
Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital
funds in the amount of P3,523,504,377.00.28

We agree with public respondents that with respect to Security Bank, the entire amount of its net
worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in
accordance with the provisions of R.A. No. 337, as amended or the General Banking Act:

Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding, the
Monetary Board, whenever it shall deem appropriate and necessary to further national
development objectives or support national priority projects, may authorize a commercial
bank, a bank authorized to provide commercial banking services, as well as a
government-owned and controlled bank, to operate under an expanded commercial
banking authority and by virtue thereof exercise, in addition to powers authorized for
 commercial banks, the powers of an Investment House as provided in Presidential
Decree No. 129, invest in the equity of a non-allied undertaking, or own a majority or all
of the equity in a financial intermediary other than a commercial bank or a bank authorized to
provide commercial banking services: Provided, That (a) the total investment in equities shall
not exceed fifty percent (50%) of the net worth of the bank; (b) the equity investment in any
one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the
net worth of the bank; (c) the equity investment of the bank, or of its wholly or majority-owned
subsidiary, in a single non-allied undertaking shall not exceed thirty-five percent (35%) of the
total equity in the enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in
that enterprise; and (d) the equity investment in other banks shall be deducted from the
investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk
assets.

xxx xxx xxx

Further, the 1993 Manual of Regulations for Banks provides:

SECTION X383. Other Limitations and Restrictions. — The following limitations and
restrictions shall also apply regarding equity investments of banks.

a. In any single enterprise. — The equity investments of banks in any single enterprise shall
not exceed at any time fifteen percent (15%) of the net worth of the investing bank as defined
in Sec. X106 and Subsec. X121.5.

Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only
P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the
Paircargo Consortium, after considering the maximum amounts that may be validly invested by each
of its members is P558,384,871.55 or only 6.08% of the project cost,29 an amount substantially less
than the prescribed minimum equity investment required for the project in the amount of
P2,755,095,000.00 or 30% of the project cost.

The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the
ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the
pre-qualification stage, the law requires the government agency to examine and determine the ability
of the bidder to fund the entire cost of the project by considering the maximum amounts that each
bidder may invest in the project at the time of pre-qualification.

The PBAC has determined that any prospective bidder for the construction, operation and
maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the
minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio
prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should
determine the maximum amounts that each member of the consortium may commit for the
construction, operation and maintenance of the NAIA IPT III project at the time of pre-qualification.
With respect to Security Bank, the maximum amount which may be invested by it would only be 15%
of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the
investment ceilings provided by applicable law would not result in a proper evaluation of whether or
not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or
legal restriction determines the true maximum amount which a bidder may invest in the project.

Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires
an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on
the required documents presented by the bidder. The PBAC should not be allowed to speculate on
the future financial ability of the bidder to undertake the project on the basis of documents submitted.
This would open doors to abuse and defeat the very purpose of a public bidding. This is especially
true in the case at bar which involves the investment of billions of pesos by the project proponent. The
relevant government authority is duty-bound to ensure that the awardee of the contract possesses the
minimum required financial capability to complete the project. To allow the PBAC to estimate the
bidder's future financial capability would not secure the viability and integrity of the project. A restrictive
and conservative application of the rules and procedures of public bidding is necessary not only to
protect the impartiality and regularity of the proceedings but also to ensure the financial and technical
reliability of the project. It has been held that:

The basic rule in public bidding is that bids should be evaluated based on the required
documents submitted before and not after the opening of bids. Otherwise, the foundation of a
fair and competitive public bidding would be defeated. Strict observance of the rules,
regulations, and guidelines of the bidding process is the only safeguard to a fair, honest
and competitive public bidding.30

Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids
are submittedfalls short of the minimum amounts required to be put up by the bidder, said bidder
should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts
which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed
by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the
contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void.

While it would be proper at this juncture to end the resolution of the instant controversy, as the legal
effects of the disqualification of respondent PIATCO's predecessor would come into play and
necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the project,
the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for
a complete resolution thereof.

II

Is the 1997 Concession Agreement valid?

Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it
contains provisions that substantially depart from the draft Concession Agreement included in the Bid
Documents. They maintain that a substantial departure from the draft Concession Agreement is a
violation of public policy and renders the 1997 Concession Agreement null and void.

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

6. Amendments to the Draft Concessions Agreement

Amendments to the Draft Concessions Agreement shall be issued from time to time. Said
amendments shall only cover items that would not materially affect the preparation of the
proponent's proposal.

By its very nature, public bidding aims to protect the public interest by giving the public the best
possible advantages through open competition. Thus:

Competition must be legitimate, fair and honest. In the field of government contract law,
competition requires, not only `bidding upon a common standard, a common basis, upon the
same thing, the same subject matter, the same undertaking,' but also that it be legitimate,
fair and honest; and not designed to injure or defraud the government.31

An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not
simply in terms of application of the procedural rules and regulations imposed by the relevant
government agency, but more importantly, on the contract bidded upon. Each bidder must be able to
bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or
modify certain provisions in the contract awarded such that the contract is altered in any material
respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would
indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and
include provisions which are favorable to it that were not previously made available to the other
bidders. Thus:

It is inherent in public biddings that there shall be a fair competition among the bidders. The
specifications in such biddings provide the common ground or basis for the bidders. The
specifications should, accordingly, operate equally or indiscriminately upon all bidders.32

The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:

The law is well settled that where, as in this case, municipal authorities can only let a contract
for public work to the lowest responsible bidder, the proposals and specifications therefore
must be so framed as to permit free and full competition. Nor can they enter into a contract
with the best bidder containing substantial provisions beneficial to him, not included
or contemplated in the terms and specifications upon which the bids were invited.33

In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft
concession agreement is subject to amendment, the pertinent portion of which was quoted above, the
PBAC also clarified that "[s]aid amendments shall only cover items that would not materially
affect the preparation of the proponent's proposal."

While we concede that a winning bidder is not precluded from modifying or amending certain
provisions of the contract bidded upon, such changes must not constitute substantial or material
amendments that would alter the basic parameters of the contract and would constitute a
denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination
of whether or not a modification or amendment of a contract bidded out constitutes a substantial
amendment rests on whether the contract, when taken as a whole, would contain substantially different
terms and conditions that would have the effect of altering the technical and/or financial proposals
previously submitted by other bidders. The alterations and modifications in the contract executed
between the government and the winning bidder must be such as to render such executed contract to
be an entirely different contract from the one that was bidded upon.

In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with approval
the ruling of the trial court that an amendment to a contract awarded through public bidding, when
such subsequent amendment was made without a new public bidding, is null and void:

The Court agrees with the contention of counsel for the plaintiffs that the due execution of a
contract after public bidding is a limitation upon the right of the contracting parties to alter or
amend it without another public bidding, for otherwise what would a public bidding be good
for if after the execution of a contract after public bidding, the contracting parties may
alter or amend the contract, or even cancel it, at their will?Public biddings are held for the
protection of the public, and to give the public the best possible advantages by means of open
competition between the bidders. He who bids or offers the best terms is awarded the contract
subject of the bid, and it is obvious that such protection and best possible advantages to the
public will disappear if the parties to a contract executed after public bidding may alter or
amend it without another previous public bidding.35

Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same agreement
that was offered for public bidding, i.e., the draft Concession Agreement attached to the Bid
Documents? A close comparison of the draft Concession Agreement attached to the Bid Documents
and the 1997 Concession Agreement reveals that the documents differ in at least two material
respects:

a. Modification on the Public

Utility Revenues and Non-Public

Utility Revenues that may be

collected by PIATCO

The fees that may be imposed and collected by PIATCO under the draft Concession Agreement and
the 1997 Concession Agreement may be classified into three distinct categories: (1) fees which are
subject to periodic adjustment of once every two years in accordance with a prescribed parametric
formula and adjustments are made effective only upon written approval by MIAA; (2) fees other than
those included in the first category which maybe adjusted by PIATCO whenever it deems necessary
without need for consent of DOTC/MIAA; and (3) new fees and charges that may be imposed by
PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport
Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as amended. The
glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie
in the types of fees included in each category and the extent of the supervision and regulation which
MIAA is allowed to exercise in relation thereto.

For fees under the first category, i.e., those which are subject to periodic adjustment in accordance
with a prescribed parametric formula and effective only upon written approval by MIAA, the draft
Concession Agreementincludes the following:36

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) groundhandling fees;

(4) rentals and airline offices;

(5) check-in counter rentals; and

(6) porterage fees.

Under the 1997 Concession Agreement, fees which are subject to adjustment and effective upon
MIAA approval are classified as "Public Utility Revenues" and include:37

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) check-in counter fees; and

(4) Terminal Fees.

The implication of the reduced number of fees that are subject to MIAA approval is best appreciated
in relation to fees included in the second category identified above. Under the 1997 Concession
Agreement, fees which PIATCO may adjust whenever it deems necessary without need for consent
of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not classified as
Public Utility Revenues derived from operations of the Terminal and the Terminal Complex." 38 Thus,
under the 1997 Concession Agreement, ground handling fees, rentals from airline offices and
porterage fees are no longer subject to MIAA regulation.

Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to regulate
(1) lobby and vehicular parking fees and (2) other new fees and charges that may be imposed by
PIATCO. Such regulation may be made by periodic adjustment and is effective only upon written
approval of MIAA. The full text of said provision is quoted below:

Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking
fees, aircraft tacking fees, groundhandling fees, rentals and airline offices, check-in-counter
 rentals and porterage fees shall be allowed only once every two years and in accordance with
the Parametric Formula attached hereto as Annex F. Provided that adjustments shall be made
effective only after the written express approval of the MIAA. Provided, further, that such
approval of the MIAA, shall be contingent only on the conformity of the adjustments with the
above said parametric formula. The first adjustment shall be made prior to the In-Service Date
of the Terminal.

The MIAA reserves the right to regulate under the foregoing terms and conditions the
lobby and vehicular parking fees and other new fees and charges as contemplated in
paragraph 2 of Section 6.01 if in its judgment the users of the airport shall be deprived
of a free option for the services they cover.39

On the other hand, the equivalent provision under the 1997 Concession Agreement reads:

Section 6.03 Periodic Adjustment in Fees and Charges.

xxx xxx xxx

(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-
Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of
services. While the vehicular parking fee, porterage fee and greeter/well wisher fee
constitute Non-Public Utility Revenues of Concessionaire, GRP may intervene and
require Concessionaire to explain and justify the fee it may set from time to time, if in
the reasonable opinion of GRP the said fees have become exorbitant resulting in the
unreasonable deprivation of End Users of such services.40

Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage
fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain and
justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is subject
to MIAA regulation and approval under the second paragraph of Section 6.03 thereof while porterage
fee is covered by the first paragraph of the same provision. There is an obvious relaxation of the extent
of control and regulation by MIAA with respect to the particular fees that may be charged by PIATCO.

Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO,
i.e., new fees and charges that may be imposed by PIATCO which have not been previously imposed
or collected at the Ninoy Aquino International Airport Passenger Terminal I, under Section 6.03 of
the draft Concession Agreement MIAA has reserved the right to regulate the same under the same
conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of once every
two years in accordance with a prescribed parametric formula and effective only upon written approval
by MIAA. However, under the 1997 Concession Agreement, adjustment of fees under the third
category is not subject to MIAA regulation.

With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was included
within the category of "Public Utility Revenues" under the 1997 Concession Agreement. This
classification is significant because under the 1997 Concession Agreement, "Public Utility
Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary
events specified in the agreement.42 However, under the draft Concession Agreement, terminal fees
are not included in the types of fees that may be subject to "Interim Adjustment."43

Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are
denominated in US Dollars44 while payments to the Government are in Philippine Pesos. In the draft
Concession Agreement,no such stipulation was included. By stipulating that "Public Utility
Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are
in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits
of depreciations of the Philippine Peso, while being effectively insulated from the detrimental effects
of exchange rate fluctuations.

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

b. Assumption by the

Government of the liabilities of

PIATCO in the event of the latter's

default thereof

Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who
have provided, loaned or advanced funds for the NAIA IPT III project does not result in the assumption
by the Government of these liabilities. In fact, nowhere in the said contract does default of PIATCO's
loans figure in the agreement. Such default does not directly result in any concomitant right or
obligation in favor of the Government.

However, the 1997 Concession Agreement provides:

Section 4.04 Assignment.

xxx xxx xxx

 (b) In the event Concessionaire should default in the payment of an Attendant Liability, and
the default has resulted in the acceleration of the payment due date of the Attendant Liability
prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately
inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days from
receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take
over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid
Creditors, if qualified, to be substituted as concessionaire and operator of the Development
Facility in accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided that if at the end of the 180-day period GRP shall not
have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall
be deemed to have elected to take over the Development Facility with the concomitant
assumption of Attendant Liabilities.

(c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as
concessionaire, the latter shall form and organize a concession company qualified to take over
the operation of the Development Facility. If the concession company should elect to designate
an operator for the Development Facility, the concession company shall in good faith identify
and designate a qualified operator acceptable to GRP within one hundred eighty (180) days
from receipt of GRP's written notice. If the concession company, acting in good faith and with
due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP
shall at the end of the 180-day period take over the Development Facility and assume
Attendant Liabilities.

The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:

Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the
books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or
advanced funds actually used for the Project, including all interests, penalties, associated
fees, charges, surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by Concessionaire to its suppliers, contractors and sub-
contractors.

Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant
Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the
occurrence of certain events that leads to the assumption by the Government of the liability
for the loans. Only in one instance may the Government escape the assumption of PIATCO's
liabilities, i.e., when the Government so elects and allows a qualified operator to take over as
Concessionaire. However, this circumstance is dependent on the existence and availability of a
qualified operator who is willing to take over the rights and obligations of PIATCO under the
contract, a circumstance that is not entirely within the control of the Government.

Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of
the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has
obtained to finance the project, an option that was not made available in the draft Concession
Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it
grants PIATCO a financial advantage or benefit which was not previously made available during
the bidding process. This financial advantage is a significant modification that translates to better
terms and conditions for PIATCO.

PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft
Concession Agreement is subject to amendment because the Bid Documents permit financing or
borrowing. They claim that it was the lenders who proposed the amendments to the draft Concession
Agreement which resulted in the 1997 Concession Agreement.

We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project
proponent or the winning bidder to obtain financing for the project, especially in this case which
involves the construction, operation and maintenance of the NAIA IPT III. Expectedly, compliance by
the project proponent of its undertakings therein would involve a substantial amount of investment. It
is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the
project. Be that as it may, this Court maintains that amendments to the contract bidded upon should
always conform to the general policy on public bidding if such procedure is to be faithful to its real
nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect
the public interest by giving the public the best possible advantages through open competition.45 It has
been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for
competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes
any of these factors destroys the distinctive character of the system and thwarts the purpose of its
adoption.46 These are the basic parameters which every awardee of a contract bidded out must
conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing
that, as in this case, the contract signed by the government and the contract-awardee is an entirely
different contract from the contract bidded, courts should not hesitate to strike down said contract in
its entirety for violation of public policy on public bidding. A strict adherence on the principles, rules
and regulations on public bidding must be sustained if only to preserve the integrity and the faith of
the general public on the procedure.

Public bidding is a standard practice for procuring government contracts for public service and for
furnishing supplies and other materials. It aims to secure for the government the lowest possible price
under the most favorable terms and conditions, to curtail favoritism in the award of government
contracts and avoid suspicion of anomalies and it places all bidders in equal footing. 47 Any
government action which permits any substantial variance between the conditions under
which the bids are invited and the contract executed after the award thereof is a grave abuse
of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.

In view of the above discussion, the fact that the foregoing substantial amendments were made on
the 1997 Concession Agreement renders the same null and void for being contrary to public
policy. These amendments convert the 1997 Concession Agreement to an entirely different
agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see
that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control
and the extent thereof and (2) the assumption by the Government, under certain conditions, of the
liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were
previously not available during the bidding process. These amendments cannot be taken as
merely supplements to or implementing provisions of those already existing in the draft Concession
Agreement. The amendments discussed above present new terms and conditions which provide
financial benefit to PIATCO which may have altered the technical and financial parameters of other
bidders had they known that such terms were available.

III

Direct Government Guarantee

Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement
provides:

Section 4.04 Assignment

xxx xxx xxx

(b) In the event Concessionaire should default in the payment of an Attendant Liability, and
the default resulted in the acceleration of the payment due date of the Attendant Liability prior
to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately
inform GRP in writing of such default. GRP shall within one hundred eighty (180) days from
receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take
over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid
Creditors, if qualified to be substituted as concessionaire and operator of the Development
facility in accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided, that if at the end of the 180-day period GRP shall not
have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall
be deemed to have elected to take over the Development Facility with the concomitant
assumption of Attendant Liabilities.

(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire,
the latter shall form and organize a concession company qualified to takeover the operation of
the Development Facility. If the concession company should elect to designate an operator for
the Development Facility, the concession company shall in good faith identify and designate a
qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of
GRP's written notice. If the concession company, acting in good faith and with due diligence,
is unable to designate a qualified operator within the aforesaid period, then GRP shall at the
end of the 180-day period take over the Development Facility and assume Attendant
Liabilities.

….

Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts recorded and from time to time outstanding in
the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned
or advanced funds actually used for the Project, including all interests, penalties, associated
 fees, charges, surcharges, indemnities, reimbursements and other related expenses, and
further including amounts owed by Concessionaire to its suppliers, contractors and sub-
contractors.48

It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults in
its loan obligations, is obligated to pay "all amounts recorded and from time to time outstanding
from the books" of PIATCO which the latter owes to its creditors.49 These amounts include "all
interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other
related expenses."50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's
default would arise if the Government opts to take over NAIA IPT III. It should be noted, however, that
even if the Government chooses the second option, which is to allow PIATCO's unpaid creditors
operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's creditors should the
latter be unable to designate a qualified operator within the prescribed period.51 In effect, whatever
option the Government chooses to take in the event of PIATCO's failure to fulfill its loan
obligations, the Government is still at a risk of assuming PIATCO's outstanding loans. This is
due to the fact that the Government would only be free from assuming PIATCO's debts if the unpaid
creditors would be able to designate a qualified operator within the period provided for in the contract.
Thus, the Government's assumption of liability is virtually out of its control. The Government
under the circumstances provided for in the 1997 Concession Agreement is at the mercy of the
existence, availability and willingness of a qualified operator. The above contractual provisions
constitute a direct government guarantee which is prohibited by law.

One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct
the infrastructure and development projects necessary for economic growth and development. This is
why private sector resources are being tapped in order to finance these projects. The BOT law allows
the private sector to participate, and is in fact encouraged to do so by way of incentives, such as
minimizing the unstable flow of returns,52 provided that the government would not have to
unnecessarily expend scarcely available funds for the project itself. As such, direct guarantee, subsidy
and equity by the government in these projects are strictly prohibited.53 This is but logical for if the
government would in the end still be at a risk of paying the debts incurred by the private entity
in the BOT projects, then the purpose of the law is subverted.

Section 2(n) of the BOT Law defines direct guarantee as follows:

(n) Direct government guarantee — An agreement whereby the government or any of its
agencies or local government units assume responsibility for the repayment of debt directly
incurred by the project proponent in implementing the project in case of a loan default.

Clearly by providing that the Government "assumes" the attendant liabilities, which consists of
PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government guarantee
for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. It is of no moment
that the relevant sections are subsumed under the title of "assignment". The provisions providing for
direct government guarantee which is prohibited by law is clear from the terms thereof.

The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect.
Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides:
Section 4.04 Security

xxx xxx xxx

(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and
enter into direct agreement with the Senior Lenders, or with an agent of such Senior
Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas),
in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard,
inter alia, to the following parameters:

xxx xxx xxx

(iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed

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

xxx xxx xxx

(vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are unable
to designate a nominee or effect a transfer in terms and conditions satisfactory to the
Senior Lenders within one hundred eighty (180) days after giving GRP notice as
referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall
endeavor in good faith to enter into any other arrangement relating to the Development
Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA
Terminal 3] to GRP) within the following one hundred eighty (180) days. If no
agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP
and the Senior Lenders within the said 180-day period, then at the end thereof
the Development Facility [NAIA Terminal 3] shall be transferred by the
Concessionaire [PIATCO] to GRP or its designee and GRP shall make a
termination payment to Concessionaire [PIATCO] equal to the Appraised Value
(as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum
of the Attendant Liabilities, if greater. Notwithstanding Section 8.01(c) hereof, this
Agreement shall be deemed terminated upon the transfer of the Development Facility
[NAIA Terminal 3] to GRP pursuant hereto;

xxx xxx xxx

Section 1.06. Attendant Liabilities

 Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from
time to time owed or which may become owing by Concessionaire [PIATCO] to Senior
Lenders or any other persons or entities who have provided, loaned, or advanced funds
or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal
3], including, without limitation, all principal, interest, associated fees, charges,
reimbursements, and other related expenses (including the fees, charges and expenses of
any agents or trustees of such persons or entities), whether payable at maturity, by
acceleration or otherwise, and further including amounts owed by Concessionaire [PIATCO]
to its professional consultants and advisers, suppliers, contractors and sub-contractors.54

It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan
obligations to its Senior Lenders, the Government is obligated to directly negotiate and enter into an
agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail to appoint a qualified
nominee or transferee who will take the place of PIATCO. If the Senior Lenders and the Government
are unable to enter into an agreement after the prescribed period, the Government must then pay
PIATCO, upon transfer of NAIA IPT III to the Government, termination payment equal to the appraised
value of the project or the value of the attendant liabilities whichever is greater. Attendant liabilities
as defined in the ARCA includes all amounts owed or thereafter may be owed by PIATCO not only to
the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons
who may have loaned, advanced funds or provided any other type of financial facilities to PIATCO for
NAIA IPT III. The amount of PIATCO's debt that the Government would have to pay as a result of
PIATCO's default in its loan obligations -- in case no qualified nominee or transferee is appointed by
the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between the
Government and the Senior Lenders -- includes, but is not limited to, "all principal, interest, associated
fees, charges, reimbursements, and other related expenses . . . whether payable at maturity, by
acceleration or otherwise."55

It is clear from the foregoing that the ARCA provides for a direct guarantee by the government
to pay PIATCO's loans not only to its Senior Lenders but all other entities who provided
PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior
Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation
would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not
detract from the fact that, should the conditions as stated in the contract occur, the
ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in
connection with NAIA IPT III. Worse, the conditions that would make the Government liable for
PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to
which loan contracts the Government was never a party to. The Government was not even given an
option as to what course of action it should take in case PIATCO defaulted in the payment of its senior
loans. The Government, upon PIATCO's default, would be merely notified by the Senior Lenders of
the same and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee.
Should the Senior Lenders fail to make such an appointment, the Government is then automatically
obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The only way
the Government would not be liable for PIATCO's debt is for a qualified nominee or transferee to be
appointed in place of PIATCO to continue the construction, operation and maintenance of NAIA IPT
III. This "pre-condition", however, will not take the contract out of the ambit of a direct guarantee by
the government as the existence, availability and willingness of a qualified nominee or transferee is
totally out of the government's control. As such the Government is virtually at the mercy of
PIATCO (that it would not default on its loan obligations to its Senior Lenders), the Senior Lenders
(that they would appoint a qualified nominee or transferee or agree to some other arrangement with
the Government) and the existence of a qualified nominee or transferee who is able and willing to take
the place of PIATCO in NAIA IPT III.

The proscription against government guarantee in any form is one of the policy considerations
behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay for all
loans, advances and obligations arising out of financial facilities extended to PIATCO for the
implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior
Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the
Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise. This is a
form of direct government guarantee.

The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT
project may be accepted, the following conditions must first be met: (1) the project involves a new
concept in technology and/or is not part of the list of priority projects, (2) no direct government
guarantee, subsidy or equity is required, and (3) the government agency or local government unit
has invited by publication other interested parties to a public bidding and conducted the same.56 The
failure to meet any of the above conditions will result in the denial of the proposal. It is further provided
that the presence of direct government guarantee, subsidy or equity will "necessarily disqualify a
proposal from being treated and accepted as an unsolicited proposal."57 The BOT Law clearly and
strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the
mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. It stands to
reason therefore that if a proposal can be denied by reason of the existence of direct government
guarantee, then its inclusion in the contract executed after the said proposal has been accepted is
likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would
result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in the
contract resulting from the said proposal. The basic rules of justice and fair play alone militate against
such an occurrence and must not, therefore, be countenanced particularly in this instance where the
government is exposed to the risk of shouldering hundreds of million of dollars in debt.

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

IV

Temporary takeover of business affected with public interest

Article XII, Section 17 of the 1987 Constitution provides:

Section 17. In times of national emergency, when the public interest so requires, the State
may, during the emergency and under reasonable terms prescribed by it, temporarily take over
or direct the operation of any privately owned public utility or business affected with public
interest.

The above provision pertains to the right of the State in times of national emergency, and in the
exercise of its police power, to temporarily take over the operation of any business affected with public
interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to include
threat from external aggression, calamities or national disasters, but not strikes "unless it is of such
proportion that would paralyze government service."60 The duration of the emergency itself is the
determining factor as to how long the temporary takeover by the government would last.61 The
temporary takeover by the government extends only to the operation of the business and not to the
ownership thereof. As such the government is not required to compensate the private entity-
owner of the said business as there is no transfer of ownership, whether permanent or temporary.
The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation
for the use of the said business and its properties as the temporary takeover by the government is in
exercise of its police power and not of its power of eminent domain.

Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:

Section 5.10 Temporary Take-over of operations by GRP.

….

(c) In the event the development Facility or any part thereof and/or the operations of
Concessionaire or any part thereof, become the subject matter of or be included in any notice,
notification, or declaration concerning or relating to acquisition, seizure or appropriation by
GRP in times of war or national emergency, GRP shall, by written notice to Concessionaire,
immediately take over the operations of the Terminal and/or the Terminal Complex. During
such take over by GRP, the Concession Period shall be suspended; provided, that upon
termination of war, hostilities or national emergency, the operations shall be returned to
Concessionaire, at which time, the Concession period shall commence to run
again. Concessionaire shall be entitled to reasonable compensation for the duration of
the temporary take over by GRP, which compensation shall take into account the
reasonable cost for the use of the Terminal and/or Terminal Complex, (which is in the
amount at least equal to the debt service requirements of Concessionaire, if the
temporary take over should occur at the time when Concessionaire is still servicing debts owed
to project lenders), any loss or damage to the Development Facility, and other consequential
damages. If the parties cannot agree on the reasonable compensation of Concessionaire, or
on the liability of GRP as aforesaid, the matter shall be resolved in accordance with Section
10.01 [Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall be
offset from the amount next payable by Concessionaire to GRP.62
PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on
temporary government takeover and obligate the government to pay "reasonable cost for the
use of the Terminal and/or Terminal Complex."63 Article XII, section 17 of the 1987 Constitution
envisions a situation wherein the exigencies of the times necessitate the government to "temporarily
take over or direct the operation of any privately owned public utility or business affected with public
interest." It is the welfare and interest of the public which is the paramount consideration in determining
whether or not to temporarily take over a particular business. Clearly, the State in effecting the
temporary takeover is exercising its police power. Police power is the "most essential, insistent, and
illimitable of powers."64 Its exercise therefore must not be unreasonably hampered nor its exercise be
a source of obligation by the government in the absence of damage due to arbitrariness of its
exercise.65 Thus, requiring the government to pay reasonable compensation for the reasonable use of
the property pursuant to the operation of the business contravenes the Constitution.

Regulation of Monopolies

A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies,
consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a
particular article, or control the sale of a particular commodity."66 The 1987 Constitution strictly
regulates monopolies, whether private or public, and even provides for their prohibition if public
interest so requires. Article XII, Section 19 of the 1987 Constitution states:

Sec. 19. The state shall regulate or prohibit monopolies when the public interest so requires.
No combinations in restraint of trade or unfair competition shall be allowed.

Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid
the government in carrying on an enterprise or to aid in the performance of various services and
functions in the interest of the public.67 Nonetheless, a determination must first be made as to
whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict
severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary
business undertaking.

In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the
"exclusive rightto operate a commercial international passenger terminal within the Island of Luzon"
at the NAIA IPT III.68 This is with the exception of already existing international airports in Luzon such
as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special
Economic Zone ("CSEZ") and in Laoag City.69 As such, upon commencement of PIATCO's operation
of NAIA IPT III, Terminals 1 and 2 of NAIA would cease to function as international passenger
terminals. This, however, does not prevent MIAA to use Terminals 1 and 2 as domestic passenger
terminals or in any other manner as it may deem appropriate except those activities that would
compete with NAIA IPT III in the latter's operation as an international passenger terminal.70 The right
granted to PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years
from the In-Service Date71 and renewable for another twenty-five (25) years at the option of the
government.72 Both the 1997 Concession Agreement and the ARCA further provide that, in view
of the exclusive right granted to PIATCO, the concession contracts of the service providers
currently servicing Terminals 1 and 2 would no longer be renewed and those concession
contracts whose expiration are subsequent to the In-Service Date would cease to be effective
on the said date.73

The operation of an international passenger airport terminal is no doubt an undertaking imbued with
public interest. In entering into a Build–Operate-and-Transfer contract for the construction, operation
and maintenance of NAIA IPT III, the government has determined that public interest would be served
better if private sector resources were used in its construction and an exclusive right to operate be
granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the
privilege given to PIATCO is subject to reasonable regulation and supervision by the Government
through the MIAA, which is the government agency authorized to operate the NAIA complex, as well
as DOTC, the department to which MIAA is attached.74

This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be
regulated.75 While it is the declared policy of the BOT Law to encourage private sector participation by
"providing a climate of minimum government regulations,"76 the same does not mean that Government
must completely surrender its sovereign power to protect public interest in the operation of a public
utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the
detriment of the public which it seeks to serve. The right granted to the public utility may be exclusive
but the exercise of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively
operate NAIA IPT III as an international passenger terminal, the Government, through the MIAA, has
the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate
NAIA IPT III cannot also violate the rights of third parties.

Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:

3.01 Concession Period

xxx xxx xxx

(e) GRP confirms that certain concession agreements relative to certain services and
operations currently being undertaken at the Ninoy Aquino International Airport passenger
Terminal I have a validity period extending beyond the In-Service Date. GRP through
DOTC/MIAA, confirms that these services and operations shall not be carried over to the
Terminal and the Concessionaire is under no legal obligation to permit such carry-
over except through a separate agreement duly entered into with Concessionaire. In the event
Concessionaire becomes involved in any litigation initiated by any such concessionaire or
operator, GRP undertakes and hereby holds Concessionaire free and harmless on full
indemnity basis from and against any loss and/or any liability resulting from any such litigation,
including the cost of litigation and the reasonable fees paid or payable to Concessionaire's
counsel of choice, all such amounts shall be fully deductible by way of an offset from any
amount which the Concessionaire is bound to pay GRP under this Agreement.

During the oral arguments on December 10, 2002, the counsel for the petitioners-in-
intervention for G.R. No. 155001 stated that there are two service providers whose contracts
 are still existing and whose validity extends beyond the In-Service Date. One contract remains
valid until 2008 and the other until 2010.77

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

In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the
1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to
supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary government
agency tasked with the job,79 it is MIAA's responsibility to ensure that whoever by contract is given the
right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights
of third parties and above all, the interest of the public.

VI

CONCLUSION

In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo
Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the
construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that
the 1997 Concession Agreement contains material and substantial amendments, which amendments
had the effect of converting the 1997 Concession Agreement into an entirely different agreement from
the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary
to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997
Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute
a direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being accessory
contracts to the ARCA, are likewise null and void.

WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement
and the Supplements thereto are set aside for being null and void.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, and

Carpio-Morales, JJ., concur.
Vitug, J., see separate (dissenting) opinion.
Panganiban, J., please see separate opinion.
Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in which he concurs.
Carpio, J., no part.
Callejo, Sr., J., also concur in the separate opinion of J. Panganiban.
Azcuna, J., joins the separate opinion of J. Vitug.

SEPARATE OPINIONS

VITUG, J.:

This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the
Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions
for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases in question,
although denominated to be petitions for prohibition, actually pray for the nullification of the PIATCO
contracts and to restrain respondents from implementing said agreements for being illegal and
unconstitutional.

Section 2, Rule 65 of the Rules of Court states:

"When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and
there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered commanding the respondent to
desist from further proceedings in the action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require."

The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer
or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from
respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal
issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis
of undisputed facts.2 The parties allege, respectively, contentious evidentiary facts. It would be difficult,
if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual submissions
made by the parties.3 As the Court has so often exhorted, it is not a trier of facts.

The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules of
Court. The Rules provide that any person interested under a contract may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties thereunder.4 The Supreme
Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional trial
courts.5
As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs. Guingona,
Jr.7 , the Supreme Court should not be thought of as having been tasked with the awesome
responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to
be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation
of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every
affair of government. What significance can still then remain of the time-honored and widely acclaimed
principle of separation of powers if, at every turn, the Court allows itself to pass upon at will the
disposition of a co-equal, independent and coordinate branch in our system of government. I dread to
think of the so varied uncertainties that such an undue interference can lead to.

Accordingly, I vote for the dismissal of the petition.

Quisumbing, and Azcuna, JJ., concur.

PANGANIBAN, J.:

The five contracts for the construction and the operation of Ninoy Aquino International Airport (NAIA)
Terminal III, the subject of the consolidated Petitions before the Court, are replete with outright
violations of law, public policy and the Constitution. The only proper thing to do is declare them all null
and void ab initio and let the chips fall where they may. Fiat iustitia ruat coelum.

The facts leading to this controversy are already well presented in the ponencia. I shall not burden the
readers with a retelling thereof. Instead, I will cut to the chase and directly address the two sets of gut
issues:

1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and decide
the Petitions? Corollarily, do petitioners have locus standi and should this Court decide the cases
without any mandatory referral to arbitration?

2. The second one is substantive in character: Did the subject contracts violate the Constitution, the
laws, and public policy to such an extent as to render all of them void and inexistent?

My answer to all the above questions is a firm "Yes."

The Procedural Issue:

Jurisdiction, Standing and Arbitration

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

Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for
arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or interest,
being in the main procedural matters, must now be set aside, as they have been in past cases. This
Court must be permitted to perform its constitutional duty of determining whether the other agencies
of government have acted within the limits of the Constitution and the laws, or if they have gravely
abused the discretion entrusted to them.1

Hierarchy of Courts

The Court has, in the past, held that questions relating to gargantuan government contracts ought to
be settled without delay.2 This holding applies with greater force to the instant cases. Respondent
Piatco is partly correct in averring that petitioners can obtain relief from the regional trial courts via an
action to annul the contracts.

Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any
such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the
parties and the general public. And, in light of the feared loss of jobs of the petitioning workers,
consequent to the inevitable pretermination of contracts of the petitioning service providers that will
follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently
urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus
justified.3

Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require delving
into factual questions,4 I submit that their disposition ultimately turns on questions of law.5 Further,
many of the significant and relevant factual questions can be easily addressed by an examination of
the documents submitted by the parties. In any event, the Petitions raise some novel questions
involving the application of the amended BOT Law, which this Court has seen fit to tackle.

Arbitration

Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco claims that
Section 10.02 of the Amended and Restated Concession Agreement (ARCA) provides for arbitration
under the auspices of the International Chamber of Commerce to settle any dispute or controversy or
claim arising in connection with the Concession Agreement, its amendments and supplements. The
government disagrees, however, insisting that there can be no arbitration based on Section 10.02 of
the ARCA, since all the Piatco contracts are void ab initio. Therefore, all contractual provisions,
including Section 10.02 of the ARCA, are likewise void, inexistent and inoperative. To support its stand,
the government cites Chavez v. Presidential Commission on Good Government:6"The void agreement
will not be rendered operative by the parties' alleged performance (partial or full) of their respective
prestations. A contract that violates the Constitution and the law is null and void ab initio and vests no
rights and creates no obligations. It produces no legal effect at all."
As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a resort
to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitioners-in-
intervention have pointed out that, even granting arguendo that the arbitration clause remained a valid
provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And in the
final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of the
ARCA, to be undertaken by a panel of three (3) arbitrators appointed in accordance with the Rules of
Arbitration of the International Chamber of Commerce, will not be able to address, determine and
definitively resolve the constitutional and legal questions that have been raised in the Petitions before
us.

Locus Standi

Given this Court's previous decisions in cases of similar import, no one will seriously doubt that, being
taxpayers and members of the House of Representatives, Petitioners Baterina et al. have locus
standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court held that the petitioner
therein, suing as a citizen, taxpayer and member of the House of Representatives, was sufficiently
clothed with standing to bring the suit questioning the validity of the assailed contract. The Court cited
the fact that public interest was involved, in view of the important role of the Manila International
Container Terminal (MICT) in the country's economic development and the magnitude of the financial
consideration. This, notwithstanding the fact that expenditure of public funds was not required under
the assailed contract.

In the cases presently under consideration, petitioners' personal and substantial interest in the
controversy is shown by the fact that certain provisions in the Piatco contracts create obligations on
the part of government (through the DOTC and the MIAA) to disburse public funds without prior
congressional appropriations.

Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely
affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are
prejudiced qua legislators, since the contractual provisions requiring the government to incur
expenditures without appropriations also operate as limitations upon the exclusive power and
prerogative of Congress over the public purse. As members of the House of Representatives, they are
actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget is
concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the
institution of which they are members, petitioners-legislators have locus standi to bring suit.

Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to
challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees
(or representatives of employees) of various service providers that have (1) existing concession
agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2)
service agreements to furnish essential support services to the international airlines operating at the
NAIA.

On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs. Agan
et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs and
losing their means of livelihood when their employer-companies are forced to shut down or otherwise
retrench and cut back on manpower. Such development would result from the imminent
implementation of certain provisions in the contracts that tend toward the creation of a monopoly in
favor of Piatco, its subsidiaries and related companies.

Petitioners-in-intervention are service providers in the business of furnishing airport-related services

to international airlines and passengers in the NAIA and are therefore competitors of Piatco as far as
that line of business is concerned. On account of provisions in the Piatco contracts, petitioners-in-
intervention have to enter into a written contract with Piatco so as not to be shut out of NAIA Terminal
III and barred from doing business there. Since there is no provision to ensure or safeguard free and
fair competition, they are literally at its mercy. They claim injury on account of their deprivation of
property (business) and of the liberty to contract, without due process of law.

And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal standing,
I have at the outset already established that, given its impact on the public and on national interest,
this controversy is laden with transcendental importance and constitutional significance. Hence, I do
not hesitate to adopt the same position as was enunciated in Kilosbayan v. Guingona Jr.8 that "in
cases of transcendental importance, the Court may relax the standing requirements and allow a suit
to prosper even when there is no direct injury to the party claiming the right of judicial review."9

The Substantive Issue:

Violations of the Constitution and the Laws

From the Outset, the Bidding Process Was Flawed and Tainted

After studying the documents submitted and arguments advanced by the parties, I have no doubt that,
right at the outset, Piatco was not qualified to participate in the bidding process for the Terminal III
project, but was nevertheless permitted to do so. It even won the bidding and was helped along by
what appears to be a series of collusive and corrosive acts.

The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes under the
category of an "unsolicited proposal," which is the subject of Section 4-A of the BOT Law.10 The
unsolicited proposal was originally submitted by the Asia's Emerging Dragon Corporation (AEDC) to
the Department of Transportation and Communications (DOTC) and the Manila International Airport
Authority (MIAA), which reviewed and approved the proposal.

The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was endorsed
to the National Economic Development Authority (NEDA-ICC), which in turn reviewed it on the basis
of its scope, economic viability, financial indicators and risks; and thereafter approved it for bidding.

The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated Draft
Concession Agreement, and published invitations for public bidding, i.e., for the submission of
comparative or competitive proposals. Piatco's predecessor-in-interest, the Paircargo Consortium,
was the only company that submitted a competitive bid or price challenge.
At this point, I must emphasize that the law requires the award of a BOT project to the bidder that has
satisfied the minimum requirements; and met the technical, financial, organizational and legal
standards provided in the BOT Law. Section 5 of this statute states:

"Sec. 5. Public bidding of projects. - . . .

"In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the
bidder who, having satisfied the minimum financial, technical, organizational and legal
standards required by this Act, has submitted the lowest bid and most favorable terms for
the project, based on the present value of its proposed tolls, fees, rentals and charges over a
fixed term for the facility to be constructed, rehabilitated, operated and maintained according
to the prescribed minimum design and performance standards, plans and specifications. . . ."
(Emphasis supplied.)

The same provision requires that the price challenge via public bidding "must be conducted under a
two-envelope/two-stage system: the first envelope to contain the technical proposal and the second
envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations
(IRR) provide that only those bidders that have passed the prequalification stage are permitted to have
their two envelopes reviewed.

In other words, prospective bidders must prequalify by submitting their prequalification documents for
evaluation; and only the pre-qualified bidders would be entitled to have their bids opened, evaluated
and appreciated. On the other hand, disqualified bidders are to be informed of the reason for their
disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I quote
thus: "Prequalified proponents will be considered eligible to move to second stage technical proposal
evaluation. The second and third envelopes of pre-disqualified proponents will be returned."11

Aside from complying with the legal and technical requirements (track record or experience of the firm
and its key personnel), a project proponent desiring to prequalify must also demonstrate its financial
capacity to undertake the project. To establish such capability, a proponent must prove that it is able
to raise the minimum amount of equity required for the project and to procure the loans or financing
needed for it. Section 5.4(c) of the 1994 IRR provides:

"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must comply

with the following requirements:

xxx xxx xxx

"c. Financial Capability. The project proponent must have adequate capability to sustain the
financing requirements for the detailed engineering design, construction, and/or operation and
maintenance phases of the project, as the case may be. For purposes of prequalification, this
capability shall be measured in terms of: (i) proof of the ability of the project proponent and/or
the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial
from reputable banks attesting that the project proponent and/or members of the consortium
are banking with them, that they are in good financial standing, and that they have adequate
resources. The government Agency/LGU concerned shall determine on a project-to-project
 basis, and before prequalification, the minimum amount of equity needed. . . . ." (Italics
supplied)

Since the minimum amount of equity for the project was set at 30 percent12 of the minimum project
cost of US$350 million, the minimum amount of equity required of any proponent stood at US$105
million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the
Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000.

However, the combined equity or net worth of the Paircargo consortium stood at only
P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost and very
much short of the required minimum equity, which was equivalent to 30 percent of the project cost.
Such deficiency should have immediately caused the disqualification of the Paircargo consortium. This
matter was brought to the attention of the Prequalification and Bidding Committee (PBAC).

Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair of the
PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger (Paircargo consortium)
was found to have a combined net worth of P3,926,421,242.00 that could support a project costing
approximately P13 billion." To justify his conclusion, he asserted: "It is not a requirement that the
networth must be `unrestricted'. To impose this as a requirement now will be nothing less than unfair."

He further opined, "(T)he networth reflected in the Financial Statement should not be taken as the
amount of money to be used to answer the required thirty (30%) percent equity of the challenger but
rather to be used in establishing if there is enough basis to believe that the challenger can comply with
the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award
of contract (Sec. 12.1 of IRR of the BOT Law) but not for prequalification (Sec. 5.4 of same document)."

On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed prequalified
and thus permitted to proceed to the other stages of the bidding process.

By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in
effect relieved the consortium of the need to comply with the financial capability requirement imposed
by the BOT Law and IRR. This position is unmistakably and squarely at odds with the Supreme Court's
consistent doctrine emphasizing the strict application of pertinent rules, regulations and guidelines for
the public bidding process, in order to place each bidder - actual or potential - on the same footing.
Thus, it is unarguably irregular and contrary to the very concept of public bidding to permit a variance
between the conditions under which bids are invited and those under which proposals are submitted
and approved.

Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the conditions
that impose some duty upon it, that bidder is not contracting in fair competition with those bidders that
propose to be bound by all conditions. The essence of public bidding is, after all, an opportunity for
fair competition and a basis for the precise comparison of bids.15 Thus, each bidder must bid under
the same conditions; and be subject to the same guidelines, requirements and limitations. The desired
result is to be able to determine the best offer or lowest bid, all things being equal.
Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent
of the minimum project cost, it should not have been prequalified or allowed to participate further in
the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened
the two envelopes of the consortium containing its technical and financial proposals; required AEDC
to match the consortium's bid; 16 or awarded the Concession Agreement to the consortium's
successor-in-interest, Piatco.

As there was effectively no public bidding to speak of, the entire bidding process having been flawed
and tainted from the very outset, therefore, the award of the concession to Paircargo's successor
Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio.
For this reason, Piatco cannot and should not be allowed to benefit from that Agreement.17

AEDC Was Deprived of the Right to Match PIATCO's Price Challenge

In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of matching
the price challenge of Piatco, AEDC as originator of the unsolicited proposal would be permitted
access only to the schedule of proposed Annual Guaranteed Payments submitted by Piatco, and not
to the latter's financial and technical proposals that constituted the basis for the price challenge in the
first place. This was supposedly in keeping with Section 11.6 of the 1994 IRR, which provides that
proprietary information is to be respected, protected and treated with utmost confidentiality, and is
therefore not to form part of the bidding/tender and related documents.

This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The
"proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary
information of the originator of an unsolicited proposal, and not to those belonging to a challenger. The
reason for the protection accorded proprietary information at all is the fact that, according to Section
4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when it pertains to
a project that involves "a new concept or technology", and/or a project that is not on the government's
list of priority projects.

To be considered as utilizing a new concept or technology, a project must involve the possession of
exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights
over a design, methodology or engineering concept.18 Patently, the intent of the BOT Law is to
encourage individuals and groups to come up with creative innovations, fresh ideas and new
technology. Hence, the significance and necessity of protecting proprietary information in connection
with unsolicited proposals. And to make the encouragement real, the law also extends to such
individuals and groups what amounts to a "right of first refusal" to undertake the project they
conceptualized, involving the use of new technology or concepts, through the mechanism of matching
a price challenge.

A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying
economic, financial, technical and other, factors; it is likewise based on certain assumptions as to the
nature of the business, the market potentials, the probable demand for the product or service, the
future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order to
be able to intelligently match a bid or price challenge, a bidder must be given access to the
assumptions and the calculations that went into crafting the competing bid.
In this instance, the financial and technical proposals of Piatco would have provided AEDC with the
necessary information to enable it to make a reasonably informed matching bid. To put it more simply,
a bidder unable to access the competitor's assumptions will never figure out how the competing bid
came about; requiring him to "counter-propose" is like having him shoot at a target in the dark while
blindfolded.

By withholding from AEDC the challenger's financial and technical proposals containing the critical
information it needed, Undersecretary Cal actually and effectively deprived AEDC of the ability to
match the price challenge. One could say that AEDC did not have the benefit of a "level playing field."
It seems to me, though, that AEDC was actually shut out of the game altogether.

At the end of the day, the bottom line is that the validity and the propriety of the award to Piatco had
been irreparably impaired.

Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR

Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within which the
winner of the bidding (and therefore the prospective awardee) shall submit the prescribed performance
security, proof of commitment of equity contributions, and indications of sources of financing (loans);
and, in the case of joint ventures, an agreement showing that the members are jointly and severally
responsible for the obligations of the project proponent under the contract.

The purpose of having a definite and firm timetable for the submission of the aforementioned
requirements is not only to prevent delays in the project implementation, but also to expose and weed
out unqualified proponents, who might have unceremoniously slipped through the earlier
prequalification process, by compelling them to put their money where their mouths are, so to speak.

Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of
the Notice of Award, in order to give the favored proponent sufficient time to comply with the
requirements. Hence, to avert or minimize the manipulation of the post-bidding process, the IRR not
only set out the precise sequence of events occurring between the completion of the evaluation of the
technical bids and the issuance of the Notice of Award, but also specified the timetables for each such
event. Definite allowable extensions of time were provided for, as were the consequences of a failure
to meet a particular deadline.

In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the
second-stage evaluation shall have been completed, the Committee must come to a decision whether
or not to award the contract and, within 7 days therefrom, the Notice of Award must be approved by
the head of agency or local government unit (LGU) concerned, and its issuance must follow within
another 7 days thereafter.

Section 9.2 of the IRR set the procedure applicable to projects involving substantial government
undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be
submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government
undertakings already previously approved, then the submission shall be for information only.
However, should there be additional or new provisions different from the original government
undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act
thereon, and unless otherwise specified, its failure to act on the contract within the specified time frame
signifies that the agency or LGU may proceed with the award. The head of agency or LGU shall
approve the Notice of Award within seven days of the clearance by the ICC on a no-objection basis,
and the Notice itself has to be issued within seven days thereafter.

The highly regulated time-frames within which the agents of government were to act evinced the intent
to impose upon them the duty to act expeditiously throughout the process, to the end that the project
be prosecuted and implemented without delay. This regulated scenario was likewise intended to
discourage collusion and substantially reduce the opportunity for agents of government to abuse their
discretion in the course of the award process.

Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred
in the award process, as can be observed from the presentation made by the counsel for public
respondents,19 quoted hereinbelow:

"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC failed to
match and that negotiations preparatory to Notice of Award should be commenced. This was
the decision to award that should have commenced the running of the 7-day period to
approve the Notice of Award, as per Section 9.1 of the IRR, or to submit the draft contract to
the ICC for approval conformably with Section 9.2.

"01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession Agreement
be submitted to the NEDA for clearance on a no-objection basis. This resolution came more
than 3 months too late as it should have been made on the 20th of December 1996 at the
latest.

"16 April 1997 - The PBAC resolved that the period of signing the Concession Agreement be
extended by 15 days.

"18 April 1997 - NEDA approved the Concession Agreement. Again this is more than 3 months
too late as the NEDA's decision should have been released on the 16th of January 1997 or
fifteen days after it should have been submitted to it for review.

"09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions of the
IRR, the Notice of Award should have been issued fourteen days after NEDA's approval, or
the 28th of January 1997. In any case, even if it were to be assumed that the release of NEDA's
approval on the 18th of April was timely, the Notice of Award should have been issued on the
9th of May 1997. In both cases, therefore, the release of the Notice of Award occurred in a
decidedly less than timely fashion."

This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in
charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the
face of this Court's solemn pronouncement in Republic v. Capulong,20 that "strict observance of the
rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and
competitive public bidding."

From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR
were repeatedly violated with unmitigated impunity - and by agents of government, no less! On account
of such violation, the award of the contract to Piatco, which undoubtedly gained time and benefited
from the delays, must be deemed null and void from the beginning.

Further Amendments Resulted in a Substantially Different Contract, Awarded Without Public

Bidding

But the violations and desecrations did not stop there. After the PBAC made its decision on December
11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract bidded out and
ended up with what amounts to a substantially new contract without any public bidding. This Contract
was subsequently further amended four more times through negotiation and without any bidding. Thus,
the contract actually executed between Piatco and DOTC/MIAA on July 12, 1997 (the Concession
Agreement or "CA") differed from the contract bidded out (the draft concession agreement or "DCA")
in the following very significant respects:

1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business of

providing airport-related services for international airlines and passengers.21

2. The CA provided that government is to answer for Piatco's unpaid loans and debts (lumped
under the term Attendant Liabilities) in the event Piatco fails to pay its senior lenders.22

3. The CA provided that in case of termination of the contract due to the fault of government,
government shall pay all expenses that Piatco incurred for the project plus the appraised value
of the Terminal.23

4. The CA imposed new and special obligations on government, including delivery of clean
possession of the site for the terminal; acquisition of additional land at the government's
expense for construction of road networks required by Piatco's approved plans and
specifications; and assistance to Piatco in securing site utilities, as well as all necessary
permits, licenses and authorizations.24

5. Where Section 3.02 of the DCA requires government to refrain from competing with the
contractor with respect to the operation of NAIA Terminal III, Section 3.02(b) of the CA
excludes and prohibits everyone, including government, from directly or indirectly competing
with Piatco, with respect to the operation of, as well as operations in, NAIA Terminal
III. Operations in is sufficiently broad to encompass all retail and other commercial business
enterprises operating within Terminal III, inclusive of the businesses of providing various
airport-related services to international airlines, within the scope of the prohibition.

6. Under Section 6.01 of the DCA, the following fees are subject to the written approval of
MIAA: lease/rental charges, concession privilege fees for passenger services, food services,
transportation utility concessions, groundhandling, catering and miscellaneous concession
fees, porterage fees, greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities fees
and others. Moreover, adjustments to the groundhandling fees, rentals and porterage fees are
permitted only once every two years and in accordance with a parametric formula, per DCA
Section 6.03. However, the CA as executed with Piatco provides in Section 6.06 that all the
aforesaid fees, rentals and charges may be adjusted without MIAA's approval or intervention.
Neither are the adjustments to these fees and charges subject to or limited by any parametric
formula.25

7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees, aircraft parking
fees, check-in counter fees and other fees are to be quoted and paid in Philippine pesos. But
per Section 1.33 of the CA, all the aforesaid fees save the terminal fee are denominated in US
Dollars.

8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities pertinent to
NAIA Terminal III, such as payment of lease rentals and performance of other obligations
under the Land Lease Agreement; the obligations under the Tenant Agreements; and payment
of all taxes, fees, charges and assessments of whatever kind that may be imposed on NAIA
Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant Liabilities refers to unpaid
debts of Piatco: "All amounts recorded and from time to time outstanding in the books of
(Piatco) as owing to Unpaid Creditors who have provided, loaned or advanced funds actually
used for the Project, including all interests, penalties, associated fees, charges, surcharges,
indemnities, reimbursements and other related expenses, and further including amounts owed
by [Piatco] to its suppliers, contractors and subcontractors."

9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the contractors
breach, rescind the contract and select one of four options: (a) take over the terminal and
assume all its attendant liabilities; (b) allow the contractor's creditors to assign the Project to
another entity acceptable to DOTC/MIAA; (c) pay the contractor rent for the facilities and
equipment the DOTC may utilize; or (d) purchase the terminal at a price established by
independent appraisers. Depending on the option selected, government may take immediate
possession and control of the terminal and its operations. Government will be obligated to
compensate the contractor for the "equivalent or proportionate contract costs actually
disbursed," but only where government is the one in breach of the contract. But under Section
8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to pay its
creditors, government is obliged to either (a) take over Terminal III and assume all of Piatco's
debts or (b) permit the qualified unpaid creditors to be substituted in place of Piatco or to
designate a new operator. And in the event of government's breach of contract, Piatco may
compel it to purchase the terminal at fair market value, per Section 8.06(b) of the CA.

10. Under the DCA, any delay by Piatco in the payment of the amounts due the government
constitutes breach of contract. However, under the CA, such delay does not necessarily
constitute breach of contract, since Piatco is permitted to suspend payments to the
government in order to first satisfy the claims of its secured creditors, per Section 8.04(d) of
the CA.
It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession
agreement) - in such substantial manner, without any public bidding, and after the bidding process
had been concluded on December 11, 1996 - is violative of public policy on public biddings, as well as
the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise was
completely lost. Its very rationale was totally subverted by permitting Piatco to amend the contract for
which public bidding had already been concluded. Competitive bidding aims to obtain the best deal
possible by fostering transparency and preventing favoritism, collusion and fraud in the awarding of
contracts. That is the reason why procedural rules pertaining to public bidding demand strict
observance.26

In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that substantive
amendments to a contract for which a public bidding has already been finished should only be awarded
after another public bidding:

"The due execution of a contract after public bidding is a limitation upon the right of the
contracting parties to alter or amend it without another public bidding, for otherwise what would
a public bidding be good for if after the execution of a contract after public bidding, the
contracting parties may alter or amend the contract, or even cancel it, at their will? Public
biddings are held for the protection of the public, and to give the public the best possible
advantages by means of open competition between the bidders. He who bids or offers the
best terms is awarded the contract subject of the bid, and it is obvious that such protection and
best possible advantages to the public will disappear if the parties to a contract executed after
public bidding may alter or amend it without another previous public bidding."28

The aforementioned case dealt with the unauthorized amendment of a contract executed after public
bidding; in the situation before us, the amendments were made also after the bidding, but prior to
execution. Be that as it may, the same rationale underlying Caltex applies to the present situation with
equal force. Allowing the winning bidder to renegotiate the contract for which the bidding process has
ended is tantamount to permitting it to put in anything it wants. Here, the winning bidder (Piatco) did
not even bother to wait until after actual execution of the contract before rushing to amend it. Perhaps
it believed that if the changes were made to a contract already won through bidding (DCA) instead of
waiting until it is executed, the amendments would not be noticed or discovered by the public.

In a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows:

"It is true that modification of government contracts, after the same had been awarded after a
public bidding, is not allowed because such modification serves to nullify the effects of the
bidding and whatever advantages the Government had secured thereby and may also result
in manifest injustice to the other bidders. This prohibition, however, refers to a change in vital
and essential particulars of the agreement which results in a substantially new contract."

Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that prohibited
further negotiations and eventual amendments to the DCA even after the bidding had been concluded.
In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft Concession Agreement shall be
issued from time to time. Said amendments will only cover items that would not materially affect the
preparation of the proponent's proposal."
I submit that accepting such warped argument will result in perverting the policy underlying public
bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in a
substantially new contract after the bidding process and price challenge had been concluded. In fact,
the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal, accords
its originator the privilege of matching the challenger's bid.

Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and
to the right of the original proponent "to match the price" of the challenger. Thus, only the price
proposals are in play. The terms, conditions and stipulations in the contract for which public bidding
has been concluded are understood to remain intact and not be subject to further negotiation.
Otherwise, the very essence of public bidding will be destroyed - there will be no basis for an exact
comparison between bids.

Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The
phrase amendments . . . from time to time refers only to those amendments to the draft concession
agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not
include or permit amendments negotiated for and introduced after the bidding process, has been
terminated.

Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public Bidding

Not satisfied with the Concession Agreement, Piatco - once more without bothering with public bidding
- negotiated with government for still more substantial changes. The result was the Amended and
Restated Concession Agreement (ARCA) executed on November 26, 1998. The following changes
were introduced:

1. The definition of Attendant Liabilities was further amended with the result that the unpaid
loans of Piatco, for which government may be required to answer, are no longer limited to only
those loans recorded in Piatco's books or loans whose proceeds were actually used in the
Terminal III project.30

2. Although the contract may be terminated due to breach by Piatco, it will not be liable to pay
the government any Liquidated Damages if a new operator is designated to take over the
operation of the terminal.31

3. The Liquidated Damages which government becomes liable for in case of its breach of
contract were substantially increased.32

4. Government's right to appoint a comptroller for Piatco in case the latter encounters liquidity
problems was deleted.33

5. Government is made liable for Incremental and Consequential Costs and Losses in case it
fails to comply or cause any third party under its direct or indirect control to comply with the
special obligations imposed on government.34
 6. The insurance policies obtained by Piatco covering the terminal are now required to be
assigned to the Senior Lenders as security for the loans; previously, their proceeds were to be
used to repair and rehabilitate the facility in case of damage.35

7. Government bound itself to set the initial rate of the terminal fee, to be charged when
Terminal III begins operations, at an amount higher than US$20.36

8. Government waived its defense of the illegality of the contract and even agreed to be liable
to pay damages to Piatco in the event the contract was declared illegal.37

9. Even though government may be entitled to terminate the ARCA on account of breach by
Piatco, government is still liable to pay Piatco the appraised value of Terminal III or the
Attendant Liabilities, if the termination occurs before the In-Service Date.38 This condition
contravenes the BOT Law provision on termination compensation.

10. Government is obligated to take the administrative action required for Piatco's imposition,
collection and application of all Public Utility Revenues.39 No such obligation existed
previously.

11. Government is now also obligated to perform and cause other persons and entities under
its direct or indirect control to perform all acts necessary to perfect the security interests to be
created in favor of Piatco's Senior Lenders.40 No such obligation existed previously.

12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility Revenues
become exorbitant or excessive has been removed.41

13. The illegality and unenforceability of the ARCA or any of its material provisions was made
an event of default on the part of government only, thus constituting a ground for Piatco to
terminate the ARCA.42

14. Amounts due from and payable by government under the contract were made payable on
demand - net of taxes, levies, imposts, duties, charges or fees of any kind except as required
by law.43

15. The Parametric Formula in the contract, which is utilized to compute for
adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking fees,
check-in counter fee and terminal fee), was revised to permit Piatco to input its more costly
short-term borrowing rates instead of the longer-terms rates in the computations for
adjustments, with the end result that the changes will redound to its greater financial benefit.

16. The Certificate of Completion simply deleted the successful performance-testing of the
terminal facility in accordance with defined performance standards as a pre-condition for
government's acceptance of the terminal facility.44

In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very material
alterations of the terms and conditions of the CA, and give further manifestly undue advantage to
Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by
the demands of its foreign lenders. However, no proof whatsoever has been adduced to buttress this
claim.

In any event, it is quite patent that the sum total of the aforementioned changes resulted in drastically
weakening the position of government to a degree that seems quite excessive, even from the
standpoint of a businessperson who regularly transacts with banks and foreign lenders, is familiar with
their mind-set, and understands what motivates them. On the other hand, whatever it was that impelled
government officials concerned to accede to those grossly disadvantageous changes, I can only
hazard a guess.

There is no question in my mind that the ARCA was unauthorized and illegal for lack of public bidding
and for being patently disadvantageous to government.

The Three Supplements Imposed New Obligations on Government, Also Without Prior Public
Bidding

After Piatco had managed to breach the protective rampart of public bidding, it recklessly went on a
rampage of further assaults on the ARCA.

The First Supplement Is as Void as the ARCA

In the First Supplement ("FS") executed on August 27, 1999, the following changes were made to the
ARCA:

1. The amounts payable by Piatco to government were reduced by allowing additional

exceptions to the Gross Revenues in which government is supposed to participate.45

2. Made part of the properties which government is obliged to construct and/or maintain and
keep in good repair are (a) the access road connecting Terminals II and III - the construction
of this access road is the obligation of Piatco, in lieu of its obligation to construct an Access
Tunnel connecting Terminals II and III; and (b) the taxilane and taxiway - these are likewise
part of Piatco's obligations, since they are part and parcel of the project as described in Clause
1.3 of the Bid Documents .46

3. The MIAA is obligated to provide funding for the maintenance and repair of the airports and
facilities owned or operated by it and by third persons under its control. It will also be liable to
Piatco for the latter's losses, expenses and damages as well as liability to third persons, in
case MIAA fails to perform such obligations. In addition, MIAA will also be liable for the
incremental and consequential costs of the remedial work done by Piatco on account of the
former's default.47

4. The FS also imposed on government ten (10) "Additional Special Obligations," including the
following:
 (a) Working for the removal of the general aviation traffic from the NAIA airport
complex48

(b) Providing through MIAA the land required by Piatco for the taxilane and one taxiway
at no cost to Piatco49

(c) Implementing the government's existing storm drainage master plan50

(d) Coordinating with DPWH the financing, the implementation and the completion of
the following works before the In-Service Date: three left-turning overpasses (EDSA to
Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.);51 and a road
upgrade and improvement program involving widening, repair and resurfacing of Sales
Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange;
and removal of squatters along Andrews Avenue.52

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

5. Government is required to work for the immediate reversion to MIAA of the Nayong
Pilipino National Park.54

6. Government's share in the terminal fees collected was revised from a flat rate of P180 to 36
percent thereof; together with government's percentage share in the gross revenues of Piatco,
the amount will be remitted to government in pesos instead of US dollars.55 This amendment
enables Piatco to benefit from the further erosion of the peso-dollar exchange rate, while
preventing government from building up its foreign exchange reserves.

7. All payments from Piatco to government are now to be invoiced to MIAA, and payments are
to accrue to the latter's exclusive benefit.56 This move appears to be in support of the funds
MIAA advanced to DPWH.

I must emphasize that the First Supplement is void in two respects. First, it is merely an amendment
to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not
capable of being ratified or amended, it follows that the FS too is void, inexistent and
inoperative. Second, even assuming arguendo that the ARCA is somehow remotely valid,
nonetheless the FS, in imposing significant new obligations upon government, altered the fundamental
terms and stipulations of the ARCA, thus necessitating a public bidding all over again. That the FS
was entered into sans public bidding renders it utterly void and inoperative.

The Second Supplement Is Similarly Void and Inexistent

The Second Supplement ("SS") was executed between the government and Piatco on September 4,
2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works
contractor, to undertake - in the government's stead - the clearing, removal, demolition and disposal
of improvements, subterranean obstructions and waste materials at the project site.57
The scope of the works, the procedures involved, and the obligations of the contractor are provided
for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates
per cubic meter of materials for each phase of the work - excavation, leveling, removal and disposal,
backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual
Guaranteed Payments it must pay government.

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

Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly
owned by a former high-ranking DOTC official. But that is another story altogether.

The Third Supplement Is Likewise Void and Inexistent

The Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001, passed
on to the government certain obligations of Piatco as Terminal III concessionaire, with respect to the
surface road connecting Terminals II and III.

By way of background, at the inception of and forming part of the NAIA Terminal III project was the
proposed construction of an access tunnel crossing Runway 13/31, which. would connect Terminal III
to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the said access tunnel was
subject to further negotiation; but for purposes of the bidding, the proponent should submit a bid for it
as well. Therefore, the tunnel was supposed to be part and parcel of the Terminal III project.

However, in Section 5 of the First Supplement, the parties declared that the access tunnel was not
economically viable at that time. In lieu thereof, the parties agreed that a surface access road (now
called the T2-T3 Road) was to be constructed by Piatco to connect the two terminals. Since it was
plainly in substitution of the tunnel, the surface road construction should likewise be considered part
and parcel of the same project, and therefore part of Piatco's obligation as well. While the access
tunnel was estimated to cost about P800 million, the surface road would have a price tag in the vicinity
of about P100 million, thus producing significant savings for Piatco.

Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road, nevertheless
shifted to government some of the obligations pertaining to the former, as follows:

1. Government is now obliged to remove at its own expense all tenants, squatters,
improvements and/or waste materials on the site where the T2-T3 road is to be
constructed.58 There was no similar obligation on the part of government insofar as the access
tunnel was concerned.

2. Should government fail to carry out its obligation as above described, Piatco may undertake
it on government's behalf, subject to the terms and conditions (including compensation
payments) contained in the Second Supplement.59

3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road.60
The TS depends upon and is intended to supplement the ARCA as well as the First Supplement, both
of which are void and inexistent and not capable of being ratified or amended. It follows that the TS is
likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and FS are
valid, still, the Third Supplement - imposing as it does significant new obligations upon government -
would in effect alter the terms and stipulations of the ARCA in material respects, thus necessitating
another public bidding. Since the TS was not subjected to public bidding, it is consequently utterly void
as well. At any rate, the TS created new monetary obligations on the part of government, for which
there were no prior appropriations. Hence it follows that the same is void ab initio.

In patiently tracing the progress of the Piatco contracts from their inception up to the present, I noted
that the whole process was riddled with significant lapses, if not outright irregularity and wholesale
violations of law and public policy. The rationale of beginning at the beginning, so to speak, will become
evident when the question of what to do with the five Piatco contracts is discussed later on.

In the meantime, I shall take up specific, provisions or changes in the contracts and highlight the more
prominent objectionable features.

Government Directly Guarantees Piatco Debts

Certainly the most discussed provision in the parties' arguments is the one creating an unauthorized,
direct government guarantee of Piatco's obligations in favor of the lenders.

Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA Terminal
III Project, may be accepted by government provided inter alia that no direct government guarantee,
subsidy or equity is required. In short, such guarantee is prohibited in unsolicited proposals. Section
2(n) of the same legislation defines direct government guarantee as "an agreement whereby the
government or any of its agencies or local government units (will) assume responsibility for the
repayment of debt directly incurred by the project proponent in implementing the project in case of a
loan default."

Both the CA and the ARCA have provisions that undeniably create such prohibited government
guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA, provides
thus:

"(iv) that if Concessionaire is in default under a payment obligation owed to the Senior Lenders,
and as a result thereof the Senior Lenders have become entitled to accelerate the Senior
Loans, the Senior Lenders shall have the right to notify GRP of the same . . .;

(v) . . . the Senior Lenders may after written notification to GRP, transfer the Concessionaire's
rights and obligations to a transferee . . .;

(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the Senior
Lenders shall endeavor . . . to enter into any other arrangement relating to the Development
Facility . . . If no agreement relating to the Development Facility is arrived at by GRP and the
Senior Lenders within the said 180-day period, then at the end thereof the Development
Facility shall be transferred by the Concessionaire to GRP or its designee and GRP shall make
 a termination payment to Concessionaire equal to the Appraised Value (as hereinafter defined)
of the Development Facility or the sum of the Attendant Liabilities, if greater. . . ."

In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows:

"Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from
time to time owed or which may become, owing by Concessionaire to Senior Lenders or any
other persons or entities who have provided, loaned or advanced funds or provided financial
facilities to Concessionaire for the Project, including, without limitation, all principal, interest,
associated fees, charges, reimbursements, and other related expenses (including the fees,
charges and expenses of any agents or trustees of such persons or entities), whether payable
at maturity, by acceleration or otherwise, and further including amounts owed by
Concessionaire to its professional consultants and advisers, suppliers, contractors and sub-
contractors."

Government's agreement to pay becomes effective in the event of a default by Piatco on any of
its loan obligations to the Senior Lenders, and the amount to be paid by government is the greater
of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by
Piatco - whether to the Senior Lenders or to other entities, including its suppliers, contractors and
subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by
government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct
government guarantee.

It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that
would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's rights
to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other
arrangement" with the government regarding the Terminal III facility, before government is required to
make good on its guarantee. What is abundantly clear is the fact that, in the devious labyrinthine
process detailed in the aforesaid section, it is entirely within the Senior Lenders' power, prerogative
and control - exercisable via a mere refusal or inability to agree upon "a transferee" or "any other
arrangement" regarding the terminal facility - to push the process forward to the ultimate contractual
cul-de-sac, wherein government will be compelled to abjectly surrender and make good on its
guarantee of payment.

Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the
event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of
government making the termination payment to Piatco, not to the lenders. However, it is almost a
certainty that the Senior Lenders will already have made Piatco sign over to them, ahead of time, its
right to receive such payments from government; and/or they may already have had themselves
appointed its attorneys-in-fact for the purpose of collecting and receiving such payments.

Nevertheless, as petitioners-in-intervention pointed out in their Memorandum,61 the termination

payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the contract
documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that it will
necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert the
foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the interests
of government at great risk. Indeed, if the unthinkable were to happen, government would be paying
several hundreds of millions of dollars, but the mortgage liens on the facility may still be foreclosed by
the Senior Lenders just the same.

Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect
government's interests. More accurately, the contracts would consistently weaken and do away with
protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco
and/or its Senior Lenders.

While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable
alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the
Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from time
to time outstanding in the books of the Concessionaire and actually used for the project. These
phrases were eliminated from the ARCA's definition of Attendant Liabilities.

Since no explanation has been forthcoming from Piatco as to the possible justification for such a
drastic change, the only conclusion, possible is that it intends to have all of its debts covered by the
guarantee, regardless of whether or not they are disclosed in its books. This has particular reference
to those borrowings which were obtained in violation of the loan covenants requiring Piatco to maintain
a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used for the
project itself.

This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which
government has guaranteed to pay as termination payment is the greater of either (i) the Appraised
Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant
Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their sum
may greatly exceed the appraised value of the facility, and government may end up paying very much
more than the real worth of Terminal III. (So why did government have to bother with public bidding
anyway?)

In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and
the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to take on
the burden and the risks of financing the construction, operation and maintenance of relevant
infrastructure and development projects for the simple reason that government is not in a position to
do so. By the same token, government guarantee was prohibited, since it would merely defeat the
purpose and raison d'être of a build-operate-and-transfer project to be undertaken by the private
sector.

To the extent that the project proponent is able to obtain loans to fund the project, those risks are
shared between the project proponent on the one hand, and its banks and other lenders on the other.
But where the proponent or its lenders manage to cajol or coerce the government into extending a
guarantee of payment of the loan obligations, the risks assumed by the lenders are passed right back
to government. I cannot understand why, in the instant case, government cheerfully assented to re-
assuming the risks of the project when it gave the prohibited guarantee and thus simply negated the
very purpose of the BOT Law and the protection it gives the government.
Contract Termination Provisions in the Piatco Contracts Are Void

The BOT Law as amended provides for contract termination as follows:

"Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or terminated
by the government through no fault of the project proponent or by mutual agreement, the
Government shall compensate the said project proponent for its actual expenses incurred in
the project plus a reasonable rate of return thereon not exceeding that stated in the contract
as of the date of such revocation, cancellation or termination: Provided, That the interest of
the Government in this instances [sic] shall be duly insured with the Government Service
Insurance System or any other insurance entity duly accredited by the Office of the Insurance
Commissioner: Provided, finally, That the cost of the insurance coverage shall be included in
the terms and conditions of the bidding referred to above.

"In the event that the government defaults on certain major obligations in the contract and such
failure is not remediable or if remediable shall remain unremedied for an unreasonable length
of time, the project proponent/contractor may, by prior notice to the concerned national
government agency or local government unit specifying the turn-over date, terminate the
contract. The project proponent/contractor shall be reasonably compensated by the
Government for equivalent or proportionate contract cost as defined in the contract."

The foregoing statutory provision in effect provides for the following limited instances when termination
compensation may be allowed:

1. Termination by the government through no fault of the project proponent

2. Termination upon the parties' mutual agreement

3. Termination by the proponent due to government's default on certain major contractual

obligations

To emphasize, the law does not permit compensation for the project proponent when contract
termination is due to the proponent's own fault or breach of contract.

This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to
pay termination compensation to Piatco even when termination is initiated by government for the
following causes:

"(i) Failure of Concessionaire to finish the Works in all material respects in accordance with
the Tender Design and the Timetable;

(ii) Commission by Concessionaire of a material breach of this Agreement . . .;

(iii) . . . a change in control of Concessionaire arising from the sale, assignment, transfer or
other disposition of capital stock which results in an ownership structure violative of statutory
or constitutional limitations;
 (iv) A pattern of continuing or repeated non-compliance, willful violation, or non-performance
of other terms and conditions hereof which is hereby deemed a material breach of this
Agreement . . ."62

As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject to
Section 4.04." The effect of this insertion is that in those instances where government may terminate
the contract on account of Piatco's breach, and it is nevertheless required under the ARCA to make
termination compensation to Piatco even though unauthorized by law, such compensation is to be
equivalent to the payment amount guaranteed by government - either a) the Appraised Value of the
terminal facility or (b) the aggregate of the Attendant Liabilities, whichever amount is greater!

Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project
proponent to recover the actual expenses it incurred in the prosecution of the project plus a reasonable
rate of return not in excess of that provided in the contract; or to be compensated for the equivalent or
proportionate contract cost as defined in the contract, in case the government is in default on certain
major contractual obligations.

Furthermore, in those instances where such termination compensation is authorized by the BOT
Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA
mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned,
and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such
coverage is that of the Senior Lenders, not that of government. This can hardly be considered
compliance with law.

In essence, the ARCA provisions on termination compensation result in another unauthorized

government guarantee, this time in favor of Piatco.

A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the National
Honor

Still another contractual provision offensive to law and public policy is Section 8.01(d) of the ARCA,
which is a "bolder and badder" version of Section 8.04(d) of the CA.

It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government
guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b. iii. of
the 1999 IRR defines a direct government subsidy as encompassing "an agreement whereby the
Government . . . will . . . postpone any payments due from the proponent."

Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:

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

By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates
the indefinitepostponement of payment of all of Piatco's obligations to the government, in order to
ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or less
than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco will
pay interest on the unpaid amounts owed to government does not change the situation or render the
prohibited subsidy any less unacceptable.

But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I
mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of
the CA which gave government the right to appoint a financial controller to manage the cash position
of Piatco during situations of financial distress. Not only has government been deprived of any means
of monitoring and managing the situation; worse, as can be seen from Section 8.01(d) above-quoted,
the Senior Lenders have effectively locked in on the right to exercise financial controllership over
Piatco and to allocate its cash resources to the payment of all amounts owed to the Senior Lenders
before allowing any payment to be made to government.

In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power and
the authority to determine how much (if at all) and when the Philippine government (as grantor of the
franchise) may be allowed to receive from Piatco. In that situation, government will be at the mercy of
the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law and to
public policy.

The aforesaid provision rouses mixed emotions - shame and disgust at the parties' (especially
the government officials') docile submission and abject servitude and surrender to the
imperious and excessive demands of the foreign lenders, on the one hand; and vehement
outrage at the affront to the sovereignty of the Republic and to the national honor, on the other.
It is indeed time to put an end to such an unbearable, dishonorable situation.

The Piatco Contracts Unarguably Violate Constitutional Injunctions

I will now discuss the manner in which the Piatco Contracts offended the Constitution.

The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the Constitution

While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and maintain the
Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the entire term of the
concession agreement, "the exclusive right to operate a commercial international passenger terminal
within the Island of Luzon" with the exception of those three terminals already existing63 at the time of
execution of the ARCA.

Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or any other
form of authorization for the operation of a public utility" that is "exclusive in character."

In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal III which
. . . is a 'terminal for public use' is a public utility." Consequently, the constitutional prohibition against
the exclusivity of a franchise applies to the franchise for the operation of NAIA Terminal III as well.

What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an
international passenger terminal within the "Island of Luzon." What this grant effectively means is that
the government is now estopped from exercising its inherent power to award any other person another
franchise or a right to operate such a public utility, in the event public interest in Luzon requires it. This
restriction is highly detrimental to government and to the public interest. Former Secretary of Justice
Hernando B. Perez expressed this point well in his Memorandum for the President dated 21 May 2002:

"Section 3.02 on 'Exclusivity'

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

"This is an onerous and disadvantageous provision. It effectively grants PIATCO a monopoly

in Luzon and ties the hands of government in the matter of developing new airports which may
be found expedient and necessary in carrying out any future plan for an inter-modal
transportation system in Luzon.

"Additionally, it imposes an unreasonable restriction on the operation of the Clark International

Airport which could adversely affect the operation and development of the Clark Special
Economic Zone to the economic prejudice of the local constituencies that are being benefited
by its operation." (Emphasis supplied)
While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a
monopoly on account of the very nature of its business and the absence of competition, such a
situation does not however constitute justification to violate the constitutional prohibition and grant
an exclusive franchise or exclusive right to operate a public utility.

Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As
correctly argued,64 the existence of a monopoly by a public utility is a situation created by
circumstances that do not encourage competition. This situation is different from the grant of a
franchise to operate a public utility, a privilege granted by government. Of course, the grant of a
franchise may result in a monopoly. But making such franchise exclusive is what is expressly
proscribed by the Constitution.

Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity; it also
guaranteed that the government will not improve or expand the facilities at Clark - and in fact is required
to put a cap on the latter's operations - until after Terminal III shall have been operated at or beyond
its peak capacity for three consecutive years.65 As counsel for public respondents pointed out, in the
real world where the rate of influx of international passengers can fluctuate substantially from year to
year, it may take many years before Terminal III sees three consecutive years' operations at peak
capacity. The Diosdado Macapagal International Airport may thus end up stagnating for a long time.
Indeed, in order to ensure greater profits for Piatco, the economic progress of a region has had to be
sacrificed.

The Piatco Contracts Violate the Time Limitation on Franchises

Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other
form of authorization for the operation of a public utility shall be . . . for a longer period than fifty years."
After all, a franchise held for an unreasonably long time would likely give rise to the same evils as a
monopoly.

The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain
an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote thus:

"Sec. 8.03. Termination Procedure and Consequences of Termination. -

a) x x x xxx xxx

b) In the event the Agreement is terminated pursuant to Section 8.01 (b) hereof,
Concessionaire shall be entitled to collect the Liquidated Damages specified in Annex
'G'. The full payment by GRP to Concessionaire of the Liquidated Damages shall be a
condition precedent to the transfer by Concessionaire to GRP of the Development
Facility. Prior to the full payment of the Liquidated Damages, Concessionaire shall to
the extent practicable continue to operate the Terminal and the Terminal Complex and
shall be entitled to retain and withhold all payments to GRP for the purpose of offsetting
the same against the Liquidated Damages. Upon full payment of the Liquidated
Damages, Concessionaire shall immediately transfer the Development Facility to GRP
on 'as-is-where-is' basis."
The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables
government to avoid having to make outright payment of an obligation that will likely run into billions
of pesos, this easy payment plan will nevertheless cost government considerable loss of income,
which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the
concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid
balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be entitled
to remain in the driver's seat and keep operating the terminal for an indefinite length of time.

The Contracts Create Two Monopolies for Piatco

By way of background, two monopolies were actually created by the Piatco contracts. The first and
more obvious one refers to the business of operating an international passenger terminal in Luzon,
the business end of which involves providing international airlines with parking space for their aircraft,
and airline passengers with the use of departure and arrival areas, check-in counters, information
systems, conveyor systems, security equipment and paraphernalia, immigrations and customs
processing areas; and amenities such as comfort rooms, restaurants and shops.

In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III will be
the only facility to be operated as an international passenger terminal;66 that NAIA Terminals I and II
will no longer be operated as such;67 and that no one (including the government) will be allowed to
compete with Piatco in the operation of an international passenger terminal in the NAIA
Complex.68 Given that, at this time, the government and Piatco are the only ones engaged in the
business of operating an international passenger terminal, I am not acutely concerned with this
particular monopolistic situation.

There was however another monopoly within the NAIA created by the subject contracts for Piatco - in
the business of providing international airlines with the following: groundhandling, in-flight catering,
cargo handling, and aircraft repair and maintenance services. These are lines of business activity in
which are engaged many service providers (including the petitioners-in-intervention), who will be
adversely affected upon full implementation of the Piatco Contracts, particularly Sections 3.01(d)69 and
(e)70 of both the ARCA and the CA.

On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international passenger
terminal at the NAIA, and therefore the only place within the NAIA Complex where the business of
providing airport-related services to international airlines may be conducted. On the other hand,
Section 3.01(d) of the ARCA requires government, through the MIAA, not to allow service providers
with expired MIAA contracts to renew or extend their contracts to render airport-related services to
airlines. Meanwhile, Section 3.01(e) of the ARCA requires government, through the DOTC and MIAA,
not to allow service providers - those with subsisting concession agreements for services and
operations being conducted at Terminal I - to carry over their concession agreements, services and
operations to Terminal III, unless they first enter into a separate agreement with Piatco.

The aforementioned provisions vest in Piatco effective and exclusive control over which service
provider may and may not operate at Terminal III and render the airport-related services needed by
international airlines. It thereby possesses the power to exclude competition. By necessary implication,
it also has effective control over the fees and charges that will be imposed and collected by these
service providers.

This intention is exceedingly clear in the declaration by Piatco that it is "completely within its rights to
exclude any party that it has not contracted with from NAIA Terminal III."71

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

In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business
opportunity. It announced72 that it has accredited three groundhandlers for Terminal III. Aside from the
Philippine Airlines, the other accredited entities are the Philippine Airport and Ground Services
Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit"). PAGSGlobeground
is a wholly-owned subsidiary of the Philippine Airport and Ground Services, Inc. or PAGS,73 while Orbit
is a wholly-owned subsidiary of Friendship Holdings, Inc.,74 which is in turn owned 80 percent by
PAGS.75 PAGS is a service provider owned 60 percent by the Cheng Family;76 it is a stockholder of 35
percent of Piatco77 and is the latter's designated contractor-operator for NAIA Terminal III.78

Such entry into and domination of the airport-related services sector appear to be very much in line
with the following provisions contained in the First Addendum to the Piatco Shareholders
Agreement,79 executed on July 6, 1999, which appear to constitute a sort of master plan to create a
monopoly and combinations in restraint of trade:

"11. The Shareholders shall ensure:

a. x x x xxx x x x.;

b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates shall, at
all times during the Concession Period, be exclusively authorized by (PIATCO) to engage in
the provision of ground-handling, catering and fueling services within the Terminal Complex.

c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession Period, be
the only entities authorized to construct and operate a warehouse for all cargo handling and
related services within the Site."

Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being fostered by
the Piatco Contracts through the erection of barriers to the entry of other service providers into
Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court ruled:

". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall regulate or
prohibit monopolies when the public interest so requires. No combinations in restraint of trade
or unfair competition shall be allowed.'
 "A monopoly is a privilege or peculiar advantage vested in one or more persons or companies,
consisting in the exclusive right or power to carry on a particular business or trade,
manufacture a particular article, or control the sale or the whole supply of a particular
commodity. It is a form of market structure in which one or only a few firms dominate the total
sales of a product or service. On the other hand, a combination in restraint of trade is an
agreement or understanding between two or more persons, in the form of a contract, trust,
pool, holding company, or other form of association, for the purpose of unduly restricting
competition, monopolizing trade and commerce in a certain commodity, controlling its
production, distribution and price, or otherwise interfering with freedom of trade without
statutory authority. Combination in restraint of trade refers to the means while monopoly refers
to the end.

"x x x xxx xxx

"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses
competition. The desirability of competition is the reason for the prohibition against restraint of
trade, the reason for the interdiction of unfair competition, and the reason for regulation of
unmitigated monopolies. Competition is thus the underlying principle of [S]ection 19, Article
XII of our Constitution, . . ."81

Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be employed: "A
'monopoly' embraces any combination the tendency of which is to prevent competition in the broad
and general sense, or to control prices to the detriment of the public. In short, it is the concentration of
business in the hands of a few. The material consideration in determining its existence is not that
prices are raised and competition actually excluded, but that power exists to raise prices or exclude
competition when desired."83 (Emphasis supplied)

The Contracts Encourage Monopolistic Pricing, Too

Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless
power over the charging of fees, rentals and so forth. What little "oversight function" the government
might be able and minded to exercise is less than sufficient to protect the public interest, as can be
gleaned from the following provisions:

"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges

"For fees, rentals and charges constituting Non-Public Utility Revenues, Concessionaire may
make any adjustments it deems appropriate without need for the consent of GRP or any
government agency subject to Sec. 6.03(c)."

Section 6.03(c) in turn provides:

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

It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy the
government without fear of any sanction. Moreover, Section 6.06 - taken together with Section 6.03(c)
of the ARCA - falls short of the standard set by the BOT Law as amended, which expressly requires
in Section 2(b) that the project proponent is "allowed to charge facility users appropriate tolls, fees,
rentals and charges not exceeding those proposed in its bid or as negotiated and incorporated
in the contract x x x."

The Piatco Contracts Violate Constitutional Prohibitions Against

Impairment of Contracts and Deprivation of Property Without Due Process

Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires government, through
DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations of certain
service providers currently operating at Terminal I with subsisting contracts.

By the In-Service Date, Terminal III shall be the only facility to be operated as an international
passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer operate as such,86 and no
one shall be allowed to compete with Piatco in the operation of an international passenger terminal in
the NAIA.87 The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal
where the business of providing airport-related services to international airlines and passengers may
be conducted at all.

Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing
contracts with service providers after the In-Service Date, as they cannot be allowed to operate in
Terminal III.

In short, the CA and the ARCA obligate and constrain government to break its existing contracts with
these service providers.

Notably, government is not in a position to require Piatco to accommodate the displaced service
providers, and it would be unrealistic to think that these service providers can perform their service
contracts in some other international airport outside Luzon. Obviously, then, these displaced service
providers are - to borrow a quaint expression - up the river without a paddle. In plainer terms, they will
have lost their businesses entirely, in the blink of an eye.

What we have here is a set of contractual provisions that impair the obligation of contracts and
contravene the constitutional prohibition against deprivation of property without due process of law.88

Moreover, since the displaced service providers, being unable to operate, will be forced to close shop,
their respective employees - among them Messrs. Agan and Lopez et al. - have very grave cause for
concern, as they will find themselves out of employment and bereft of their means of livelihood. This
situation comprises still another violation of the constitution prohibition against deprivation of property
without due process.
True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless,
where that privilege has been availed of by the petitioners-in-intervention service providers for years
on end, a situation arises, similar to that in American Inter-fashion v. GTEB.89 We held therein that a
privilege enjoyed for seven years "evolved into some form of property right which should not be
removed x x x arbitrarily and without due process." Said pronouncement is particularly relevant and
applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors
are at stake.

The Piatco Contracts Violate Constitutional Prohibition

Against Deprivation of Liberty Without Due Process

The Piatco Contracts by locking out existing service providers from entry into Terminal III and
restricting entry of future service providers, thereby infringed upon the freedom - guaranteed to and
heretofore enjoyed by international airlines - to contract with local service providers of their choice,
and vice versa.

Both the service providers and their client airlines will be deprived of the right to liberty, which includes
the right to enter into all contracts,90 and/or the right to make a contract in relation to one's business.91

By Creating New Financial Obligations for Government,

Supplements to the ARCA Violate the Constitutional
Ban on Disbursement of Public Funds Without Valid Appropriation

Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except in
pursuance of an appropriation made by law.92 The immediate effect of this constitutional ban is that all
the various agencies of government are constrained to limit their expenditures to the amounts
appropriated by law for each fiscal year; and to carefully count their cash before taking on contractual
commitments. Giving flesh and form to the injunction of the fundamental law, Sections 46 and 47 of
Executive Order 292, otherwise known as the Administrative Code of 1987, provide as follows:

"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the
expenditure of public funds shall be entered into unless there is an appropriation therefor, the
unexpended balance of which, free of other obligations, is sufficient to cover the proposed
expenditure; and . .

"Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of a contract
for personal service, for supplies for current consumption or to be carried in stock not
exceeding the estimated consumption for three (3) months, or banking transactions of
government-owned or controlled banks, no contract involving the expenditure of public funds
by any government agency shall be entered into or authorized unless the proper accounting
official of the agency concerned shall have certified to the officer entering into the obligation
that funds have been duly appropriated for the purpose and that the amount necessary to
cover the proposed contract for the current calendar year is available for expenditure on
account thereof, subject to verification by the auditor concerned. The certificate signed by the
proper accounting official and the auditor who verified it, shall be attached to and become an
integral part of the proposed contract, and the sum so certified shall not thereafter be available
 for expenditure for any other purpose until the obligation of the government agency concerned
under the contract is fully extinguished."

Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the tenor of
the language of the law that the existence of appropriations and the availability of funds are
indispensable pre-requisites to or conditions sine qua non for the execution of government contracts.
The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed
contract."93

Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents, the three
Supplements to the ARCA, which were not approved by NEDA, imposed on government the additional
burden of spending public moneys without prior appropriation.

In the First Supplement ("FS") dated August 27, 1999, the following requirements were imposed on
the government:

• To construct, maintain and keep in good repair and operating condition all airport support
services, facilities, equipment and infrastructure owned and/or operated by MIAA, which are
not part of the Project or which are located outside the Site, even though constructed by
Concessionaire - including the access road connecting Terminals II and III and the taxilane,
taxiways and runways

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

• Section 4 of the FS imposed on government ten (10) "Additional Special Obligations,"

including the following:

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

• Section 5 of the FS also provides that in lieu of the access tunnel, a surface access road (T2-
T3) will be constructed. This provision requires government to expend funds to purchase
additional land from Nayong Pilipino and to clear the same in order to be able to deliver clean
possession of the site to Piatco, as required in Section 5(c) of the FS.

On the other hand, the Third Supplement ("TS") obligates the government to deliver, within 120 days
from date thereof, clean possession of the land on which the T2-T3 Road is to be constructed.

The foregoing contractual stipulations undeniably impose on government the expenditures of public
funds not included in any congressional appropriation or authorized by any other statute. Piatco
however attempts to take these stipulations out of the ambit of Sections 46 and 47 of the Administrative
Code by characterizing them as stipulations for compliance on a "best-efforts basis" only.

To determine whether the additional obligations under the Supplements may really be undertaken on
a best-efforts basis only, the nature of each of these obligations must be examined in the context of
its relevance and significance to the Terminal III Project, as well as of any adverse impact that may
result if such obligation is not performed or undertaken on time. In short, the criteria for determining
whether the best-efforts basis will apply is whether the obligations are critical to the success of the
Project and, accordingly, whether failure to perform them (or to perform them on time) could result in
a material breach of the contract.

Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on a different
aspect. In particular, each of the following may all be deemed to play a major role in the successful
and timely prosecution of the Terminal III Project: the obtention of land required by PIATCO for the
taxilane and taxiway; the implementation of government's existing storm drainage master plan; and
coordination with DPWH for the completion of the three left-turning overpasses before the In-Service
Date, as well as acquisition and delivery of additional land for the construction of the T2-T3 access
road.

Conversely, failure to deliver on any of these obligations may conceivably result in substantial
prejudice to the concessionaire, to such an extent as to constitute a material breach of the Piatco
Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to Section
8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with Section
8.02(a) of the ARCA; or the concessionaire may instead require government to pay the Incremental
and Consequential Losses under Section 1.23 of the ARCA.94The logical conclusion then is that the
obligations in the Supplements are not to be performed on a best-efforts basis only, but are unarguably
mandatory in character.

Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation of the road
upgrading and improvement program for Sales, Andrews and Manlunas Roads (which provide access
to the Terminal III site) prior to the In-Service Date, it is essential to take note of the fact that there was
a pressing need to complete the program before the opening of Terminal III.95 For that reason, the
MIAA was compelled to enter into a memorandum of agreement with the DPWH in order to ensure
the timely completion of the road widening and improvement program. MIAA agreed to advance the
total amount of P410.11 million to DPWH for the works, while the latter was committed to do the
following:

"2.2.8. Reimburse all advance payments to MIAA including but not limited to interest, fees,
plus other costs of money within the periods CY2004 and CY2006 with payment of no less
than One Hundred Million Pesos (PhP100M) every year.

"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget allocation the
repayments for the advances made by MIAA, to ensure that the advances are fully repaid by
CY2006. For this purpose, DPWH shall include the amounts to be appropriated for
reimbursement to MIAA in the "Not Needing Clearance" column of their Agency Budget Matrix
(ABM) submitted to the Department of Budget and Management."

It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete the
upgrading program for the crucially situated access roads prior to the targeted opening date of
Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not have been able
to complete the program on time. As a consequence, government would have been in breach of a
material obligation. Hence, this particular undertaking of government may likewise not be construed
as being for best-efforts compliance only.

They also Infringe on the Legislative Prerogative and Power Over the Public Purse

But the particularly sad thing about this transaction between MIAA and DPWH is the fact that both
agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that
would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that
purpose. The agreement would then be presented to Congress as a done deal. Congress would thus
be obliged to uphold the agreement and support it with the necessary allocations and appropriations
for three years, in order to enable DPWH to deliver on its committed repayments to MIAA. The net
result is an infringement on the legislative power over the public purse and a diminution of Congress'
control over expenditures of public funds - a development that would not have come about, were it not
for the Supplements. Very clever but very illegal!

EPILOGUE
What Do We Do Now?

In the final analysis, there remains but one ultimate question, which I raised during the Oral Argument
on December 10, 2002: What do we do with the Piatco Contracts and Terminal III?96 (Feeding
directly into the resolution of the decisive question is the other nagging issue: Why should we bother
with determining the legality and validity of these contracts, when the Terminal itself has already been
built and is practically complete?)

Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without exception,
are void ab initio, and therefore inoperative. Even the very process by which the contracts came into
being - the bidding and the award - has been riddled with irregularities galore and blatant violations of
law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by some,
of saving one (the original Concession Agreement) while junking all the rest.

Neither is it possible to argue for the retention of the Draft Concession Agreement (referred to in the
various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect
to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the
government executed was the Concession Agreement which is entirely different from the Draft
Concession Agreement.

Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of

public policy and an insult to ourselves if we opt to keep in place a contract - any contract - for to do
so would assume that we agree to having Piatco continue as the concessionaire for Terminal III.

Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated,
keeping Piatco on as concessionaire and even rewarding it by allowing it to operate and profit from
Terminal III - instead of imposing upon it the stiffest sanctions permissible under the laws - is
unconscionable.

It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in place.
For all it may care, we can do just as well without one, if we only let it continue and operate the facility.
After all, the real money will come not from building the Terminal, but from actually operating it for fifty
or more years and charging whatever it feels like, without any competition at all. This scenario must
not be allowed to happen.

If the Piatco contracts are junked altogether as I think they should be, should not AEDC automatically
be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-
cold 'No'. AEDC never won the bidding, never signed any contract, and never built any facility. Why
should it be allowed to automatically step in and benefit from the greed of another?

Should government pay at all for reasonable expenses incurred in the construction of the Terminal?
Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular,
its funders, contractors and investors - both local and foreign. After all, there is no question that the
State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and
transportation-related programs of government.

In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was void, the
principle of payment by quantum meruit was found applicable, and the contractor was allowed to
recover the reasonable value of the thing or services rendered (regardless of any agreement as to
the supposed value), in order to avoid unjust enrichment on the part of government. The principle
of quantum meruit was likewise applied in Eslao v. Commission on Audit,98 because to deny payment
for a building almost completed and already occupied would be to permit government to unjustly enrich
itself at the expense of the contractor. The same principle was applied in Republic v. Court of
Appeals.99

One possible practical solution would be for government - in view of the nullity of the Piatco contracts
and of the fact that Terminal III has already been built and is almost finished - to bid out the operation
of the facility under the same or analogous principles as build-operate-and-transfer projects. To be
imposed, however, is the condition that the winning bidder must pay the builder of the facility a price
fixed by government based on quantum meruit; on the real, reasonable - not inflated - value of the
built facility.

How the payment or series of payments to the builder, funders, investors and contractors will be
staggered and scheduled, will have to be built into the bids, along with the annual guaranteed
payments to government. In this manner, this whole sordid mess could result in something truly
beneficial for all, especially for the Filipino people.

WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL and VOID.

6. LIGA NG MGA BARANGAY NATIONAL V. ATIENZA JR.

G.R. No. 154599 January 21, 2004

THE LIGA NG MGA BARANGAY NATIONAL, petitioner,

vs.
THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF
MANILA, respondents.

DECISION

DAVIDE, JR., C.J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila City
Ordinance No. 8039, Series of 2002,1 and respondent City Mayor’s Executive Order No. 011, Series
of 2002,2 dated 15 August 2002 , for being patently contrary to law.

The antecedents are as follows:

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

Section 493 of that law provides that "[t]he liga at the municipal, city, provincial, metropolitan
political subdivision, and national levels directly elect a president, a vice-president, and five (5)
members of the board of directors." All other matters not provided for in the law affecting the
internal organization of the leagues of local government units shall be governed by their
 respective constitution and by-laws, which must always conform to the provisions of the
Constitution and existing laws.3

On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern its internal
organization.4 Section 1, third paragraph, Article XI of said Constitution and By-Laws states:

All other election matters not covered in this Article shall be governed by the "Liga Election
Code" or such other rules as may be promulgated by the National Liga Executive Board in
conformity with the provisions of existing laws.

By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code.5 Section
1.2, Article I of the Liga Election Code states:

1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall be
nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC chapters to
be held on the third Monday of the month immediately after the month when the synchronized
elections in paragraph 1.1 above was held. The incumbent Liga chapter president concerned
duly assisted by the proper government agency, office or department, e.g.
Provincial/City/NCR/Regional Director, shall convene all the duly elected Component
City/Municipal Chapter Presidents and all the current elected Punong Barangays (for
HUC/ICC) of the respective chapters in any public place within its area of jurisdiction for the
purpose of reorganizing and electing the officers and directors of the provincial, metropolitan
or HUC/ICC Liga chapters. Said president duly assisted by the government officer
aforementioned, shall notify, in writing, all the above concerned at least fifteen (15) days before
the scheduled election meeting on the exact date, time, place and requirements of the said
meeting.

The Liga thereafter came out with its Calendar of Activities and Guidelines in the Implementation of
the Liga Election Code of 2002,6 setting on 21 October 2002 the synchronized elections for highly
urbanized city chapters, such as the Liga Chapter of Manila, together with independent component
city, provincial, and metropolitan chapters.
lawphi1.net

On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of 2002,
providing, among other things, for the election of representatives of the District Chapters in the City
Chapter of Manila and setting the elections for both chapters thirty days after the barangay elections.
Section 3 (A) and (B) of the assailed ordinance read:

SEC. 3. Representation Chapters. — Every Barangay shall be represented in the said Liga
Chapters … by the Punong Barangay…or, in his absence or incapacity, by the kagawad duly
elected for the purpose among its members….

A. District Chapter

All elected Barangay Chairman in each District shall elect from among themselves the
President, Vice-President and five (5) members of the Board….
 B. City Chapter

The District Chapter representatives shall automatically become members of the Board and
they shall elect from among themselves a President, Vice-President, Secretary, Treasurer,
Auditor and create other positions as it may deem necessary for the management of the
chapter.

The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza, Jr.,
for his signature and approval.

On 16 July 2002, upon being informed that the ordinance had been forwarded to the Office of
the City Mayor, still unnumbered and yet to be officially released, the Liga sent respondent
Mayor of Manila a letter requesting him that said ordinance be vetoed considering that it
encroached upon, or even assumed, the functions of the Liga through legislation, a function
which was clearly beyond the ambit of the powers of the City Council.7

Respondent Mayor, however, signed and approved the assailed city ordinance and issued on 15
August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance.

Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:

WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED GRAVE

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

II

WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION WHEN HE
ISSUED EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED CITY ORDINANCE
NO. 8039 S. 2002.

In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and Executive
Order No. 011, Series of 2002, contradict the Liga Election Code and are therefore invalid. There
exists neither rhyme nor reason, not to mention the absence of legal basis, for the Manila City Council
to encroach upon, or even assume, the functions of the Liga by prescribing, through legislation, the
manner of conducting the Liga elections other than what has been provided for by the Liga Constitution
and By-laws and the Liga Election Code. Accordingly, the subject ordinance is an ultra vires act of the
respondents and, as such, should be declared null and void.
As for its prayer for the issuance of a temporary restraining order, the petitioner cites as reason therefor
the fact that under Section 5 of the assailed city ordinance, the Manila District Chapter elections would
be held thirty days after the regular barangay elections. Hence, it argued that the issuance of a
temporary restraining order and/or preliminary injunction would be imperative to prevent the
implementation of the ordinance and executive order.

On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a member of the Liga ng
mga Barangay in the City Chapter of Manila, filed a Complaint in Intervention with Urgent Motion for
the Issuance of Temporary Restraining Order and/or Preliminary Injunction.8 He supports the position
of the Liga and prays for the declaration of the questioned ordinance and executive order, as well as
the elections of the Liga ng mga Barangay pursuant thereto, to be null and void. The assailed
ordinance prescribing for an "indirect manner of election" amended, in effect, the provisions of the
Local Government Code of 1991, which provides for the election of the Liga officers at large. It also
violated and curtailed the rights of the petitioner and intervenor, as well as the other 896 Barangay
Chairmen in the City of Manila, to vote and be voted upon in a direct election.

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of
Comment.9 It supports the petition of the Liga, arguing that the assailed city ordinance and executive
order are clearly inconsistent with the express public policy enunciated in R.A. No. 7160. Local political
subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the
national legislature. They are mere agents vested with what is called the power of subordinate
legislation. Thus, the enactments in question, which are local in origin, cannot prevail against the
decree, which has the force and effect of law.

On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG posits that
technical rules of procedure should be relaxed in the instant petition. While Batas Pambansa Blg. 129,
as amended, grants original jurisdiction over cases of this nature to the Regional Trial Court (RTC),
the exigency of the present petition, however, calls for the relaxation of this rule. Section 496 (should
be Section 491) of the Local Government Code of 1991 primarily intended that the Liga ng mga
Barangay determine the representation of the Liga in the sanggunians for the immediate ventilation,
articulation, and crystallization of issues affecting barangay government administration. Thus, the
immediate resolution of this petition is a must.

On the other hand, the respondents defend the validity of the assailed ordinance and executive order
and pray for the dismissal of the present petition on the following grounds: (1) certiorari under Rule 65
of the Rules of Court is unavailing; (2) the petition should not be entertained by this Court in view of
the pendency before the Regional Trial Court of Manila of two actions or petitions questioning the
subject ordinance and executive order; (3) the petitioner is guilty of forum shopping; and (4) the act
sought to be enjoined is fait accompli.

The respondents maintain that certiorari is an extraordinary remedy available to one aggrieved by the
decision of a tribunal, officer, or board exercising judicial or quasi-judicial functions. The City Council
and City Mayor of Manila are not the "board" and "officer" contemplated in Rule 65 of the Rules of
Court because both do not exercise judicial functions. The enactment of the subject ordinance and
issuance of the questioned executive order are legislative and executive functions, respectively, and
thus, do not fall within the ambit of "judicial functions." They are both within the prerogatives, powers,
and authority of the City Council and City Mayor of Manila, respectively. Furthermore, the petition
failed to show with certainty that the respondents acted without or in excess of jurisdiction or with grave
abuse of discretion.

The respondents also asseverate that the petitioner cannot claim that it has no other recourse in
addressing its grievance other than this petition for certiorari. As a matter of fact, there are two cases
pending before Branches 33 and 51 of the RTC of Manila (one is for mandamus; the other, for
declaratory relief) and three in the Court of Appeals (one is for prohibition; the two other cases, for quo
warranto), which are all akin to the present petition in the sense that the relief being sought therein is
the declaration of the invalidity of the subject ordinance. Clearly, the petitioner may ask the RTC or
the Court of Appeals the relief being prayed for before this Court. Moreover, the petitioner failed to
prove discernible compelling reasons attending the present petition that would warrant cognizance of
the present petition by this Court.

Besides, according to the respondents, the petitioner has transgressed the proscription against forum-
shopping in filing the instant suit. Although the parties in the other pending cases and in this petition
are different individuals or entities, they represent the same interest.

With regard to petitioner's prayer for temporary restraining order and/ or preliminary injunction in its
petition, the respondents maintain that the same had become moot and academic in view of the
elections of officers of the City Liga ng mga Barangay on 15 September 2002 and their subsequent
assumption to their respective offices.10 Since the acts to be enjoined are now fait accompli, this
petition for certiorari with an application for provisional remedies must necessarily fail. Thus, where
the records show that during the pendency of the case certain events or circumstances had taken
place that render the case moot and academic, the petition for certiorari must be dismissed.

After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.

First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto
themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal,
board, or officer exercising judicial or quasi-judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:

SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer,
and granting such incidental reliefs as law and justice may require.

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

A respondent is said to be exercising judicial function where he has the power to determine
what the law is and what the legal rights of the parties are, and then undertakes to determine
these questions and adjudicate upon the rights of the parties.11

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of
public administrative officers or bodies … required to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise
discretion of a judicial nature."12

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there
be a law that gives rise to some specific rights of persons or property under which adverse claims to
such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law and adjudicate the respective rights of
the contending parties.13

The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasi-
judicial functions. As correctly pointed out by the respondents, the enactment by the City Council of
Manila of the assailed ordinance and the issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive functions, respectively, and not of judicial
or quasi-judicial functions. On this score alone, certiorari will not lie.

Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the
declaration by this Court of the unconstitutionality or illegality of the questioned ordinance and
executive order. It, thus, partakes of the nature of a petition for declaratory relief over which this Court
has only appellate, not original, jurisdiction.14 Section 5, Article VIII of the Constitution provides:

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

(1) Exercise original jurisdiction over cases affecting ambassadors, other public
ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.

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

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

As such, this petition must necessary fail, as this Court does not have original jurisdiction over
a petition for declaratory relief even if only questions of law are involved.15
Third, even granting arguendo that the present petition is ripe for the extraordinary writ of certiorari,
there is here a clear disregard of the hierarchy of courts. No special and important reason or
exceptional and compelling circumstance has been adduced by the petitioner or the intervenor why
direct recourse to this Court should be allowed.

We have held that this Court’s original jurisdiction to issue a writ of certiorari (as well as of prohibition,
mandamus, quo warranto, habeas corpus and injunction) is not exclusive, but is concurrent with the
Regional Trial Courts and the Court of Appeals in certain cases. As aptly stated in People v.
Cuaresma:16

This concurrence of jurisdiction is not, however, to be taken as according to parties seeking

any of the writs an absolute, unrestrained freedom of choice of the court to which application
therefor0 will be directed. There is after all a hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming regard of that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against
first level ("inferior") courts should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction
to issue these writs should be allowed only when there are special and important reasons
therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a
policy necessary to prevent inordinate demands upon the Court’s time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court’s docket.

As we have said in Santiago v. Vasquez,17 the propensity of litigants and lawyers to disregard the
hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a halt
for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it would
cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in
some instances had to be remanded or referred to the lower court as the proper forum under the rules
of procedure, or as better equipped to resolve the issues because this Court is not a trier of facts.

Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts, and exceptional and compelling
circumstances justify the availment of the extraordinary remedy of writ of certiorari, calling for the
exercise of its primary jurisdiction.18

Petitioner’s reliance on Pimentel v. Aguirre19 is misplaced because the non-observance of the

hierarchy-of-courts rule was not an issue therein. Besides, what was sought to be nullified in the
petition for certiorari and prohibition therein was an act of the President of the Philippines, which would
have greatly affected all local government units. We reiterated therein that when an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the controversy
becomes the duty of this Court. The same is true when what is seriously alleged to be unconstitutional
is an act of the President, who in our constitutional scheme is coequal with Congress.

We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. Forum-shopping
exists where the elements of litis pendentia are present or when a final judgment in one case will
amount to res judicata in the other. For litis pendentia to exist, the following requisites must be present:
(1) identity of parties, or at least such parties as are representing the same interests in both actions;
(2) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and
(3) identity with respect to the two preceding particulars in the two cases, such that any judgment that
may be rendered in the pending case, regardless of which party is successful, would amount to res
judicata in the other case.20

In the instant petition, and as admitted by the respondents, the parties in this case and in the alleged
other pending cases are different individuals or entities; thus, forum-shopping cannot be said to exist.
Moreover, even assuming that those five petitions are indeed pending before the RTC of Manila and
the Court of Appeals, we can only guess the causes of action and issues raised before those courts,
considering that the respondents failed to furnish this Court with copies of the said petitions.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

7. MANILA BANKERS LIFE INSURANCE CORP. V. NG KOK WEI

G.R. No. 139791 December 12, 2003

MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner,

vs.
EDDY NG KOK WEI, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari assailing the Decision 1 dated March 26, 1999 and
Resolution2 dated August 5, 1999 of the Court of Appeals in CA-G.R. CV No. 40504, entitled "Eddy Ng
Kok Wei vs. Manila Bankers Life Insurance Corporation".

The factual antecedents as borne by the records are:

Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into investing in the
Philippines. On November 29, 1988, respondent, in a Letter of Intent addressed to Manila Bankers
Life Insurance Corporation, petitioner, expressed his intention to purchase a condominium unit at Valle
Verde Terraces.

Subsequently or on December 5, 1988, respondent paid petitioner a reservation fee of ₱50,000.00 for
the purchase of a 46-square meter condominium unit (Unit 703) valued at ₱860,922.00. On January
16, 1989, respondent paid 90% of the purchase price in the sum of ₱729,830.00.
Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a Contract to Sell in
favor of the respondent. The contract expressly states that the subject condominium unit "shall
substantially be completed and delivered" to the respondent "within fifteen (15) months" from February
8, 1989 or on May 8, 1990, and that "(S)hould there be no substantial completion and fail(ure) to
deliver the unit on the date specified, a penalty of 1% of the total amount paid (by respondent) shall
be charged against (petitioner)".

Considering that the stipulated 15-month period was at hand, respondent returned to the Philippines
sometime in April, 1990.

In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-President, Mr. Mario G.
Zavalla, informed respondent of the substantial completion of his condominium unit, however, due to
various uncontrollable forces (such as coup d‘ etat attempts, typhoon and steel and cement shortage),
the final turnover is reset to May 31, 1990.1âwphi 1

Meanwhile, on July 5, 1990, upon receipt of petitioner’s notice of delivery dated May 31, 1990,
respondent again flew back to Manila. He found the unit still uninhabitable for lack of water and electric
facilities.

Once more, petitioner issued another notice to move-in addressed to its building administrator advising
the latter that respondent is scheduled to move in on August 22, 1990.

On October 5, 1990, respondent returned to the Philippines only to find that his condominium unit was
still unlivable. Exasperated, he was constrained to send petitioner a letter dated November 21, 1990
demanding payment for the damages he sustained. But petitioner ignored such demand, prompting
respondent to file with the Regional Trial Court, Branch 150, Makati City, a complaint against the
former for specific performance and damages, docketed as Civil Case No. 90-3440.

Meanwhile, during the pendency of the case, respondent finally accepted the condominium unit and
on April 12, 1991, occupied the same. Thus, respondent’s cause of action has been limited to his
claim for damages.

On December 18, 1992, the trial court rendered a Decision3 finding the petitioner liable for payment of
damages due to the delay in the performance of its obligation to the respondent. The dispositive
portion reads:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant, ordering
Manila Bankers Life Insurance Corporation to pay plaintiff Eddy Ng Kok Wei the following:

1. One percent (1%) of the total amount plaintiff paid defendant;

2. ₱100,000.00 as moral damages;

3. ₱50,000.00 as exemplary damages;

4. ₱25,000.00 by way of attorney’s fees; and

Cost of suit.

"SO ORDERED."

On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in toto the trial court’s
award of damages in favor of the respondent.

Unsatisfied, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a
Resolution dated August 5, 1999.

Hence, this petition for review on certiorari. Petitioner contends that the trial court has no jurisdiction
over the instant case; and that the Court of Appeals erred in affirming the trial court’s finding that
petitioner incurred unreasonable delay in the delivery of the condominium unit to respondent.

On petitioner’s contention that the trial court has no jurisdiction over the instant case, Section 1 (c) of
Presidential Decree No. 1344, as amended, provides:

"SECTION 1. – In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority [now
Housing and Land Use Regulatory Board (HLURB)]4 shall have exclusive jurisdiction to hear and
decide cases of the following nature:

xxx

"C. Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman.

x x x."

Pursuant to the above provisions, it is the HLURB which has jurisdiction over the instant case. We
have consistently held that complaints for specific performance with damages by a lot or condominium
unit buyer against the owner or developer falls under the exclusive jurisdiction of the HLURB.5

While it may be true that the trial court is without jurisdiction over the case, petitioner’s active
participation in the proceedings estopped it from assailing such lack of it. We have held that it is an
undesirable practice of a party participating in the proceedings and submitting its case for decision
and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when
adverse.6

Here, petitioner failed to raise the question of jurisdiction before the trial court and the Appellate Court.
In effect, petitioner confirmed and ratified the trial court’s jurisdiction over this case. Certainly, it is now
in estoppel and can no longer question the trial court’s jurisdiction.

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

The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, is limited to reviewing only errors of law, not of fact, unless the factual
findings being assailed are not supported by evidence on record or the impugned judgment is based
on a misapprehension of facts.8 These exceptions are not present here.

WHEREFORE, the petition is DENIED. The assailed Decision dated March 26, 1999 and Resolution
dated August 5, 1999 of the Court of Appeals are hereby AFFIRMED IN TOTO.

Costs against the petitioner.

SO ORDERED.

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

8. OFFICE OF THE COURT ADMINISTRATOR V. SARDILLO

A.M. No. MTJ-01-1370 April 25, 2003

(Formerly A.M. No. 00-11-238-MTC)

OFFICE OF THE COURT ADMINISTRATOR, complainant,

vs.
JUDGE AGUSTIN T. SARDIDO, Municipal Trial Court of Koronadal, South Cotabato, respondent.

CARPIO, J.:

The Case

This is an administrative case against respondent Judge Agustin T. Sardido ("Judge Sardido") formerly
presiding judge of the Municipal Trial Court of Koronadal, South Cotabato, for gross ignorance of the
law. Judge Sardido issued an Order dated 20 October 1998 excluding Judge Braulio Hurtado, Jr.
("Judge Hurtado") of the Regional Trial Court of Kabacan, North Cotabato as one of the accused in
an Amended Information.1 Judge Sardido ruled that Supreme Court Circular No. 3-89 requires that
Judge Hurtado be dropped from the Amended Information and his case be forwarded to the Court.

The Facts

Private complainant Teresita Aguirre Magbanua accused Oscar Pagunsan and Danilo Ong of the
crime of "Falsification by Private Individual and Use of Falsified Document." 2 The Amended
Information included Judge Hurtado. The case, docketed as Criminal Case No. 14071, was raffled to
Judge Sardido, then presiding judge of the Municipal Trial Court of Koronadal, South Cotabato ("MTC-
Koronadal").
In a Deed of Absolute Sale dated 8 August 1993, private complainant Magbanua and six other vendors
allegedly sold two parcels of land, covered by TCT Nos. 47873 and 33633 and located at the
commercial district of Koronadal, to Davao Realty Development Corporation, represented by accused
Ong, with co-accused Pagunsan, as broker. Judge Hurtado, who at that time was the Clerk of Court
of RTC-Koronadal and ex-officio notary public, notarized the Deed of Absolute Sale.

However, private complainant Magbanua denies signing the Deed of Absolute Sale dated 8 August
1993 which states that the consideration for the sale was only P600,000.00. Private complainant
asserts that what she and the other vendors signed was a Deed of Absolute Sale dated 6 August 1996
for a consideration of P16,000,000.00. Under the terms of the sale, the vendee agreed to pay for the
capital gains tax. The consideration in the 8 August 1993 Deed of Absolute Sale was apparently
undervalued. Subsequently, the Bureau of Internal Revenue assessed the vendors a deficiency capital
gains tax of P1,023,375.00.

Judge Hurtado filed a motion praying that the criminal complaint against him be forwarded to the
Supreme Court. Judge Hurtado claimed that Circular No. 3-89 dated 6 February 1989 requires "all
cases involving justices and judges of the lower courts, whether or not such complaints deal with acts
apparently unrelated to the discharge of their official functions, such as acts of immorality, estafa,
crimes against persons and property, etc." to be forwarded to the Supreme Court. Judge Hurtado
asserted that since the case against him is one involving a judge of a lower court, the same should be
forwarded to the Supreme Court pursuant to Circular No. 3-89.

The Provincial Prosecutor opposed Judge Hurtado’s motion, arguing that the case against Judge
Hurtado is not within the scope of Circular No. 3-89 since it is not an IBP-initiated case. Moreover, the
offense charged was committed in 1993 when Judge Hurtado was still a clerk of court and ex-
officio notary public.

On 20 October 1998, Judge Sardido issued an Order, the pertinent portions of which read:

The issue to be resolved in the instant case is, whether the case of Judge Hurtado, who is
charged for acts committed prior to his appointment as an RTC Judge, falls within the purview
of the afore-said Circular No. 3-89.

It is the humble submission of the Court that the case of Judge Hurtado, an RTC Judge of the
Regional Trial Court of Kabacan, North Cotabato, falls within the meaning and intent of the
said circular.

For reasons being, firstly, the said circular provides that all cases involving justices and judges
of lower courts shall be forwarded to the Supreme Court for appropriate action, whether or not
such complaints deal with acts apparently unrelated to the discharge of their official functions,
and regardless of the nature of the crime, without any qualification whether the crime was
committed before or during his tenure of office. Under the law on Legal Hermeneutics, if the
law does not qualify we must not qualify. Secondly, it would sound, to the mind of the Court,
awkward for a first level court to be trying an incumbent judge of a second level court.
 For reasons afore-stated, this Court can not and shall not try this case as against Judge
Hurtado, unless the Honorable Supreme Court would order otherwise.

Wherefore, the foregoing premises duly considered, the name of Judge Braulio L. Hurtado, Jr.
is ordered excluded from the amended information and the case against him is ordered
forwarded to the Honorable Supreme Court, pursuant to the afore-said Circular No. 3-89 of
the Supreme Court, dated February 9, 1989.

Accordingly, Maxima S. Borja ("Borja"), Stenographer I and Acting Clerk of Court II of the MTC-
Koronadal, South Cotabato, wrote a letter dated 21 July 1999 forwarding the criminal case against
Judge Hurtado to the Court Administrator for appropriate action.

Then Court Administrator Alfredo L. Benipayo issued a Memorandum dated 25 October 2000 pointing
out that Circular No. 3-89 refers only to administrative complaints filed with the IBP against justices
and judges of lower courts. The Circular does not apply to criminal cases filed before trial courts
against such justices and judges.

Thus, in the Resolution of 6 December 2000, the Court directed that the letter of Acting Clerk of Court
Borja be returned to the MTC-Koronadal together with the records of the criminal case. The Court
directed Judge Sardido to explain in writing why he should not be held liable for gross ignorance of
the law for excluding Judge Hurtado from the Amended Information and for transmitting the records
of Judge Hurtado’s case to the Court.

In his Explanation dated 26 January 2001, Judge Sardido reasoned out that he excluded Judge
Hurtado because Circular No. 3-89 directs the IBP to "forward to the Supreme Court for appropriate
action all cases involving justices and judges of lower courts x x x." Judge Sardido claims that the
Circular likewise "applies to courts in cases involving justices or judges of the lower courts," especially
so in this case where "Judge Hurtado was charged with falsification of public document as a notary
public while he was still the Clerk of Court of the Regional Trial Court of the 11 th Judicial Region in
Koronadal, South Cotabato."

In the Resolution of 28 March 2001, the Court referred this case to the Office of the Court Administrator
("OCA") for evaluation, report and recommendation. On 10 July 2001, the OCA submitted a
Memorandum recommending that this case be re-docketed as a regular administrative matter.

Judge Sardido filed his Manifestation dated 20 September 2001 stating that he is submitting the case
for decision based on the pleadings and records already filed. Judge Sardido insisted that he did "what
he had done in all honesty and good faith."

OCA’s Findings and Conclusions

The OCA found that Judge Sardido erred in excluding Judge Hurtado as one of the accused in the
Amended Information in Criminal Case No. 14071. The OCA held that Circular No. 3-89, which is
Judge Sardido’s basis in issuing the Order of 20 October 1998, refers to administrative complaints
filed with the IBP against justices and judges of lower courts. The Circular does not apply to criminal
cases filed against justices and judges of lower courts. The OCA recommended that a fine
of P5,000.00 be imposed on Judge Sardido for gross ignorance of the law.

The Court’s Ruling

The Court issued Circular No. 3-89 in response to a letter dated 19 December 1988 by then IBP
President Leon M. Garcia, seeking clarification of the Court’s En Banc Resolution of 29 November
1998 in RE: Letter of then Acting Presiding Justice Rodolfo A. Nocon3 and Associate Justices Reynato
Puno4 and Alfredo Marigomen5 of the Court of Appeals.

A certain Atty. Eduardo R. Balaoing had filed a complaint against Court of Appeals Justices Nocon,
Puno and Marigomen relating to a petition filed before their division. In its En Banc Resolution of 29
November 1988, the Court required the IBP to refer to the Supreme Court for appropriate action the
complaint6 filed by Atty. Balaoing with the IBP Commission on Bar Discipline. The Court stated that
the power to discipline justices and judges of the lower courts is within the Court’s exclusive power
and authority as provided in Section 11, Article VII of the 1987 Constitution.7 The Court Administrator
publicized the En Banc Resolution of 29 November 1988 by issuing Circular No. 17 dated 20
December 1988.

The Court issued Circular No. 3-89 on 6 February 1989 clarifying the En Banc Resolution of 29
November 1988. Circular No. 3-89 provides in part as follows:

(1) The IBP (Board of Governors and Commission on Bar Discipline) shall forward to the
Supreme Court for appropriate action all cases involving justices and judges of lower courts,
whether or not such complaints deal with acts apparently unrelated to the discharge of their
official functions, such as acts of immorality, estafa, crimes against persons and property, etc.
x x x. (Emphasis supplied)

Circular No. 3-89 clarified the second paragraph, Section 1 of Rule 139-B of the Rules of Court which
states that:

The IBP Board of Governors may, motu proprio or upon referral by the Supreme Court or by
a Chapter Board of Officers, or at the instance of any person, initiate and prosecute proper
charges against erring attorneys including those in the government service. (Emphasis
supplied).

As clarified, the phrase "attorneys x x x in the government service" in Section 1 of Rule 139-B does
not include justices of appellate courts and judges of lower courts who are not subject to the disciplining
authority of the IBP. All administrative cases against justices of appellate courts and judges of lower
courts fall exclusively within the jurisdiction of the Supreme Court.

However, Rule 139-B refers to Disbarment and Discipline of Attorneys which is administrative and not
criminal in nature. The cases referred to in Circular No. 3-89 are administrative cases for disbarment,
suspension or discipline of attorneys, including justices of appellate courts and judges of the lower
courts. The Court has vested the IBP with the power to initiate and prosecute administrative cases
against erring lawyers.8 However, under Circular No. 3-89, the Court has directed the IBP to refer to
the Supreme Court for appropriate action all administrative cases filed with IBP against justices of
appellate courts and judges of the lower courts. As mandated by the Constitution, the Court exercises
the exclusive power to discipline administratively justices of appellate courts and judges of lower
courts.

Circular No. 3-89 does not refer to criminal cases against erring justices of appellate courts or judges
of lower courts. Trial courts retain jurisdiction over the criminal aspect of offenses committed by
justices of appellate courts9and judges of lower courts. This is clear from the Circular directing the IBP,
and not the trial courts, to refer all administrative cases filed against justices of appellate courts and
judges of lower courts to the Supreme Court. The case filed against Judge Hurtado is not an
administrative case filed with the IBP. It is a criminal case filed with the trial court under its jurisdiction
as prescribed by law.

The acts or omissions of a judge may well constitute at the same time both a criminal act and an
administrative offense. Whether the criminal case against Judge Hurtado relates to an act committed
before or after he became a judge is of no moment. Neither is it material that an MTC judge will be
trying an RTC judge in the criminal case. A criminal case against an attorney or judge is distinct and
separate from an administrative case against him. The dismissal of the criminal case does not warrant
the dismissal of an administrative case arising from the same set of facts. The quantum of evidence
that is required in the latter is only preponderance of evidence, and not proof beyond reasonable doubt
which is required in criminal cases.10 As held in Gatchalian Promotions Talents Pool, Inc. v. Naldoza:11

Administrative cases against lawyers belong to a class of their own. They are distinct from and
they may proceed independently of civil and criminal cases.

The burden of proof for these types of cases differ. In a criminal case, proof beyond reasonable
doubt is necessary; in an administrative case for disbarment or suspension, ‘clearly
preponderant evidence’ is all that is required. Thus, a criminal prosecution will not constitute a
prejudicial question even if the same facts and circumstances are attendant in the
administrative proceedings.

It should be emphasized that a finding of guilt in the criminal case will not necessarily result in
a finding of liability in the administrative case. Conversely, respondent’s acquittal does not
necessarily exculpate him administratively. In the same vein, the trial court’s finding of civil
liability against the respondent will not inexorably lead to a similar finding in the administrative
action before this Court. Neither will a favorable disposition in the civil action absolve the
administrative liability of the lawyer. The basic premise is that criminal and civil cases are
altogether different from administrative matters, such that the disposition in the first two will
not inevitably govern the third and vice versa. For this reason, it would be well to remember
the Court’s ruling in In re Almacen, which we quote:

"x x x Disciplinary proceedings against lawyers are sui generis. Neither purely civil nor
purely criminal, they do not involve a trial of an action or a suit, but are rather
investigations by the Court into the conduct of one of its officers. Not being intended
to inflict punishment, [they are] in no sense a criminal prosecution. Accordingly, there
is neither a plaintiff nor a prosecutor therein. [They] may be initiated by the Court motu
 proprio. Public interest is [their] primary objective, and the real question for
determination is whether or not the attorney is still a fit person to be allowed the
privileges as such. Hence, in the exercise of its disciplinary powers, the Court merely
calls upon a member of the Bar to account for his actuations as an officer of the Court
with the end in view of preserving the purity of the legal profession and the proper and
honest administration of justice by purging the profession of members who by their
misconduct have prove[n] themselves no longer worthy to be entrusted with the duties
and responsibilities pertaining to the office of an attorney. x x x"

A judge is called upon to exhibit more than just a cursory acquaintance with statutes and procedural
rules. He must be conversant with basic legal principles and well-settled doctrines. He should strive
for excellence and seek the truth with passion.12 Judge Sardido failed in this regard. He erred in
excluding Judge Hurtado as one of the accused in the Amended Information and in forwarding the
criminal case against Judge Hurtado to the Court.

One last point. This administrative case against Judge Sardido started before the amendment13 of
Rule 140 classifying gross ignorance of the law a serious offense punishable by a fine of more
than P20,000.00 but not exceeding P40,000.00. The amendment cannot apply retroactively to Judge
Sardido’s case. However, the fine of P5,000.00 recommended by the OCA is too light a penalty
considering that this is not the first offense of Judge Sardido.

In RE: Hold Departure Order Issued by Judge Agustin T. Sardido,14 the Court reprimanded Judge
Sardido for issuing a hold-departure order contrary to Circular No. 39-97. In Cabilao v. Judge
Sardido,15 the Court fined Judge Sardido P5,000.00 for gross ignorance of the law, grave abuse of
discretion and gross misconduct. The Court gave a stern warning to Judge Sardido that a commission
of the same or similar act would be dealt with more severely. In Almeron v. Judge Sardido,16 the Court
imposed on Judge Sardido a stiffer fine of P10,000.00 for gross ignorance of the law. He was again
sternly warned that the commission of the same or similar act in the future would be dealt with more
severely including, if warranted, his dismissal from the service.

In a more recent administrative case, Torcende v. Judge Sardido,17 the Court found Judge Sardido
again guilty of gross ignorance of the law and of gross misconduct. This time the
Court dismissed Judge Sardido from the service with forfeiture of his retirement benefits, except
accrued leave credits. The dismissal was with prejudice to reemployment in any branch of the
government or any of its agencies or instrumentalities, including government-owned and controlled
corporations.

The records of the OCA further disclose that Judge Sardido has other similar administrative
complaints18 still pending against him. Such an unflattering service record erodes the people’s faith
and confidence in the judiciary. It is the duty of every member of the bench to avoid any impression of
impropriety to protect the image and integrity of the judiciary.19 The Court may still impose a fine on
Judge Sardido in the instant case despite his dismissal from the service.

WHEREFORE, respondent Judge Agustin T. Sardido is FINED Ten Thousand Pesos (P10,000.00)
for gross ignorance of the law. The fine may be deducted from his accrued leave credits.
SO ORDERED.

9. KATON V. PALANCA

G.R. No. 151149 September 7, 2004

GEORGE KATON, petitioner,

vs.
MANUEL PALANCA JR., LORENZO AGUSTIN, JESUS GAPILANGO and JUAN
FRESNILLO, respondents.

DECISION

PANGANIBAN, J.:

Where prescription, lack of jurisdiction or failure to state a cause of action clearly appear from the
complaint filed with the trial court, the action may be dismissed motu proprio by the Court of Appeals,
even if the case has been elevated for review on different grounds. Verily, the dismissal of such cases
appropriately ends useless litigations.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the December 8,
2000 Decision2and the November 20, 2001 Resolution3 of the Court of Appeals in CA-GR SP No.
57496. The assailed Decision disposed as follows:

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

"WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to cost."4

The assailed Resolution, on the other hand, denied the Motion for Reconsideration filed by petitioner.
It affirmed the RTC’s dismissal of his Complaint in Civil Case No. 3231, not on the grounds relied upon
by the trial court, but because of prescription and lack of jurisdiction.
The Antecedent Facts

The CA narrates the antecedent facts as follows:

"On August 2, 1963, herein [P]etitioner [George Katon] filed a request with the District Office
of the Bureau of Forestry in Puerto Princesa, Palawan, for the re-classification of a piece of
real property known as Sombrero Island, located in Tagpait, Aborlan, Palawan, which consists
of approximately 18 hectares. Said property is within Timberland Block of LC Project No. 10-
C of Aborlan, Palawan, per BF Map LC No. 1582.

"Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan, ordered the
inspection, investigation and survey of the land subject of the petitioner’s request for eventual
conversion or re-classification from forest to agricultural land, and thereafter for George Katon
to apply for a homestead patent.

"Gabriel Mandocdoc (now retired Land Classification Investigator) undertook the investigation,
inspection and survey of the area in the presence of the petitioner, his brother Rodolfo Katon
(deceased) and his cousin, [R]espondent Manuel Palanca, Jr. During said survey, there were
no actual occupants on the island but there were some coconut trees claimed to have been
planted by petitioner and [R]espondent Manuel Palanca, Jr. (alleged overseer of petitioner)
who went to the island from time to time to undertake development work, like planting of
additional coconut trees.

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

"In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L. Utleg informed
the Director of Lands, Manila, that since the subject land was no longer needed for forest
purposes, the same is therefore certified and released as agricultural land for disposition under
the Public Land Act.

"Petitioner contends that the whole area known as Sombrero Island had been classified from
forest land to agricultural land and certified available for disposition upon his request and at
his instance. However, Mr. Lucio Valera, then [l]and investigator of the District Land Office,
Puerto Princesa, Palawan, favorably endorsed the request of [R]espondents Manuel Palanca
Jr. and Lorenzo Agustin, for authority to survey on November 15, 1965. On November 22, a
second endorsement was issued by Palawan District Officer Diomedes De Guzman with
specific instruction to survey vacant portions of Sombrero Island for the respondents consisting
of five (5) hectares each. On December 10, 1965, Survey Authority No. R III-342-65 was
issued authorizing Deputy Public Land Surveyor Eduardo Salvador to survey ten (10) hectares
of Sombrero Island for the respondents. On December 23, 1990, [R]espondent Lorenzo
Agustin filed a homestead patent application for a portion of the subject island consisting of an
area of 4.3 hectares.
 "Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a homestead
patent application for a portion of the island comprising 8.5 hectares. Records also reveal that
[R]espondent Jesus Gapilango filed a homestead application on June 8, 1972. Respondent
Manuel Palanca, Jr. was issued Homestead Patent No. 145927 and OCT No. G-7089 on
March 3, 19775 with an area of 6.84 hectares of Sombrero Island.

"Petitioner assails the validity of the homestead patents and original certificates of title covering
certain portions of Sombrero Island issued in favor of respondents on the ground that the same
were obtained through fraud. Petitioner prays for the reconveyance of the whole island in his
favor.

"On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself requested for
the reclassification of the island in dispute and that on or about the time of such request,
[R]espondents Fresnillo, Palanca and Gapilango already occupied their respective areas and
introduced numerous improvements. In addition, Palanca said that petitioner never filed any
homestead application for the island. Respondents deny that Gabriel Mandocdoc undertook
the inspection and survey of the island.

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

"Respondents aver that they are all bona fide and lawful possessors of their respective portions
and have declared said portions for taxation purposes and that they have been faithfully paying
taxes thereon for twenty years.

"Respondents contend that the petitioner has no legal capacity to sue insofar as the island is
concerned because an action for reconveyance can only be brought by the owner and not a
mere homestead applicant and that petitioner is guilty of estoppel by laches for his failure to
assert his right over the land for an unreasonable and unexplained period of time.

"In the instant case, petitioner seeks to nullify the homestead patents and original certificates
of title issued in favor of the respondents covering certain portions of the Sombrero Island as
well as the reconveyance of the whole island in his favor. The petitioner claims that he has the
exclusive right to file an application for homestead patent over the whole island since it was
he who requested for its conversion from forest land to agricultural land."6

Respondents filed their Answer with Special and/or Affirmative Defenses and Counterclaim in due
time. On June 30, 1999, they also filed a Motion to Dismiss on the ground of the alleged defiance by
petitioner of the trial court’s Order to amend his Complaint so he could thus effect a substitution by the
legal heirs of the deceased, Respondent Gapilango. The Motion to Dismiss was granted by the RTC
in its Order dated July 29, 1999.

Petitioner’s Motion for Reconsideration of the July 29, 1999 Order was denied by the trial court in its
Resolution dated December 17, 1999, for being a third and prohibited motion. In his Petition for
Certiorari before the CA, petitioner charged the trial court with grave abuse of discretion on the ground
that the denied Motion was his first and only Motion for Reconsideration of the aforesaid Order.

Ruling of the Court of Appeals

Instead of limiting itself to the allegation of grave abuse of discretion, the CA ruled on the merits. It
held that while petitioner had caused the reclassification of Sombrero Island from forest to agricultural
land, he never applied for a homestead patent under the Public Land Act. Hence, he never acquired
title to that land.

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

Finally, granting arguendo that petitioner had the exclusive right to apply for a patent to the land in
question, he was already barred by laches for having slept on his right for almost 23 years from the
time Respondent Palanca’s title had been issued.

In the Assailed Resolution, the CA acknowledged that it had erred when it ruled on the merits of the
case. It agreed with petitioner that the trial court had acted without jurisdiction in perfunctorily
dismissing his September 10, 1999 Motion for Reconsideration, on the erroneous ground that it was
a third and prohibited motion when it was actually only his first motion.

Nonetheless, the Complaint was dismissed motu proprio by the challenged Resolution of the CA
Special Division of five members – with two justices dissenting – pursuant to its "residual prerogative"
under Section 1 of Rule 9 of the Rules of Court.

From the allegations of the Complaint, the appellate court opined that petitioner clearly had no standing
to seek reconveyance of the disputed land, because he neither held title to it nor even applied for a
homestead patent. It reiterated that only the State could sue for cancellation of the title issued upon a
homestead patent, and for reversion of the land to the public domain.

Finally, it ruled that prescription had already barred the action for reconveyance. First, petitioner’s
action was brought 24 years after the issuance of Palanca’s homestead patent. Under the Public Land
Act, such action should have been taken within ten years from the issuance of the homestead
certificate of title. Second, it appears from the submission (Annex "F" of the Complaint) of petitioner
himself that Respondents Fresnillo and Palanca had been occupying six hectares of the island since
1965, or 33 years before he took legal steps to assert his right to the property. His action was filed
beyond the 30-year prescriptive period under Articles 1141 and 1137 of the Civil Code.

Hence, this Petition.7

Issues

In his Memorandum, petitioner raises the following issues:

 "1. Is the Court of Appeals correct in resolving the Petition for Certiorari based on an issue not
raised (the merits of the case) in the Petition?

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

The Court’s Ruling

The Petition has no merit.

First Issue:

Propriety of Ruling on the Merits

This is not the first time that petitioner has taken issue with the propriety of the CA’s ruling on the
merits. He raised it with the appellate court when he moved for reconsideration of its December 8,
2000 Decision. The CA even corrected itself in its November 20, 2001 Resolution, as follows:

"Upon another review of the case, the Court concedes that it may indeed have lost its way and
been waylaid by the variety, complexity and seeming importance of the interests and issues
involved in the case below, the apparent reluctance of the judges, five in all, to hear the case,
and the volume of the conflicting, often confusing, submissions bearing on incidental matters.
We stand corrected."9

That explanation should have been enough to settle the issue. The CA’s Resolution on this point has
rendered petitioner’s issue moot. Hence, there is no need to discuss it further. Suffice it to say that the
appellate court indeed acted ultra jurisdictio in ruling on the merits of the case when the only issue
that could have been, and was in fact, raised was the alleged grave abuse of discretion committed by
the trial court in denying petitioner’s Motion for Reconsideration. Settled is the doctrine that the sole
office of a writ of certiorari is the correction of errors of jurisdiction. Such writ does not include a review
of the evidence,10 more so when no determination of the merits has yet been made by the trial court,
as in this case.

Second Issue:

Dismissal for Prescription and Lack of Jurisdiction

Petitioner next submits that the CA erroneously invoked its "residual prerogatives" under Section 1 of
Rule 9 of the Rules of Court when it motu proprio dismissed the Petition for lack of jurisdiction and
prescription. According to him, residual prerogative refers to the power that the trial court, in the
exercise of its original jurisdiction, may still validly exercise even after perfection of an appeal. It follows
that such powers are not possessed by an appellate court.

Petitioner has confused what the CA adverted to as its "residual prerogatives" under Section 1 of Rule
9 of the Rules of Court with the "residual jurisdiction" of trial courts over cases appealed to the CA.
Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not pleaded either in a motion
to dismiss or in the answer are deemed waived, except when (1) lack of jurisdiction over the subject
matter, (2) litis pendentia, (3) res judicata and (4) prescription are evident from the pleadings or the
evidence on record. In the four excepted instances, the court shall motu proprio dismiss the claim or
action. In Gumabon v. Larin11 we explained thus:

"x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the
court clearly had no jurisdiction over the subject matter and when the plaintiff did not appear
during trial, failed to prosecute his action for an unreasonable length of time or neglected to
comply with the rules or with any order of the court. Outside of these instances, any motu
proprio dismissal would amount to a violation of the right of the plaintiff to be heard. Except for
qualifying and expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of
Court, the amendatory 1997 Rules of Civil Procedure brought about no radical change. Under
the new rules, a court may motu proprio dismiss a claim when it appears from the pleadings
or evidence on record that it has no jurisdiction over the subject matter; when there is another
cause of action pending between the same parties for the same cause, or where the action is
barred by a prior judgment or by statute of limitations. x x x."12 (Italics supplied)

On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule 41 of the Rules of Court, as
follows:

"SEC. 9. Perfection of appeal; effect thereof. – A party’s appeal by notice of appeal is deemed
perfected as to him upon the filing of the notice of appeal in due time.

"A party’s appeal by record on appeal is deemed perfected as to him with respect to the subject
matter thereof upon the approval of the record on appeal filed in due time.

"In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection
of the appeals filed in due time and the expiration of the time to appeal of the other parties.

"In appeals by record on appeal, the court loses jurisdiction only over the subject matter thereof
upon the approval of the records on appeal filed in due time and the expiration of the time to
appeal of the other parties.

"In either case, prior to the transmittal of the original record or the record on appeal, the court
may issue orders for the protection and preservation of the rights of the parties which do not
involve any matter litigated by the appeal, approve compromises, permit appeals of indigent
litigants, order execution pending appeal in accordance with Section 2 of Rule 39, and allow
withdrawal of the appeal." (Italics supplied)

The "residual jurisdiction" of trial courts is available at a stage in which the court is normally deemed
to have lost jurisdiction over the case or the subject matter involved in the appeal. This stage is reached
upon the perfection of the appeals by the parties or upon the approval of the records on appeal, but
prior to the transmittal of the original records or the records on appeal.13 In either instance, the trial
court still retains its so-called residual jurisdiction to issue protective orders, approve compromises,
permit appeals of indigent litigants, order execution pending appeal, and allow the withdrawal of the
appeal.

The CA’s motu proprio dismissal of petitioner’s Complaint could not have been based, therefore, on
residual jurisdiction under Rule 41. Undeniably, such order of dismissal was not one for the protection
and preservation of the rights of the parties, pending the disposition of the case on appeal. What the
CA referred to as residual prerogatives were the general residual powers of the courts to dismiss an
action motu proprio upon the grounds mentioned in Section 1 of Rule 9 of the Rules of Court and
under authority of Section 2 of Rule 114 of the same rules.

To be sure, the CA had the excepted instances in mind when it dismissed the Complaint motu proprio
"on more fundamental grounds directly bearing on the lower court’s lack of jurisdiction" 15 and for
prescription of the action. Indeed, when a court has no jurisdiction over the subject matter, the only
power it has is to dismiss the action.16

Jurisdiction over the subject matter is conferred by law and is determined by the allegations in the
complaint and the character of the relief sought.17 In his Complaint for "Nullification of Applications for
Homestead and Original Certificate of Title No. G-7089 and for Reconveyance of Title,"18 petitioner
averred:

"2. That on November 10, 1965, without the knowledge of [petitioner, Respondent] Manuel
Palanca Jr., [petitioner’s] cousin, in connivance with his co-[respondent], Lorenzo Agustin, x x
x fraudulently and in bad faith:

2.1. x x x made the request for authority to survey as a pre-requisite to the filing of an
application for homestead patent in his name and that of his Co-[Respondent] Agustin,
[despite being] fully aware that [Petitioner] KATON had previously applied or requested
for re-classification and certification of the same land from forest land to agricultural
land which request was favorably acted upon and approved as mentioned earlier; a
clear case of intrinsic fraud and misrepresentation;

xxx xxx xxx

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

"3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089 in the name of
[Respondent] Manuel Palanca Jr. and the filing of Homestead Patent Applications in the
names of [respondents], Lorenzo Agustin, Jesus Gapilango and Juan Fresnillo[,] having been
done fraudulently and in bad faith, are ipso facto null and void and of no effect whatsoever."19

xxx xxx xxx

"x x x. By a wrongful act or a willful omission and intending the effects with natural necessity
arise knowing from such act or omission, [Respondent Palanca] on account of his blood
 relation, first degree cousins, trust, interdependence and intimacy is guilty of intrinsic fraud
[sic]. x x x."20

Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the homestead patent
applications of Respondents Agustin, Fresnillo and Gapilango as well as Homestead Patent No.
145927 and OCT No. G-7089 in the name of Respondent Palanca; and (2) ordering the director of the
Land Management Bureau to reconvey the Sombrero Island to petitioner.21

The question is, did the Complaint sufficiently allege an action for declaration of nullity of the free
patent and certificate of title or, alternatively, for reconveyance? Or did it plead merely for reversion?

The Complaint did not sufficiently make a case for any of such actions, over which the trial court could
have exercised jurisdiction.

In an action for nullification of title or declaration of its nullity, the complaint must contain the following
allegations: 1) that the contested land was privately owned by the plaintiff prior to the issuance of the
assailed certificate of title to the defendant; and 2) that the defendant perpetuated a fraud or committed
a mistake in obtaining a document of title over the parcel of land claimed by the plaintiff. 22 In these
cases, the nullity arises not from fraud or deceit, but from the fact that the director of the Land
Management Bureau had no jurisdiction to bestow title; hence, the issued patent or certificate of title
was void ab initio.23

In an alternative action for reconveyance, the certificate of title is also respected as incontrovertible,
but the transfer of the property or title thereto is sought to be nullified on the ground that it was
wrongfully or erroneously registered in the defendant’s name.24 As with an annulment of title, a
complaint must allege two facts that, if admitted, would entitle the plaintiff to recover title to the disputed
land: (1) that the plaintiff was the owner of the land, and (2) that the defendant illegally dispossessed
the plaintiff of the property.25 Therefore, the defendant who acquired the property through mistake or
fraud is bound to hold and reconvey to the plaintiff the property or the title thereto.26

In the present case, nowhere in the Complaint did petitioner allege that he had previously held title to
the land in question. On the contrary, he acknowledged that the disputed island was public land,27 that
it had never been privately titled in his name, and that he had not applied for a homestead under the
provisions of the Public Land Act.28 This Court has held that a complaint by a private party who alleges
that a homestead patent was obtained by fraudulent means, and who consequently prays for its
annulment, does not state a cause of action; hence, such complaint must be dismissed.29

Neither can petitioner’s case be one for reversion. Section 101 of the Public Land Act categorically
declares that only the solicitor general or the officer in his stead may institute such an action. 30 A
private person may not bring an action for reversion or any other action that would have the effect of
canceling a free patent and its derivative title, with the result that the land thereby covered would again
form part of the public domain.31

Thus, when the plaintiff admits in the complaint that the disputed land will revert to the public domain
even if the title is canceled or amended, the action is for reversion; and the proper party who may bring
action is the government, to which the property will revert.32 A mere homestead applicant, not being
the real party in interest, has no cause of action in a suit for reconveyance.33 As it is, vested rights over
the land applied for under a homestead may be validly claimed only by the applicant, after approval
by the director of the Land Management Bureau of the former’s final proof of homestead patent.34

Consequently, the dismissal of the Complaint is proper not only because of lack of jurisdiction, but
also because of the utter absence of a cause of action,35 a defense raised by respondents in their
Answer.36 Section 2 of Rule 3 of the Rules of Court37 ordains that every action must be prosecuted or
defended in the name of the real party in interest, who stands to be benefited or injured by the judgment
in the suit. Indeed, one who has no right or interest to protect has no cause of action by which to
invoke, as a party-plaintiff, the jurisdiction of the court.38

Finally, assuming that petitioner is the proper party to bring the action for annulment of title or its
reconveyance, the case should still be dismissed for being time-barred.39 It is not disputed that a
homestead patent and an Original Certificate of Title was issued to Palanca on February 21,
1977,40 while the Complaint was filed only on October 6, 1998. Clearly, the suit was brought way past
ten years from the date of the issuance of the Certificate, the prescriptive period for reconveyance of
fraudulently registered real property.41

It must likewise be stressed that Palanca’s title -- which attained the status of indefeasibility one year
from the issuance of the patent and the Certificate of Title in February 1977 -- is no longer open to
review on the ground of actual fraud. Ybanez v. Intermediate Appellate Court42 ruled that a certificate
of title, issued under an administrative proceeding pursuant to a homestead patent, is as indefeasible
as one issued under a judicial registration proceeding one year from its issuance; provided, however,
that the land covered by it is disposable public land, as in this case.

In Aldovino v. Alunan,43 the Court has held that when the plaintiff’s own complaint shows clearly that
the action has prescribed, such action may be dismissed even if the defense of prescription has not
been invoked by the defendant. In Gicano v. Gegato,44 we also explained thus:

"x x x [T]rial courts have authority and discretion to dismiss an action on the ground of
prescription when the parties' pleadings or other facts on record show it to be indeed time-
barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v.
Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28,
1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a
motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets up such ground
as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on
the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the
defense has not been asserted at all, as where no statement thereof is found in the pleadings
(Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua
Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB
v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the
lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the
record; either in the averments of the plaintiff's complaint, or otherwise established by the
evidence."45 (Italics supplied)
Clearly then, the CA did not err in dismissing the present case. After all, if and when they are able to
do so, courts must endeavor to settle entire controversies before them to prevent future litigations.46

WHEREFORE, the Petition is hereby DENIED, and the assailed Resolution AFFIRMED. The
dismissal of the Complaint in Civil Case No. 3231 is SUSTAINED on the grounds of lack of jurisdiction,
failure to state a cause of action and prescription. Costs against petitioner.

SO ORDERED.

10. FIGUEROA V. PEOPLE

G.R. No. 147406 July 14, 2008

VENANCIO FIGUEROA y CERVANTES,1 Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

NACHURA, J.:

When is a litigant estopped by laches from assailing the jurisdiction of a tribunal? This is the paramount
issue raised in this petition for review of the February 28, 2001 Decision2 of the Court of Appeals (CA)
in CA-G.R. CR No. 22697.

Pertinent are the following antecedent facts and proceedings:

On July 8, 1994, an information3 for reckless imprudence resulting in homicide was filed against the
petitioner before the Regional Trial Court (RTC) of Bulacan, Branch 18.4 The case was docketed as
Criminal Case No. 2235-M-94.5 Trial on the merits ensued and on August 19, 1998, the trial court
convicted the petitioner as charged.6 In his appeal before the CA, the petitioner questioned, among
others, for the first time, the trial court’s jurisdiction.7

The appellate court, however, in the challenged decision, considered the petitioner to have actively
participated in the trial and to have belatedly attacked the jurisdiction of the RTC; thus, he was already
estopped by laches from asserting the trial court’s lack of jurisdiction. Finding no other ground to
reverse the trial court’s decision, the CA affirmed the petitioner’s conviction but modified the penalty
imposed and the damages awarded.8

Dissatisfied, the petitioner filed the instant petition for review on certiorari raising the following issues
for our resolution:
 a. Does the fact that the petitioner failed to raise the issue of jurisdiction during the trial of this
case, which was initiated and filed by the public prosecutor before the wrong court, constitute
laches in relation to the doctrine laid down in Tijam v. Sibonghanoy, notwithstanding the fact
that said issue was immediately raised in petitioner’s appeal to the Honorable Court of
Appeals? Conversely, does the active participation of the petitioner in the trial of his case,
which is initiated and filed not by him but by the public prosecutor, amount to estoppel?

b. Does the admission of the petitioner that it is difficult to immediately stop a bus while it is
running at 40 kilometers per hour for the purpose of avoiding a person who unexpectedly
crossed the road, constitute enough incriminating evidence to warrant his conviction for the
crime charged?

c. Is the Honorable Court of Appeals justified in considering the place of accident as falling
within Item 4 of Section 35 (b) of the Land Transportation and Traffic Code, and subsequently
ruling that the speed limit thereto is only 20 kilometers per hour, when no evidence whatsoever
to that effect was ever presented by the prosecution during the trial of this case?

d. Is the Honorable Court of Appeals justified in convicting the petitioner for homicide through
reckless imprudence (the legally correct designation is "reckless imprudence resulting to
homicide") with violation of the Land Transportation and Traffic Code when the prosecution
did not prove this during the trial and, more importantly, the information filed against the
petitioner does not contain an allegation to that effect?

e. Does the uncontroverted testimony of the defense witness Leonardo Hernal that the victim
unexpectedly crossed the road resulting in him getting hit by the bus driven by the petitioner
not enough evidence to acquit him of the crime charged?9

Applied uniformly is the familiar rule that the jurisdiction of the court to hear and decide a case is
conferred by the law in force at the time of the institution of the action, unless such statute provides
for a retroactive application thereof.10 In this case, at the time the criminal information for reckless
imprudence resulting in homicide with violation of the Automobile Law (now Land Transportation and
Traffic Code) was filed, Section 32(2) of Batas Pambansa (B.P.) Blg. 12911 had already been amended
by Republic Act No. 7691.12 The said provision thus reads:

Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in Criminal Cases.—Except in cases falling within the exclusive original jurisdiction of Regional
Trial Courts and the Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:

xxxx

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not exceeding six (6)
years irrespective of the amount of fine, and regardless of other imposable accessory or other
penalties, including the civil liability arising from such offenses or predicated thereon, irrespective of
kind, nature, value or amount thereof: Provided, however, That in offenses involving damage to
property through criminal negligence, they shall have exclusive original jurisdiction thereof.
As the imposable penalty for the crime charged herein is prision correccional in its medium and
maximum periods or imprisonment for 2 years, 4 months and 1 day to 6 years,13 jurisdiction to hear
and try the same is conferred on the Municipal Trial Courts (MTCs). Clearly, therefore, the RTC of
Bulacan does not have jurisdiction over Criminal Case No. 2235-M-94.

While both the appellate court and the Solicitor General acknowledge this fact, they nevertheless are
of the position that the principle of estoppel by laches has already precluded the petitioner from
questioning the jurisdiction of the RTC—the trial went on for 4 years with the petitioner actively
participating therein and without him ever raising the jurisdictional infirmity. The petitioner, for his part,
counters that the lack of jurisdiction of a court over the subject matter may be raised at any time even
for the first time on appeal. As undue delay is further absent herein, the principle of laches will not be
applicable.

To settle once and for all this problem of jurisdiction vis-à-vis estoppel by laches, which continuously
confounds the bench and the bar, we shall analyze the various Court decisions on the matter.

As early as 1901, this Court has declared that unless jurisdiction has been conferred by some
legislative act, no court or tribunal can act on a matter submitted to it.14 We went on to state in U.S. v.
De La Santa15 that:

It has been frequently held that a lack of jurisdiction over the subject-matter is fatal, and subject to
objection at any stage of the proceedings, either in the court below or on appeal (Ency. of Pl. & Pr.,
vol. 12, p. 189, and large array of cases there cited), and indeed, where the subject-matter is not within
the jurisdiction, the court may dismiss the proceeding ex mero motu. (4 Ill., 133; 190 Ind., 79; Chipman
vs. Waterbury, 59 Conn., 496.)

Jurisdiction over the subject-matter in a judicial proceeding is conferred by the sovereign authority
which organizes the court; it is given only by law and in the manner prescribed by law and an objection
based on the lack of such jurisdiction can not be waived by the parties. x x x16

Later, in People v. Casiano,17 the Court explained:

4. The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon
whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried
and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from
assailing such jurisdiction, for the same "must exist as a matter of law, and may not be conferred by
consent of the parties or by estoppel" (5 C.J.S., 861-863). However, if the lower court had jurisdiction,
and the case was heard and decided upon a given theory, such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume
an inconsistent position—that the lower court had jurisdiction. Here, the principle of estoppel applies.
The rule that jurisdiction is conferred by law, and does not depend upon the will of the parties, has no
bearing thereon. Thus, Corpus Juris Secundum says:

Where accused has secured a decision that the indictment is void, or has been granted an instruction
based on its defective character directing the jury to acquit, he is estopped, when subsequently
indicted, to assert that the former indictment was valid. In such case, there may be a new prosecution
whether the indictment in the former prosecution was good or bad. Similarly, where, after the jury was
impaneled and sworn, the court on accused's motion quashed the information on the erroneous
assumption that the court had no jurisdiction, accused cannot successfully plead former jeopardy to a
new information. x x x (22 C.J.S., sec. 252, pp. 388-389; italics ours.)

Where accused procured a prior conviction to be set aside on the ground that the court was without
jurisdiction, he is estopped subsequently to assert, in support of a defense of previous jeopardy, that
such court had jurisdiction." (22 C.J.S. p. 378.)18

But in Pindañgan Agricultural Co., Inc. v. Dans,19 the Court, in not sustaining the plea of lack of
jurisdiction by the plaintiff-appellee therein, made the following observations:

It is surprising why it is only now, after the decision has been rendered, that the plaintiff-appellee
presents the question of this Court’s jurisdiction over the case. Republic Act No. 2613 was enacted on
August 1, 1959. This case was argued on January 29, 1960. Notwithstanding this fact, the jurisdiction
of this Court was never impugned until the adverse decision of this Court was handed down. The
conduct of counsel leads us to believe that they must have always been of the belief that
notwithstanding said enactment of Republic Act 2613 this Court has jurisdiction of the case, such
conduct being born out of a conviction that the actual real value of the properties in question actually
exceeds the jurisdictional amount of this Court (over ₱200,000). Our minute resolution in G.R. No. L-
10096, Hyson Tan, et al. vs. Filipinas Compaña de Seguros, et al., of March 23, 1956, a parallel case,
is applicable to the conduct of plaintiff-appellee in this case, thus:

x x x that an appellant who files his brief and submits his case to the Court of Appeals for decision,
without questioning the latter’s jurisdiction until decision is rendered therein, should be considered as
having voluntarily waived so much of his claim as would exceed the jurisdiction of said Appellate Court;
for the reason that a contrary rule would encourage the undesirable practice of appellants submitting
their cases for decision to the Court of Appeals in expectation of favorable judgment, but with intent of
attacking its jurisdiction should the decision be unfavorable: x x x20

Then came our ruling in Tijam v. Sibonghanoy21 that a party may be barred by laches from invoking
lack of jurisdiction at a late hour for the purpose of annulling everything done in the case with the active
participation of said party invoking the plea. We expounded, thus:

A party may be estopped or barred from raising a question in different ways and for different reasons.
Thus, we speak of estoppel in pais, of estoppel by deed or by record, and of estoppel by laches.

Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time,
to do that which, by exercising due diligence, could or should have been done earlier; it is negligence
or omission to assert a right within a reasonable time, warranting a presumption that the party entitled
to assert it either has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires,
for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not
a mere question of time but is principally a question of the inequity or unfairness of permitting a right
or claim to be enforced or asserted.
It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against
his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the
rule, it was further said that the question whether the court had jurisdiction either of the subject matter
of the action or of the parties was not important in such cases because the party is barred from such
conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but
for the reason that such a practice cannot be tolerated—obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an
adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the
court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis etc. vs.
McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it
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.

Upon this same principle is what We said in the three cases mentioned in the resolution of the Court
of Appeals of May 20, 1963 (supra)—to the effect that we frown upon the "undesirable practice" of a
party submitting his case for decision and then accepting the judgment, only if favorable, and attacking
it for lack of jurisdiction, when adverse—as well as in Pindañgan etc. vs. Dans et al., G.R. L-14591,
September 26, 1962; Montelibano et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young
Men Labor Union etc. vs. The Court of Industrial Relations et al., G.R. L-20307, Feb. 26, 1965, and
Mejia vs. Lucas, 100 Phil. p. 277.

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it
could have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take
cognizance of the present action by reason of the sum of money involved which, according to the law
then in force, was within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead,
at several stages of the proceedings in the court a quo, as well as in the Court of Appeals, it invoked
the jurisdiction of said courts to obtain affirmative relief and submitted its case for a final adjudication
on the merits. It was only after an adverse decision was rendered by the Court of Appeals that it finally
woke up to raise the question of jurisdiction. Were we to sanction such conduct on its part, We would
in effect be declaring as useless all the proceedings had in the present case since it was commenced
on July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The inequity
and unfairness of this is not only patent but revolting.22

For quite a time since we made this pronouncement in Sibonghanoy, courts and tribunals, in resolving
issues that involve the belated invocation of lack of jurisdiction, have applied the principle of estoppel
by laches. Thus, in Calimlim v. Ramirez,23 we pointed out that Sibonghanoy was developing into a
general rule rather than the exception:

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite
is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be
conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at
any stage of the proceedings, even on appeal. This doctrine has been qualified by recent
pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to
be regretted, however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstance involved in Sibonghanoy which
justified the departure from the accepted concept of non-waivability of objection to jurisdiction has
been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing
altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered the questioned ruling was
held to be barred by estoppel by laches. It was ruled that the lack of jurisdiction having been raised
for the first time in a motion to dismiss filed almost fifteen (15) years after the questioned ruling had
been rendered, such a plea may no longer be raised for being barred by laches. As defined in said
case, laches is "failure or neglect, for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have been done earlier; it is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the party entitled to assert
has abandoned it or declined to assert it.24

In Calimlim, despite the fact that the one who benefited from the plea of lack of jurisdiction was the
one who invoked the court’s jurisdiction, and who later obtained an adverse judgment therein, we
refused to apply the ruling in Sibonghanoy. The Court accorded supremacy to the time-honored
principle that the issue of jurisdiction is not lost by waiver or by estoppel.

Yet, in subsequent cases decided after Calimlim, which by sheer volume are too plentiful to mention,
the Sibonghanoy doctrine, as foretold in Calimlim, became the rule rather than the exception. As such,
in Soliven v. Fastforms Philippines, Inc.,25 the Court ruled:

While it is true that jurisdiction may be raised at any time, "this rule presupposes that estoppel has not
supervened." In the instant case, respondent actively participated in all stages of the proceedings
before the trial court and invoked its authority by asking for an affirmative relief. Clearly, respondent is
estopped from challenging the trial court’s jurisdiction, especially when an adverse judgment has been
rendered. In PNOC Shipping and Transport Corporation vs. Court of Appeals, we held:

Moreover, we note that petitioner did not question at all the jurisdiction of the lower court x x x in its
answers to both the amended complaint and the second amended complaint. It did so only in its motion
for reconsideration of the decision of the lower court after it had received an adverse decision. As this
Court held in Pantranco North Express, Inc. vs. Court of Appeals (G.R. No. 105180, July 5, 1993, 224
SCRA 477, 491), participation in all stages of the case before the trial court, that included invoking its
authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the
court’s jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April
16, 1985, petitioner did not question the lower court’s jurisdiction. It was only on December 29, 1989
when it filed its motion for reconsideration of the lower court’s decision that petitioner raised the
question of the lower court’s lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of
jurisdiction by its own inaction. (italics ours)

Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc. vs. Cabrigas, we ruled:

In the case at bar, it was found by the trial court in its 30 September 1996 decision in LCR Case No.
Q-60161(93) that private respondents (who filed the petition for reconstitution of titles) failed to comply
with both sections 12 and 13 of RA 26 and therefore, it had no jurisdiction over the subject matter of
the case. However, private respondents never questioned the trial court’s jurisdiction over its petition
for reconstitution throughout the duration of LCR Case No. Q-60161(93). On the contrary, private
respondents actively participated in the reconstitution proceedings by filing pleadings and presenting
its evidence. They invoked the trial court’s jurisdiction in order to obtain affirmative relief – the
reconstitution of their titles. Private respondents have thus foreclosed their right to raise the issue of
jurisdiction by their own actions.

The Court has constantly upheld the doctrine that while jurisdiction may be assailed at any stage, a
litigant’s participation in all stages of the case before the trial court, including the invocation of its
authority in asking for affirmative relief, bars such party from challenging the court’s jurisdiction (PNOC
Shipping and Transport Corporation vs. Court of Appeals, 297 SCRA 402 [1998]). A party cannot
invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or
failing to obtain such relief, repudiate or question that same jurisdiction (Asset Privatization Trust vs.
Court of Appeals, 300 SCRA 579 [1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442
[1998]). The Court frowns upon the undesirable practice of a party participating in the proceedings and
submitting his case for decision and then accepting judgment, only if favorable, and attacking it for
lack of jurisdiction, when adverse (Producers Bank of the Philippines vs. NLRC, 298 SCRA 517 [1998],
citing Ilocos Sur Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36 [1995]). (italics ours)26

Noteworthy, however, is that, in the 2005 case of Metromedia Times Corporation v. Pastorin,27 where
the issue of lack of jurisdiction was raised only in the National Labor Relations Commission (NLRC)
on appeal, we stated, after examining the doctrines of jurisdiction vis-à-vis estoppel, that the ruling in
Sibonghanoy stands as an exception, rather than the general rule. Metromedia, thus, was not
estopped from assailing the jurisdiction of the labor arbiter before the NLRC on appeal.28 1avvphi1

Later, in Francel Realty Corporation v. Sycip,29 the Court clarified that:

Petitioner argues that the CA’s affirmation of the trial court’s dismissal of its case was erroneous,
considering that a full-blown trial had already been conducted. In effect, it contends that lack of
jurisdiction could no longer be used as a ground for dismissal after trial had ensued and ended.

The above argument is anchored on estoppel by laches, which has been used quite successfully in a
number of cases to thwart dismissals based on lack of jurisdiction. Tijam v. Sibonghanoy, in which this
doctrine was espoused, held that a party may be barred from questioning a court’s jurisdiction after
being invoked to secure affirmative relief against its opponent. In fine, laches prevents the issue of
lack of jurisdiction from being raised for the first time on appeal by a litigant whose purpose is to annul
everything done in a trial in which it has actively participated.

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it."

The ruling in Sibonghanoy on the matter of jurisdiction is, however, the exception rather than the
rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which
1avvphi 1
the factual milieu is analogous to that in the cited case. In such controversies, laches should be clearly
present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption
that the party entitled to assert it had abandoned or declined to assert it. That Sibonghanoy applies
only to exceptional circumstances is clarified in Calimlim v. Ramirez, which we quote:

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite
is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be
conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at
any stage of the proceedings, even on appeal. This doctrine has been qualified by recent
pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to
be regretted, however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstance involved in Sibonghanoy which
justified the departure from the accepted concept of non-waivability of objection to jurisdiction has
been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing
altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

Indeed, the general rule remains: a court’s lack of jurisdiction may be raised at any stage of the
proceedings, even on appeal. The reason is that jurisdiction is conferred by law, and lack of it affects
the very authority of the court to take cognizance of and to render judgment on the action. Moreover,
jurisdiction is determined by the averments of the complaint, not by the defenses contained in the
answer.30

Also, in Mangaliag v. Catubig-Pastoral,31 even if the pleader of lack of jurisdiction actively took part in
the trial proceedings by presenting a witness to seek exoneration, the Court, reiterating the doctrine
in Calimlim, said:

Private respondent argues that the defense of lack of jurisdiction may be waived by estoppel through
active participation in the trial. Such, however, is not the general rule but an exception, best
characterized by the peculiar circumstances in Tijam vs. Sibonghanoy. In Sibonghanoy, the party
invoking lack of jurisdiction did so only after fifteen years and at a stage when the proceedings had
already been elevated to the CA. Sibonghanoy is an exceptional case because of the presence of
laches, which was defined therein as failure or neglect for an unreasonable and unexplained length of
time to do that which, by exercising due diligence, could or should have been done earlier; it is the
negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert has abandoned it or declined to assert it.32

And in the more recent Regalado v. Go,33 the Court again emphasized that laches should be clearly
present for the Sibonghanoy doctrine to be applicable, thus:

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier, it is negligence or
omission to assert a right within a reasonable length of time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it."
The ruling in People v. Regalario that was based on the landmark doctrine enunciated in Tijam v.
Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than the rule. Estoppel by
laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu
is analogous to that in the cited case. In such controversies, laches should have been clearly present;
that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the
party entitled to assert it had abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss
filed by the Surety almost 15 years after the questioned ruling had been rendered. At several stages
of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety invoked the
jurisdiction of the said courts to obtain affirmative relief and submitted its case for final adjudication on
the merits. It was only when the adverse decision was rendered by the Court of Appeals that it finally
woke up to raise the question of jurisdiction.

Clearly, the factual settings attendant in Sibonghanoy are not present in the case at bar. Petitioner
Atty. Regalado, after the receipt of the Court of Appeals resolution finding her guilty of contempt,
promptly filed a Motion for Reconsideration assailing the said court’s jurisdiction based on procedural
infirmity in initiating the action. Her compliance with the appellate court’s directive to show cause why
she should not be cited for contempt and filing a single piece of pleading to that effect could not be
considered as an active participation in the judicial proceedings so as to take the case within the milieu
of Sibonghanoy. Rather, it is the natural fear to disobey the mandate of the court that could lead to
dire consequences that impelled her to comply.34

The Court, thus, wavered on when to apply the exceptional circumstance in Sibonghanoy and on when
to apply the general rule enunciated as early as in De La Santa and expounded at length in Calimlim.
The general rule should, however, be, as it has always been, that the issue of jurisdiction may be
raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel.
Estoppel by laches, to bar a litigant from asserting the court’s absence or lack of jurisdiction, only
supervenes in exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy. Indeed, the fact
that a person attempts to invoke unauthorized jurisdiction of a court does not estop him from thereafter
challenging its jurisdiction over the subject matter, since such jurisdiction must arise by law and not by
mere consent of the parties. This is especially true where the person seeking to invoke unauthorized
jurisdiction of the court does not thereby secure any advantage or the adverse party does not suffer
any harm.35

Applying the said doctrine to the instant case, the petitioner is in no way estopped by laches in assailing
the jurisdiction of the RTC, considering that he raised the lack thereof in his appeal before the appellate
court. At that time, no considerable period had yet elapsed for laches to attach. True, delay alone,
though unreasonable, will not sustain the defense of "estoppel by laches" unless it further appears
that the party, knowing his rights, has not sought to enforce them until the condition of the party
pleading laches has in good faith become so changed that he cannot be restored to his former state,
if the rights be then enforced, due to loss of evidence, change of title, intervention of equities, and
other causes.36 In applying the principle of estoppel by laches in the exceptional case of Sibonghanoy,
the Court therein considered the patent and revolting inequity and unfairness of having the judgment
creditors go up their Calvary once more after more or less 15 years.37 The same, however, does not
obtain in the instant case.
We note at this point that estoppel, being in the nature of a forfeiture, is not favored by law. It is to be
applied rarely—only from necessity, and only in extraordinary circumstances. The doctrine must be
applied with great care and the equity must be strong in its favor.38 When misapplied, the doctrine of
estoppel may be a most effective weapon for the accomplishment of injustice.39 Moreover, a judgment
rendered without jurisdiction over the subject matter is void.40 Hence, the Revised Rules of Court
provides for remedies in attacking judgments rendered by courts or tribunals that have no jurisdiction
over the concerned cases. No laches will even attach when the judgment is null and void for want of
jurisdiction.41 As we have stated in Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto
Cruz,42

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency,
over the nature and subject matter of a petition or complaint is determined by the material allegations
therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant
is entitled to any or all such reliefs. Jurisdiction over the nature and subject matter of an action is
conferred by the Constitution and the law, and not by the consent or waiver of the parties where the
court otherwise would have no jurisdiction over the nature or subject matter of the action. Nor can it
be acquired through, or waived by, any act or omission of the parties. Moreover, estoppel does not
apply to confer jurisdiction to a tribunal that has none over the cause of action. x x x

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses or theories set up by the
defendant or respondent in his answer or motion to dismiss. Jurisdiction should be determined by
considering not only the status or the relationship of the parties but also the nature of the issues or
questions that is the subject of the controversy. x x x x The proceedings before a court or tribunal
without jurisdiction, including its decision, are null and void, hence, susceptible to direct and collateral
attacks.43

With the above considerations, we find it unnecessary to resolve the other issues raised in the petition.

WHEREFORE, premises considered, the petition for review on certiorari is GRANTED. Criminal Case
No. 2235-M-94 is hereby DISMISSED without prejudice.

SO ORDERED.
 11. HANNAH SERANA V. SANDIGANBAYAN

G.R. No. 162059 January 22, 2008

HANNAH EUNICE D. SERANA, petitioner,

vs.
SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.

DECISION

REYES, R.T., J.:

CAN the Sandiganbayan try a government scholaran** accused, along with her brother, of swindling
government funds?

MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng bayan, at ang kanyang kapatid,
na kapwa pinararatangan ng estafa ng pera ng bayan?

The jurisdictional question is posed in this petition for certiorari assailing the Resolutions1 of the
Sandiganbayan, Fifth Division, denying petitioner’s motion to quash the information and her motion
for reconsideration.

The Antecedents

Petitioner Hannah Eunice D. Serana was a senior student of the University of the Philippines-Cebu. A
student of a state university is known as a government scholar. She was appointed by then President
Joseph Estrada on December 21, 1999 as a student regent of UP, to serve a one-year term starting
January 1, 2000 and ending on December 31, 2000.

In the early part of 2000, petitioner discussed with President Estrada the renovation of Vinzons Hall
Annex in UP Diliman.2 On September 4, 2000, petitioner, with her siblings and relatives, registered
with the Securities and Exchange Commission the Office of the Student Regent Foundation, Inc.
(OSRFI).3

One of the projects of the OSRFI was the renovation of the Vinzons Hall Annex.4 President Estrada
gave Fifteen Million Pesos (P15,000,000.00) to the OSRFI as financial assistance for the proposed
renovation. The source of the funds, according to the information, was the Office of the President.

The renovation of Vinzons Hall Annex failed to materialize.5 The succeeding student regent, Kristine
Clare Bugayong, and Christine Jill De Guzman, Secretary General of the KASAMA sa U.P., a system-
wide alliance of student councils within the state university, consequently filed a complaint for
Malversation of Public Funds and Property with the Office of the Ombudsman.6
On July 3, 2003, the Ombudsman, after due investigation, found probable cause to indict petitioner
and her brother Jade Ian D. Serana for estafa, docketed as Criminal Case No. 27819 of the
Sandiganbayan.7 The Information reads:

The undersigned Special Prosecution Officer III, Office of the Special Prosecutor, hereby
accuses HANNAH EUNICE D. SERANA and JADE IAN D. SERANA of the crime of Estafa,
defined and penalized under Paragraph 2(a), Article 315 of the Revised Penal Code, as
amended committed as follows:

That on October, 24, 2000, or sometime prior or subsequent thereto, in Quezon City, Metro
Manila, Philippines, and within the jurisdiction of this Honorable Court, above-named accused,
HANNAH EUNICE D. SERANA, a high-ranking public officer, being then the Student Regent
of the University of the Philippines, Diliman, Quezon City, while in the performance of her
official functions, committing the offense in relation to her office and taking advantage of her
position, with intent to gain, conspiring with her brother, JADE IAN D. SERANA, a private
individual, did then and there wilfully, unlawfully and feloniously defraud the government by
falsely and fraudulently representing to former President Joseph Ejercito Estrada that the
renovation of the Vinzons Hall of the University of the Philippines will be renovated and
renamed as "President Joseph Ejercito Estrada Student Hall," and for which purpose accused
HANNAH EUNICE D. SERANA requested the amount of FIFTEEN MILLION PESOS
(P15,000,000.00), Philippine Currency, from the Office of the President, and the latter relying
and believing on said false pretenses and misrepresentation gave and delivered to said
accused Land Bank Check No. 91353 dated October 24, 2000 in the amount of FIFTEEN
MILLION PESOS (P15,000,000.00), which check was subsequently encashed by accused
Jade Ian D. Serana on October 25, 2000 and misappropriated for their personal use and
benefit, and despite repeated demands made upon the accused for them to return aforesaid
amount, the said accused failed and refused to do so to the damage and prejudice of the
government in the aforesaid amount.

CONTRARY TO LAW. (Underscoring supplied)

Petitioner moved to quash the information. She claimed that the Sandiganbayan does not have any
jurisdiction over the offense charged or over her person, in her capacity as UP student regent.

Petitioner claimed that Republic Act (R.A.) No. 3019, as amended by R.A. No. 8249, enumerates the
crimes or offenses over which the Sandiganbayan has jurisdiction.8 It has no jurisdiction over the crime
of estafa.9 It only has jurisdiction over crimes covered by Title VII, Chapter II, Section 2 (Crimes
Committed by Public Officers), Book II of the Revised Penal Code (RPC). Estafa falling under Title X,
Chapter VI (Crimes Against Property), Book II of the RPC is not within the Sandiganbayan’s
jurisdiction.

She also argued that it was President Estrada, not the government, that was duped. Even assuming
that she received the P15,000,000.00, that amount came from Estrada, not from the coffers of the
government.10
Petitioner likewise posited that the Sandiganbayan had no jurisdiction over her person. As a student
regent, she was not a public officer since she merely represented her peers, in contrast to the other
regents who held their positions in an ex officio capacity. She addsed that she was a simple student
and did not receive any salary as a student regent.

She further contended that she had no power or authority to receive monies or funds. Such power was
vested with the Board of Regents (BOR) as a whole. Since it was not alleged in the information that it
was among her functions or duties to receive funds, or that the crime was committed in connection
with her official functions, the same is beyond the jurisdiction of the Sandiganbayan citing the case
of Soller v. Sandiganbayan.11

The Ombudsman opposed the motion.12 It disputed petitioner’s interpretation of the law. Section 4(b)
of Presidential Decree (P.D.) No. 1606 clearly contains the catch -all phrase "in relation to office," thus,
the Sandiganbayan has jurisdiction over the charges against petitioner. In the same breath, the
prosecution countered that the source of the money is a matter of defense. It should be threshed out
during a full-blown trial.13

According to the Ombudsman, petitioner, despite her protestations, iwas a public officer. As a member
of the BOR, she hads the general powers of administration and exerciseds the corporate powers of
UP. Based on Mechem’s definition of a public office, petitioner’s stance that she was not compensated,
hence, not a public officer, is erroneous. Compensation is not an essential part of public office.
Parenthetically, compensation has been interpreted to include allowances. By this definition, petitioner
was compensated.14

Sandiganbayan Disposition

In a Resolution dated November 14, 2003, the Sandiganbayan denied petitioner’s motion for lack of
merit.15 It ratiocinated:

The focal point in controversy is the jurisdiction of the Sandiganbayan over this case.

It is extremely erroneous to hold that only criminal offenses covered by Chapter II, Section 2,
Title VII, Book II of the Revised Penal Code are within the jurisdiction of this Court. As correctly
pointed out by the prosecution, Section 4(b) of R.A. 8249 provides that the Sandiganbayan
also has jurisdiction over other offenses committed by public officials and employees in relation
to their office. From this provision, there is no single doubt that this Court has jurisdiction over
the offense of estafa committed by a public official in relation to his office.

Accused-movant’s claim that being merely a member in representation of the student body,
she was never a public officer since she never received any compensation nor does she fall
under Salary Grade 27, is of no moment, in view of the express provision of Section 4 of
Republic Act No. 8249 which provides:

Sec. 4. Jurisdiction – The Sandiganbayan shall exercise exclusive original jurisdiction in all
cases involving:
(A) x x x

(1) Officials of the executive branch occupying the positions of regional director and higher,
otherwise classified as Grade "27" and higher, of the Compensation and Position Classification
Act of 1989 (Republic Act No. 6758), specifically including:

xxxx

(g) Presidents, directors or trustees, or managers of government-owned or controlled

corporations, state universities or educational institutions or foundations. (Italics supplied)

It is very clear from the aforequoted provision that the Sandiganbayan has original exclusive
jurisdiction over all offenses involving the officials enumerated in subsection (g), irrespective
of their salary grades, because the primordial consideration in the inclusion of these officials
is the nature of their responsibilities and functions.

Is accused-movant included in the contemplated provision of law?

A meticulous review of the existing Charter of the University of the Philippines reveals that the
Board of Regents, to which accused-movant belongs, exclusively exercises the general
powers of administration and corporate powers in the university, such as: 1) To receive and
appropriate to the ends specified by law such sums as may be provided by law for the support
of the university; 2) To prescribe rules for its own government and to enact for the government
of the university such general ordinances and regulations, not contrary to law, as are
consistent with the purposes of the university; and 3) To appoint, on recommendation of the
President of the University, professors, instructors, lecturers and other employees of the
University; to fix their compensation, hours of service, and such other duties and conditions as
it may deem proper; to grant to them in its discretion leave of absence under such regulations
as it may promulgate, any other provisions of law to the contrary notwithstanding, and to
remove them for cause after an investigation and hearing shall have been had.

It is well-established in corporation law that the corporation can act only through its board of
directors, or board of trustees in the case of non-stock corporations. The board of directors or
trustees, therefore, is the governing body of the corporation.

It is unmistakably evident that the Board of Regents of the University of the Philippines is
performing functions similar to those of the Board of Trustees of a non-stock corporation. This
draws to fore the conclusion that being a member of such board, accused-movant undoubtedly
falls within the category of public officials upon whom this Court is vested with original
exclusive jurisdiction, regardless of the fact that she does not occupy a position classified as
Salary Grade 27 or higher under the Compensation and Position Classification Act of 1989.

Finally, this court finds that accused-movant’s contention that the same of P15 Million was
received from former President Estrada and not from the coffers of the government, is a matter
a defense that should be properly ventilated during the trial on the merits of this case.16
On November 19, 2003, petitioner filed a motion for reconsideration.17 The motion was denied with
finality in a Resolution dated February 4, 2004.18

Issue

Petitioner is now before this Court, contending that "THE RESPONDENT COURT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION IN
NOT QUASHING THE INFORMATION AND DISMISING THE CASE NOTWITHSTANDING THAT IS
HAS NO JURISDICTION OVER THE OFFENSE CHARGED IN THE INFORMATION."19

In her discussion, she reiterates her four-fold argument below, namely: (a) the Sandiganbayan has no
jurisdiction over estafa; (b) petitioner is not a public officer with Salary Grade 27 and she paid her
tuition fees; (c) the offense charged was not committed in relation to her office; (d) the funds in question
personally came from President Estrada, not from the government.

Our Ruling

The petition cannot be granted.

Preliminarily, the denial of a motion to

quash is not correctible by certiorari.

We would ordinarily dismiss this petition for certiorari outright on procedural grounds. Well-established
is the rule that when a motion to quash in a criminal case is denied, the remedy is not a petition
for certiorari, but for petitioners to go to trial, without prejudice to reiterating the special defenses
invoked in their motion to quash.20 Remedial measures as regards interlocutory orders, such as a
motion to quash, are frowned upon and often dismissed.21 The evident reason for this rule is to avoid
multiplicity of appeals in a single action.22

In Newsweek, Inc. v. Intermediate Appellate Court,23 the Court clearly explained and illustrated the
rule and the exceptions, thus:

As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be
subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule 41). The ordinary
procedure to be followed in such a case is to file an answer, go to trial and if the decision is
adverse, reiterate the issue on appeal from the final judgment. The same rule applies to an
order denying a motion to quash, except that instead of filing an answer a plea is entered and
no appeal lies from a judgment of acquittal.

This general rule is subject to certain exceptions. If the court, in denying the motion to dismiss
or motion to quash, acts without or in excess of jurisdiction or with grave abuse of discretion,
then certiorari or prohibition lies. The reason is that it would be unfair to require the defendant
or accused to undergo the ordeal and expense of a trial if the court has no jurisdiction over the
subject matter or offense, or is not the court of proper venue, or if the denial of the motion to
dismiss or motion to quash is made with grave abuse of discretion or a whimsical and
 capricious exercise of judgment. In such cases, the ordinary remedy of appeal cannot be plain
and adequate. The following are a few examples of the exceptions to the general rule.

In De Jesus v. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack of
jurisdiction over the subject matter, this Court granted the petition for certiorari and prohibition
against the City Court of Manila and directed the respondent court to dismiss the case.

In Lopez v. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of
jurisdiction over the offense, this Court granted the petition for prohibition and enjoined the
respondent court from further proceeding in the case.

In Enriquez v. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on
improper venue, this Court granted the petition for prohibition and enjoined the respondent
judge from taking cognizance of the case except to dismiss the same.

In Manalo v. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by
prior judgment, this Court granted the petition for certiorari and directed the respondent judge
to dismiss the case.

In Yuviengco v. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on
the Statute of Frauds, this Court granted the petition for certiorari and dismissed the amended
complaint.

In Tacas v. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after the
motion to quash based on double jeopardy was denied by respondent judge and ordered him
to desist from further action in the criminal case except to dismiss the same.

In People v. Ramos (83 SCRA 11), the order denying the motion to quash based on
prescription was set aside on certiorari and the criminal case was dismissed by this Court.24

We do not find the Sandiganbayan to have committed a grave abuse of discretion.

The jurisdiction of the Sandiganbayan is

set by P.D. No. 1606, as amended, not by
R.A. No. 3019, as amended.

We first address petitioner’s contention that the jurisdiction of the Sandiganbayan is determined by
Section 4 of R.A. No. 3019 (The Anti-Graft and Corrupt Practices Act, as amended). We note that
petitioner refers to Section 4 of the said law yet quotes Section 4 of P.D. No. 1606, as amended, in
her motion to quash before the Sandiganbayan.25She repeats the reference in the instant petition
for certiorari26 and in her memorandum of authorities.27

We cannot bring ourselves to write this off as a mere clerical or typographical error. It bears stressing
that petitioner repeated this claim twice despite corrections made by the Sandiganbayan.28
Her claim has no basis in law. It is P.D. No. 1606, as amended, rather than R.A. No. 3019, as
amended, that determines the jurisdiction of the Sandiganbayan. A brief legislative history of the
statute creating the Sandiganbayan is in order. The Sandiganbayan was created by P.D. No. 1486,
promulgated by then President Ferdinand E. Marcos on June 11, 1978. It was promulgated to attain
the highest norms of official conduct required of public officers and employees, based on the concept
that public officers and employees shall serve with the highest degree of responsibility, integrity, loyalty
and efficiency and shall remain at all times accountable to the people.29

P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was promulgated on December 10,
1978. P.D. No. 1606 expanded the jurisdiction of the Sandiganbayan.30

P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983, further altering the
Sandiganbayan jurisdiction. R.A. No. 7975 approved on March 30, 1995 made succeeding
amendments to P.D. No. 1606, which was again amended on February 5, 1997 by R.A. No. 8249.
Section 4 of R.A. No. 8249 further modified the jurisdiction of the Sandiganbayan. As it now stands,
the Sandiganbayan has jurisdiction over the following:

Sec. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive original jurisdiction in all
cases involving:

A. Violations of Republic Act No. 3019, as amended, other known as the Anti-Graft and Corrupt
Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised
Penal Code, where one or more of the accused are officials occupying the following positions
in the government, whether in a permanent, acting or interim capacity, at the time of the
commission of the offense:

(1) Officials of the executive branch occupying the positions of regional director and higher,
otherwise classified as Grade "27" and higher, of the Compensation and Position Classification
Act of 989 (Republic Act No. 6758), specifically including:

" (a) Provincial governors, vice-governors, members of the sangguniang panlalawigan, and
provincial treasurers, assessors, engineers, and other city department heads;

" (b) City mayor, vice-mayors, members of the sangguniang panlungsod, city treasurers,
assessors, engineers, and other city department heads;

"(c ) Officials of the diplomatic service occupying the position of consul and higher;

" (d) Philippine army and air force colonels, naval captains, and all officers of higher rank;

" (e) Officers of the Philippine National Police while occupying the position of provincial director
and those holding the rank of senior superintended or higher;

" (f) City and provincial prosecutors and their assistants, and officials and prosecutors in the
Office of the Ombudsman and special prosecutor;
" (g) Presidents, directors or trustees, or managers of government-owned or controlled
corporations, state universities or educational institutions or foundations.

" (2) Members of Congress and officials thereof classified as Grade "27'" and up under the
Compensation and Position Classification Act of 1989;

" (3) Members of the judiciary without prejudice to the provisions of the Constitution;

" (4) Chairmen and members of Constitutional Commission, without prejudice to the provisions
of the Constitution; and

" (5) All other national and local officials classified as Grade "27'" and higher under the
Compensation and Position Classification Act of 1989.

B. Other offenses of felonies whether simple or complexed with other crimes committed by the
public officials and employees mentioned in subsection a of this section in relation to their
office.

C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2,
14 and 14-A, issued in 1986.

" In cases where none of the accused are occupying positions corresponding to Salary Grade
"27'" or higher, as prescribed in the said Republic Act No. 6758, or military and PNP officer
mentioned above, exclusive original jurisdiction thereof shall be vested in the proper regional
court, metropolitan trial court, municipal trial court, and municipal circuit trial court, as the case
may be, pursuant to their respective jurisdictions as provided in Batas Pambansa Blg. 129, as
amended.

" The Sandiganbayan shall exercise exclusive appellate jurisdiction over final judgments,
resolutions or order of regional trial courts whether in the exercise of their own original
jurisdiction or of their appellate jurisdiction as herein provided.

" The Sandiganbayan shall have exclusive original jurisdiction over petitions for the issuance
of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction and over petitions of similar
nature, including quo warranto, arising or that may arise in cases filed or which may be filed
under Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986: Provided, That the jurisdiction
over these petitions shall not be exclusive of the Supreme Court.

" The procedure prescribed in Batas Pambansa Blg. 129, as well as the implementing rules
that the Supreme Court has promulgated and may thereafter promulgate, relative to
appeals/petitions for review to the Court of Appeals, shall apply to appeals and petitions for
review filed with the Sandiganbayan. In all cases elevated to the Sandiganbayan and from the
Sandiganbayan to the Supreme Court, the Office of the Ombudsman, through its special
prosecutor, shall represent the People of the Philippines, except in cases filed pursuant to
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.
 " In case private individuals are charged as co-principals, accomplices or accessories with the
public officers or employees, including those employed in government-owned or controlled
corporations, they shall be tried jointly with said public officers and employees in the proper
courts which shall exercise exclusive jurisdiction over them.

" Any provisions of law or Rules of Court to the contrary notwithstanding, the criminal action
and the corresponding civil action for the recovery of civil liability shall, at all times, be
simultaneously instituted with, and jointly determined in, the same proceeding by the
Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the filing such civil
action separately from the criminal action shall be recognized: Provided, however, That where
the civil action had heretofore been filed separately but judgment therein has not yet been
rendered, and the criminal case is hereafter filed with the Sandiganbayan or the appropriate
court, said civil action shall be transferred to the Sandiganbayan or the appropriate court, as
the case may be, for consolidation and joint determination with the criminal action, otherwise
the separate civil action shall be deemed abandoned."

Upon the other hand, R.A. No. 3019 is a penal statute approved on August 17, 1960. The said law
represses certain acts of public officers and private persons alike which constitute graft or corrupt
practices or which may lead thereto.31 Pursuant to Section 10 of R.A. No. 3019, all prosecutions for
violation of the said law should be filed with the Sandiganbayan.32

R.A. No. 3019 does not contain an enumeration of the cases over which the Sandiganbayan has
jurisdiction. In fact, Section 4 of R.A. No. 3019 erroneously cited by petitioner, deals not with the
jurisdiction of the Sandiganbayan but with prohibition on private individuals. We quote:

Section 4. Prohibition on private individuals. – (a) It shall be unlawful for any person having
family or close personal relation with any public official to capitalize or exploit or take
advantage of such family or close personal relation by directly or indirectly requesting or
receiving any present, gift or material or pecuniary advantage from any other person having
some business, transaction, application, request or contract with the government, in which
such public official has to intervene. Family relation shall include the spouse or relatives by
consanguinity or affinity in the third civil degree. The word "close personal relation" shall
include close personal friendship, social and fraternal connections, and professional
employment all giving rise to intimacy which assures free access to such public officer.

(b) It shall be unlawful for any person knowingly to induce or cause any public official to commit
any of the offenses defined in Section 3 hereof.

In fine, the two statutes differ in that P.D. No. 1606, as amended, defines the jurisdiction of the
Sandiganbayan while R.A. No. 3019, as amended, defines graft and corrupt practices and provides
for their penalties.

Sandiganbayan has jurisdiction over

the offense of estafa.
Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is not among those crimes
cognizable by the Sandiganbayan. We note that in hoisting this argument, petitioner isolated the first
paragraph of Section 4 of P.D. No. 1606, without regard to the succeeding paragraphs of the said
provision.

The rule is well-established in this jurisdiction that statutes should receive a sensible construction so
as to avoid an unjust or an absurd conclusion.33 Interpretatio talis in ambiguis semper fienda est, ut
evitetur inconveniens et absurdum. Where there is ambiguity, such interpretation as will avoid
inconvenience and absurdity is to be adopted. Kung saan mayroong kalabuan, ang
pagpapaliwanag ay hindi dapat maging mahirap at katawa-tawa.

Every section, provision or clause of the statute must be expounded by reference to each other in
order to arrive at the effect contemplated by the legislature.34 The intention of the legislator must be
ascertained from the whole text of the law and every part of the act is to be taken into view.35 In other
words, petitioner’s interpretation lies in direct opposition to the rule that a statute must be interpreted
as a whole under the principle that the best interpreter of a statute is the statute itself.36 Optima statuti
interpretatrix est ipsum statutum. Ang isang batas ay marapat na bigyan ng kahulugan sa
kanyang kabuuan sa ilalim ng prinsipyo na ang pinakamainam na interpretasyon ay ang
mismong batas.

Section 4(B) of P.D. No. 1606 reads:

B. Other offenses or felonies whether simple or complexed with other crimes committed by the
public officials and employees mentioned in subsection a of this section in relation to their
office.

Evidently, the Sandiganbayan has jurisdiction over other felonies committed by public officials in
relation to their office. We see no plausible or sensible reason to exclude estafa as one of the offenses
included in Section 4(bB) of P.D. No. 1606. Plainly, estafa is one of those other felonies. The
jurisdiction is simply subject to the twin requirements that (a) the offense is committed by public officials
and employees mentioned in Section 4(A) of P.D. No. 1606, as amended, and that (b) the offense is
committed in relation to their office.

In Perlas, Jr. v. People,37 the Court had occasion to explain that the Sandiganbayan has jurisdiction
over an indictment for estafa versus a director of the National Parks Development Committee, a
government instrumentality. The Court held then:

The National Parks Development Committee was created originally as an Executive

Committee on January 14, 1963, for the development of the Quezon Memorial, Luneta and
other national parks (Executive Order No. 30). It was later designated as the National Parks
Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966,
Mrs. Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and Vice-
Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to the Bureau of Forest
Development, Department of Natural Resources, on December 1, 1975 (Letter of
Implementation No. 39, issued pursuant to PD No. 830, dated November 27, 1975), the NPDC
has remained under the Office of the President (E.O. No. 709, dated July 27, 1981).
 Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular government
agency under the Office of the President and allotments for its maintenance and operating
expenses were issued direct to NPDC (Exh. 10-A, Perlas, Item Nos. 2, 3).

The Sandiganbayan’s jurisdiction over estafa was reiterated with greater firmness in Bondoc v.
Sandiganbayan.38Pertinent parts of the Court’s ruling in Bondoc read:

Furthermore, it is not legally possible to transfer Bondoc’s cases to the Regional Trial Court,
for the simple reason that the latter would not have jurisdiction over the offenses. As already
above intimated, the inability of the Sandiganbayan to hold a joint trial of Bondoc’s cases and
those of the government employees separately charged for the same crimes, has not altered
the nature of the offenses charged, as estafa thru falsification punishable by penalties higher
than prision correccional or imprisonment of six years, or a fine of P6,000.00, committed by
government employees in conspiracy with private persons, including Bondoc. These crimes
are within the exclusive, original jurisdiction of the Sandiganbayan. They simply cannot be
taken cognizance of by the regular courts, apart from the fact that even if the cases could be
so transferred, a joint trial would nonetheless not be possible.

Petitioner UP student regent

is a public officer.

Petitioner also contends that she is not a public officer. She does not receive any salary or
remuneration as a UP student regent. This is not the first or likely the last time that We will be called
upon to define a public officer. In Khan, Jr. v. Office of the Ombudsman, We ruled that it is difficult to
pin down the definition of a public officer.39 The 1987 Constitution does not define who are public
officers. Rather, the varied definitions and concepts are found in different statutes and jurisprudence.

In Aparri v. Court of Appeals,40 the Court held that:

A public office is the right, authority, and duty created and conferred by law, by which for a
given period, either fixed by law or enduring at the pleasure of the creating power, an individual
is invested with some portion of the sovereign functions of the government, to be exercise by
him for the benefit of the public ([Mechem Public Offices and Officers,] Sec. 1). The right to
hold a public office under our political system is therefore not a natural right. It exists, when it
exists at all only because and by virtue of some law expressly or impliedly creating and
conferring it (Mechem Ibid., Sec. 64). There is no such thing as a vested interest or an estate
in an office, or even an absolute right to hold office. Excepting constitutional offices which
provide for special immunity as regards salary and tenure, no one can be said to have any
vested right in an office or its salary (42 Am. Jur. 881).

In Laurel v. Desierto,41 the Court adopted the definition of Mechem of a public office:

"A public office is the right, authority and duty, created and conferred by law, by which, for a
given period, either fixed by law or enduring at the pleasure of the creating power, an individual
is invested with some portion of the sovereign functions of the government, to be exercised by
him for the benefit of the public. The individual so invested is a public officer."42
Petitioner claims that she is not a public officer with Salary Grade 27; she is, in fact, a regular tuition
fee-paying student. This is likewise bereft of merit. It is not only the salary grade that determines the
jurisdiction of the Sandiganbayan. The Sandiganbayan also has jurisdiction over other officers
enumerated in P.D. No. 1606. In Geduspan v. People,43 We held that while the first part of Section
4(A) covers only officials with Salary Grade 27 and higher, its second part specifically includes other
executive officials whose positions may not be of Salary Grade 27 and higher but who are by express
provision of law placed under the jurisdiction of the said court. Petitioner falls under the jurisdiction of
the Sandiganbayan as she is placed there by express provision of law.44

Section 4(A)(1)(g) of P.D. No. 1606 explictly vested the Sandiganbayan with jurisdiction over
Presidents, directors or trustees, or managers of government-owned or controlled corporations, state
universities or educational institutions or foundations. Petitioner falls under this category. As the
Sandiganbayan pointed out, the BOR performs functions similar to those of a board of trustees of a
non-stock corporation.45 By express mandate of law, petitioner is, indeed, a public officer as
contemplated by P.D. No. 1606.

Moreover, it is well established that compensation is not an essential element of public office. 46 At
most, it is merely incidental to the public office.47

Delegation of sovereign functions is essential in the public office. An investment in an individual of

some portion of the sovereign functions of the government, to be exercised by him for the benefit of
the public makes one a public officer.48

The administration of the UP is a sovereign function in line with Article XIV of the Constitution. UP
performs a legitimate governmental function by providing advanced instruction in literature,
philosophy, the sciences, and arts, and giving professional and technical training.49 Moreover, UP is
maintained by the Government and it declares no dividends and is not a corporation created for profit.50

The offense charged was committed

in relation to public office, according
to the Information.

Petitioner likewise argues that even assuming that she is a public officer, the Sandiganbayan would
still not have jurisdiction over the offense because it was not committed in relation to her office.

According to petitioner, she had no power or authority to act without the approval of the BOR. She
adds there was no Board Resolution issued by the BOR authorizing her to contract with then President
Estrada; and that her acts were not ratified by the governing body of the state university. Resultantly,
her act was done in a private capacity and not in relation to public office.

It is axiomatic that jurisdiction is determined by the averments in the information.51 More than that,
jurisdiction is not affected by the pleas or the theories set up by defendant or respondent in an answer,
a motion to dismiss, or a motion to quash.52 Otherwise, jurisdiction would become dependent almost
entirely upon the whims of defendant or respondent.53
In the case at bench, the information alleged, in no uncertain terms that petitioner, being then a student
regent of U.P., "while in the performance of her official functions, committing the offense in relation to
her office and taking advantage of her position, with intent to gain, conspiring with her brother, JADE
IAN D. SERANA, a private individual, did then and there wilfully, unlawfully and feloniously defraud
the government x x x." (Underscoring supplied)

Clearly, there was no grave abuse of discretion on the part of the Sandiganbayan when it did not
quash the information based on this ground.

Source of funds is a defense that should

be raised during trial on the merits.

It is contended anew that the amount came from President Estrada’s private funds and not from the
government coffers. Petitioner insists the charge has no leg to stand on.

We cannot agree. The information alleges that the funds came from the Office of the President and
not its then occupant, President Joseph Ejercito Estrada. Under the information, it is averred that
"petitioner requested the amount of Fifteen Million Pesos (P15,000,000.00), Philippine Currency, from
the Office of the President, and the latter relying and believing on said false pretenses and
misrepresentation gave and delivered to said accused Land Bank Check No. 91353 dated October
24, 2000 in the amount of Fifteen Million Pesos (P15,000,000.00)."

Again, the Court sustains the Sandiganbayan observation that the source of the P15,000,000 is a
matter of defense that should be ventilated during the trial on the merits of the instant case.54

A lawyer owes candor, fairness

and honesty to the Court.

As a parting note, petitioner’s counsel, Renato G. dela Cruz, misrepresented his reference to Section
4 of P.D. No. 1606 as a quotation from Section 4 of R.A. No. 3019. A review of his motion to quash,
the instant petition for certiorari and his memorandum, unveils the misquotation. We urge petitioner’s
counsel to observe Canon 10 of the Code of Professional Responsibility, specifically Rule 10.02 of the
Rules stating that "a lawyer shall not misquote or misrepresent."

The Court stressed the importance of this rule in Pangan v. Ramos,55 where Atty Dionisio D. Ramos
used the name Pedro D.D. Ramos in connection with a criminal case. The Court ruled that Atty. Ramos
resorted to deception by using a name different from that with which he was authorized. We severely
reprimanded Atty. Ramos and warned that a repetition may warrant suspension or disbarment.56

We admonish petitioner’s counsel to be more careful and accurate in his citation. A lawyer’s conduct
before the court should be characterized by candor and fairness.57 The administration of justice would
gravely suffer if lawyers do not act with complete candor and honesty before the courts.58

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED
 12. PAT-OG SR. V. CIVIL SERVICE COMMISSION

G.R. No. 198755 June 5, 2013

ALBERTO PAT-OG, SR., Petitioner,

vs.
CIVIL SERVICE COMMISSION, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, which
seeks to set aside the April 6, 2011 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 101700,
affirming the April 11, 2007 Decision2 of the Civil Service Commission (CSC), which ordered the
dismissal of petitioner Alberto Pat-og, Sr. (Pat-og) from the service for grave misconduct.

The Facts

On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old second year high school
student of the Antadao National High School in Sagada, Mountain Province, tiled an affidavit-complaint
against Pat-og, a third year high school teacher of the same school, before the Civil Service
Commission-Cordillera Administrative Region (CSC-CAR).

Bang-on alleged that on the morning of August 26, 2003, he attended his class at the basketball court
of the school, where Pat-og and his third year students were also holding a separate class; that he
and some of his classmates joined Pat-og’s third year students who were practicing basketball shots;
that Pat-og later instructed them to form two lines; that thinking that three lines were to be formed, he
stayed in between the two lines; that Pat-og then held his right arm and punched his stomach without
warning for failing to follow instructions; and that as a result, he suffered stomach pain for several days
and was confined in a hospital from September 10-12, 2003, as evidenced by a medico-legal
certificate, which stated that he sustained a contusion hematoma in the hypogastric area.

Regarding the same incident, Bang-on filed a criminal case against Pat-og for the crime of Less
Serious Physical Injury with the Regional Trial Court (RTC) of Bontoc, Mountain Province.

Taking cognizance of the administrative case, the CSC-CAR directed Pat-og to file his counter-
affidavit. He denied the charges hurled against him and claimed that when he was conducting his
Music, Arts, Physical Education and Health (MAPEH) class, composed of third year students, he
instructed the girls to play volleyball and the boys to play basketball; that he later directed the boys to
form two lines; that after the boys failed to follow his repeated instructions, he scolded them in a loud
voice and wrested the ball from them; that while approaching them, he noticed that there were male
students who were not members of his class who had joined the shooting practice; that one of those
male students was Bang-on, who was supposed to be having his own MAPEH class under another
teacher; that he then glared at them, continued scolding them and dismissed the class for their failure
to follow instructions; and that he offered the sworn statement of other students to prove that he did
not box Bang-on.

On June 1, 2004, the CSC-CAR found the existence of a prima faciecase for misconduct and formally
charged Pat-og.

While the proceedings of the administrative case were ongoing, the RTC rendered its judgment in the
criminal case and found Pat-og guilty of the offense of slight physical injury. He was meted the penalty
of imprisonment from eleven (11) to twenty (20) days. Following his application for probation, the
decision became final and executory and judgment was entered.

Meanwhile, in the administrative case, a pre-hearing conference was conducted after repeated
postponement by Pat-og. With the approval of the CSC-CAR, the prosecution submitted its position
paper in lieu of a formal presentation of evidence and formally offered its evidence, which included the
decision in the criminal case. It offered the affidavits of Raymund Atuban, a classmate of Bang-on;
and James Domanog, a third year high school student, who both witnessed Pat-og hit Bang-on in the
stomach.

For his defense, Pat-og offered the testimonies of his witnesses - Emiliano Dontongan (Dontongan),
a teacher in another school, who alleged that he was a member of the Municipal Council for the
Protection of Children, and that, in such capacity, he investigated the incident and came to the
conclusion that it did not happen at all; and Ernest Kimmot, who testified that he was in the basketball
court at the time but did not see such incident. Pat-og also presented the affidavits of thirteen other
witnesses to prove that he did not punch Bang-on.

Ruling of the CSC-CAR

In its Decision,3 dated September 19, 2006, the CSC-CAR found Pat-og guilty and disposed as follows:

WHEREFORE, all premises told, respondent Alberto Pat-og, Sr., Teacher Antadao National High
School, is hereby found guilty of Simple Misconduct.

Under the Uniform Rules on Administrative Cases in the Civil Service, the imposable penalty on the
first offense of Simple Misconduct is suspension of one (1) month and one (1) day to six (6) months.

Due to seriousness of the resulting injury to the fragile body of the minor victim, the CSC-CAR hereby
imposed upon respondent the maximum penalty attached to the offense which is six months
suspension without pay.

The CSC-CAR gave greater weight to the version posited by the prosecution, finding that a blow was
indeed inflicted by Pat-og on Bang-on. It found that Pat-og had a motive for doing so - his students’
failure to follow his repeated instructions which angered him. Nevertheless, the CSCCAR ruled that a
motive was not necessary to establish guilt if the perpetrator of the offense was positively identified.
The positive identification of Pat-og was duly proven by the corroborative testimonies of the
prosecution witnesses, who were found to be credible and disinterested. The testimony of defense
witness, Dontongan, was not given credence considering that the students he interviewed for his
investigation claimed that Pat-og was not even angry at the time of the incident, contrary to the latter’s
own admission.

The CSC-CAR held that the actions of Pat-og clearly transgressed the proper norms of conduct
required of a public official, and the gravity of the offense was further magnified by the seriousness of
the injury of Bang-on which required a healing period of more than ten (10) days. It pointed out that,
being his teacher, Pat-og’s substitute parental authority did not give him license to physically chastise
a misbehaving student. The CSC-CAR added that the fact that Pat-og applied for probation in the
criminal case, instead of filing an appeal, further convinced it of his guilt.

The CSC-CAR believed that the act committed by Pat-og was sufficient to find him guilty of Grave
Misconduct. It, however, found the corresponding penalty of dismissal from the service too harsh under
the circumstances. Thus, it adjudged petitioner guilty of Simple Misconduct and imposed the maximum
penalty of suspension for six (6) months.

On December 11, 2006, the motion for reconsideration filed by Pat-og was denied for lack of merit.4

The Ruling of the CSC

In its Resolution,5 dated April 11, 2007, the CSC dismissed Pat-og’s appeal and affirmed with
modification the decision of the CSC-CAR as follows:

WHEREFORE, foregoing premises considered, the instant appeal is hereby DISMISSED. The
decision of the CSC-CAR is affirmed with the modification that Alberto Pat-og, Sr., is adjudged guilty
of grave misconduct, for which he is meted out the penalty of dismissal from the service with all its
accessory penalties of cancellation of eligibilities, perpetual disqualification from reemployment in the
government service, and forfeiture of retirement benefits.6

After evaluating the records, the CSC sustained the CSC-CAR’s conclusion that there existed
substantial evidence to sustain the finding that Pat-og did punch Bang-on in the stomach. It gave
greater weight to the positive statements of Bang-on and his witnesses over the bare denial of Patog.
It also highlighted the fact that Pat-og failed to adduce evidence of any ill motive on the part of Bang-
on in filing the administrative case against him. It likewise gave credence to the medico-legal certificate
showing that Bang-on suffered a hematoma contusion in his hypogastric area.

The CSC ruled that the affidavits of Bang-on’s witnesses were not bereft of evidentiary value even if
Pat-og was not afforded a chance to cross-examine the witnesses of Bang-on. It is of no moment
because the cross- examination of witnesses is not an indispensable requirement of administrative
due process.

The CSC noted that Pat-og did not question but, instead, fully acquiesced in his conviction in the
criminal case for slight physical injury, which was based on the same set of facts and circumstances,
and involved the same parties and issues. It, thus, considered his prior criminal conviction as evidence
against him in the administrative case.
Finding that his act of punching his student displayed a flagrant and wanton disregard of the dignity of
a person, reminiscent of corporal punishment that had since been outlawed for being harsh, unjust,
and cruel, the CSC upgraded Pat-og’s offense from Simple Misconduct to Grave Misconduct and
ordered his dismissal from the service.

Pat-og filed a motion for reconsideration, questioning for the first time the jurisdiction of CSC over the
case. He contended that administrative charges against a public school teacher should have been
initially heard by a committee to be constituted pursuant to the Magna Carta for Public School
Teachers.

On November 5, 2007, the CSC denied his motion for reconsideration.7 It ruled that Pat-og was
estopped from challenging its jurisdiction considering that he actively participated in the administrative
proceedings against him, raising the issue of jurisdiction only after his appeal was dismissed by the
CSC.

Ruling of the Court of Appeals

In its assailed April 6, 2011 Decision,8 the CA affirmed the resolutions of the CSC. It agreed that Pat-
og was estopped from questioning the jurisdiction of the CSC as the records clearly showed that he
actively participated in the proceedings. It was of the view that Pat-og was not denied due process
when he failed to cross-examine Bang-on and his witnesses because he was given the opportunity to
be heard and present his evidence before the CSC-CAR and the CSC.

The CA also held that the CSC committed no error in taking into account the conviction of Pat-og in
the criminal case. It stated that his conviction was not the sole basis of the CSC for his dismissal from
the service because there was substantial evidence proving that Pat-og had indeed hit Bang-on.

In its assailed Resolution,9 dated September 13, 2011, the CA denied the motion for reconsideration
filed by Pat-og.

Hence, the present petition with the following

Assignment of Errors

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT AFFIRMED THE SUPREME PENALTY OF DISMISSAL FROM SERVICE
WITH FORFEITURE OF RETIREMENT BENEFITS AGAINST THE PETITIONER WITHOUT
CONSIDERING PETITIONER’S LONG YEARS OF GOVERNMENT SERVICE?

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT RULED THAT PETITIONER IS ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE CIVIL SERVICE COMMISSION TO HEAR AND DECIDE THE
ADMINISTRATIVE CASE AGAINST HIM?
WHETHER OR NOT RESPONDENT COURT OF APPEALS SERIOUSLY ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE APPEAL DESPITE LACK OF
SUBSTANTIAL EVIDENCE?

On Jurisdiction

Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670, otherwise known as the Magna Carta
for Public School Teachers, provides that administrative charges against a public school teacher shall
be heard initially by a committee constituted under said section. As no committee was ever formed,
the petitioner posits that he was denied due process and that the CSC did not have the jurisdiction to
hear and decide his administrative case. He further argues that notwithstanding the fact that the issue
of jurisdiction was raised for the first time on appeal, the rule remains that estoppel does not confer
jurisdiction on a tribunal that has no jurisdiction over the cause of action or subject matter of the case.

The Court cannot sustain his position.

The petitioner’s argument that the administrative case against him can only proceed under R.A. No.
4670 is misplaced.

In Puse v. Santos-Puse,10 it was held that the CSC, the Department of Education (DepEd) and the
Board of Professional Teachers-Professional Regulatory Commission (PRC) have concurrent
jurisdiction over administrative cases against public school teachers.

Under Article IX-B of the 1987 Constitution, the CSC is the body charged with the establishment and
administration of a career civil service which embraces all branches and agencies of the
government.11 Executive Order (E.O.) No. 292 (the Administrative Code of 1987)12 and Presidential
Decree (P.D.) No. 807 (the Civil Service Decree of the Philippines)13 expressly provide that the CSC
has the power to hear and decide administrative disciplinary cases instituted with it or brought to it on
appeal. Thus, the CSC, as the central personnel agency of the government, has the inherent power
to supervise and discipline all members of the civil service, including public school teachers.

Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over administrative cases of public school
teachers is lodged with the investigating committee constituted therein.14 Also, under Section 23 of
R.A. No. 7836 (the Philippine Teachers Professionalization Act of 1994), the Board of Professional
Teachers is given the power, after due notice and hearing, to suspend or revoke the certificate of
registration of a professional teacher for causes enumerated therein.15

Concurrent jurisdiction is that which is possessed over the same parties or subject matter at the same
time by two or more separate tribunals. When the law bestows upon a government body the jurisdiction
to hear and decide cases involving specific matters, it is to be presumed that such jurisdiction is
exclusive unless it be proved that another body is likewise vested with the same jurisdiction, in which
case, both bodies have concurrent jurisdiction over the matter.16

Where concurrent jurisdiction exists in several tribunals, the body that first takes cognizance of the
complaint shall exercise jurisdiction to the exclusion of the others. In this case, it was CSC which first
acquired jurisdiction over the case because the complaint was filed before it. Thus, it had the authority
to proceed and decide the case to the exclusion of the DepEd and the Board of Professional
Teachers.17

In CSC v. Alfonso,18 it was held that special laws, such as R.A. No. 4670, do not divest the CSC of its
inherent power to supervise and discipline all members of the civil service, including public school
teachers. Pat-og, as a public school teacher, is first and foremost, a civil servant accountable to the
people and answerable to the CSC for complaints lodged against him as a public servant. To hold that
R.A. No. 4670 divests the CSC of its power to discipline public school teachers would negate the very
purpose for which the CSC was established and would impliedly amend the Constitution itself.

To further drive home the point, it was ruled in CSC v. Macud19 that R.A. No. 4670, in imposing a
separate set of procedural requirements in connection with administrative proceedings against public
school teachers, should be construed to refer only to the specific procedure to be followed in
administrative investigations conducted by the DepEd. By no means, then, did R.A. No. 4670 confer
an exclusive disciplinary authority over public school teachers on the DepEd.

At any rate, granting that the CSC was without jurisdiction, the petitioner is indeed estopped from
raising the issue. Although the rule states that a jurisdictional question may be raised at any time, such
rule admits of the exception where, as in this case, estoppel has supervened.20 Here, instead of
opposing the CSC’s exercise of jurisdiction, the petitioner invoked the same by actively participating
in the proceedings before the CSC-CAR and by even filing his appeal before the CSC itself; only
raising the issue of jurisdiction later in his motion for reconsideration after the CSC denied his appeal.
This Court has time and again frowned upon the undesirable practice of a party submitting his case
for decision and then accepting the judgment only if favorable, but attacking it for lack of jurisdiction
when adverse.21

On Administrative Due Process

On due process, Pat-og asserts that the affidavits of the complainant and his witnesses are of
questionable veracity having been subscribed in Bontoc, which is nearly 30 kilometers from the
residences of the parties. Furthermore, he claimed that considering that the said affiants never
testified, he was never afforded the opportunity to cross-examine them. Therefore, their affidavits were
mere hearsay and insufficient to prove his guilt.

The petitioner does not persuade.

The essence of due process is simply to be heard, or as applied to administrative proceedings, a fair
and reasonable opportunity to explain one’s side, or an opportunity to seek a reconsideration of the
action or ruling complained of.22 Administrative due process cannot be fully equated with due process
in its strict judicial sense. In administrative proceedings, a formal or trial-type hearing is not always
necessary23 and technical rules of procedure are not strictly applied. Hence, the right to cross-examine
is not an indispensable aspect of administrative due process.24 The petitioner cannot, therefore, argue
that the affidavit of Bang-on and his witnesses are hearsay and insufficient to prove his guilt.
At any rate, having actively participated in the proceedings before the CSC-CAR, the CSC, and the
CA, the petitioner was apparently afforded every opportunity to explain his side and seek
reconsideration of the ruling against him. 1âwphi1

As to the issue of the veracity of the affidavits, such is a question of fact which cannot now be raised
before the Court under Rule 45 of the Rules of Court. The CSC-CAR, the CSC and the CA did not,
therefore, err in giving credence to the affidavits of the complainants and his witnesses, and in
consequently ruling that there was substantial evidence to support the finding of misconduct on the
part of the petitioner.

On the Penalty

Assuming that he did box Bang-on, Pat-og argues that there is no substantial evidence to prove that
he did so with a clear intent to violate the law or in flagrant disregard of the established rule, as required
for a finding of grave misconduct. He insists that he was not motivated by bad faith or ill will because
he acted in the belief that, as a teacher, he was exercising authority over Bang-on in loco parentis,
and was, accordingly, within his rights to discipline his student. Citing his 33 years in the government
service without any adverse record against him and the fact that he is at the edge of retirement, being
already 62 years old, the petitioner prays that, in the name of substantial and compassionate justice,
the CSC-CAR’s finding of simple misconduct and the concomitant penalty of suspension should be
upheld, instead of dismissal.

The Court agrees in part.

Misconduct means intentional wrongdoing or deliberate violation of a rule of law or standard of

behavior. To constitute an administrative offense, misconduct should relate to or be connected with
the performance of the official functions and duties of a public officer. In grave misconduct, as
distinguished from simple misconduct, the elements of corruption, clear intent to violate the law or
t1agrant disregard of an established rule must be manifest.25

Teachers are duly licensed professionals who must not only be competent in the practice of their noble
profession, but must also possess dignity and a reputation with high moral values. They must strictly
adhere to, observe, and practice the set of ethical and moral principles, standards, and values laid
down in the Code of Ethics of Professional Teachers, which apply to all teachers in schools in the
Philippines, whether public or private, as provided in the preamble of the said Code.26 Section 8 of
Article VIII of the same Code expressly provides that "a teacher shall not inflict corporal punishment
on offending learners."

Clearly then, petitioner cannot argue that in punching Bang-on, he was exercising his right as a teacher
in loco parentis to discipline his student. It is beyond cavil that the petitioner, as a public school teacher,
deliberately violated his Code of Ethics. Such violation is a flagrant disregard for the established rule
contained in the said Code tantamount to grave misconduct.

Under Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in the Civil Service,
the penalty for grave misconduct is dismissal from the service, which carries with it the cancellation of
eligibility, forfeiture of retirement benefits and perpetual disqualification from reemployment in the
government service.27 This penalty must, however, be tempered with compassion as there was
sut1icient provocation on the part of Bang-on. Considering further the mitigating circumstances that
the petitioner has been in the government service for 33 years, that this is his first offense and that he
is at the cusp of retirement, the Court finds the penalty of suspension for six months as appropriate
under the circumstances.

WHEREFORE, the Court PARTIALLY GRANTS the petition and MODIFIES the April 6, 2011 Decision
of the Court of Appeals in CA-G.R. SP No. 101700. Accordingly, Alberto Pat-og, Sr. is found GUlLTY
of Grave Misconduct, but the penalty is reduced from dismissal from the service to SUSPENSION for
SIX MONTHS.

SO ORDERED.

13. BOSTON EQUITY RESOURCES, INC. V. CA

G.R. No. 173946 June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner,

vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the
Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of
Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's petition for
certiorari upon a finding that the trial court committed grave abuse of discretion in denying respondent's
motion to dismiss the complaint against her.3 Based on this finding, the Court of Appeals reversed and
set aside the Orders, dated 8 November 20044 and 22 December 2004,5respectively, of the Regional
Trial Court (RTC) of Manila, Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance of
a writ of preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein respondent
filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit
Amended Answer7 in which she alleged, among others, that her husband and co-defendant, Manuel
Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as the date
of death. As a result, petitioner filed a motion, dated 5 August 1999, to require respondent to disclose
the heirs of Manuel.10 In compliance with the verbal order of the court during the 11 October 1999
hearing of the case, respondent submitted the required names and addresses of the heirs.11 Petitioner
then filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel be substituted by
his children as party-defendants. It appears that this motion was granted by the trial court in an Order
dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing,
among others, the dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its
exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of
the parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen days
within which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead filed a
motion to dismiss the complaint, citing the following as grounds: (1) that the complaint failed to implead
an indispensable party or a real party in interest; hence, the case must be dismissed for failure to state
a cause of action; (2) that the trial court did not acquire jurisdiction over the person of Manuel pursuant
to Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the
substitution of the deceased Manuel by his heirs; and (4) that the court must also dismiss the case
against Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed
out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the time for
but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be
made x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on
the ground that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by laches"
since respondent failed to raise the issue despite several chances to do so.18

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court
seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery,
during the trial of the case, of evidence that would constitute a ground for dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the
latter voluntarily appeared or submitted to the court or by coercive process issued by the court to him,
x x x. In this case, it is undisputed that when petitioner Boston filed the complaint on December 24,
1997, defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo
could not have acquired jurisdiction over the person of defendant Manuel S. Toledo.

x x x the court a quo’s denial of respondent’s motion to dismiss was based on its finding that
respondent’s attack on the jurisdiction of the court was already barred by laches as respondent failed
to raise the said ground in its [sic] amended answer and during the pre-trial, despite her active
participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding,
even for the first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss x
x x respondent is not estopped from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet decided
the case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the
motion for reconsideration;

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already
dead. The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only
the wife, considering that the estate of Manuel S. Toledo is an indispensable party, which stands to
be benefited or be injured in the outcome of the case. x x x

xxxx

Respondent’s motion to dismiss the complaint should have been granted by public respondent judge
as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with another
debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in conformity with
the provision of Section 6, Rule 86 of the Rules of Court, x x x.20

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial court’s jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the
dismissal of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner
file its claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s
motion to dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well
settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial
by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is
merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something
to be done by the court before a case is finally decided on the merits.21 Therefore, "the proper remedy
in such a case is to appeal after a decision has been rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only
to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of
jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons
from arbitrary acts – acts which courts or judges have no power or authority in law to perform. It is not
designed to correct erroneous findings and conclusions made by the courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS
AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the
outright dismissal of the motion for having been filed in clear contravention of the express mandate of
Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a motion to dismiss shall be
filed within the time for but before the filing of an answer to the complaint or pleading asserting a
claim.24

More importantly, respondent’s motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioner’s and the trial court’s
conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to delay
the prompt resolution of the case against her.

Also worth mentioning is the fact that respondent’s motion to dismiss under consideration herein is not
the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier motion to
dismiss26 on the sole ground of the unenforceability of petitioner’s claim under the Statute of Frauds,
which motion was denied by the trial court. More telling is the following narration of the trial court in its
Order denying respondent’s motion for reconsideration of the denial of her motion to dismiss:

As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of defendants’
evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendants, the hearing on
March 31, 2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum to
one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception of
defendants’ evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence was
cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants’ witness,
hearing was reset to September 24 and October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a
demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x.27
Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and then the
motion to dismiss at issue here, as well as several motions for postponement, lends credibility to the
position taken by petitioner, which is shared by the trial court, that respondent is

deliberately impeding the early disposition of this case. The filing of the second motion to dismiss was,
therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from deviating or straying off
course from established jurisprudence on the matter, x x x had in fact faithfully observed the law and
legal precedents in this case."29 The Court of Appeals, therefore, erred not only in entertaining
respondent’s petition for certiorari, it likewise erred in ruling that the trial court committed grave abuse
of discretion when it denied respondent’s motion to dismiss.

On whether or not respondent is estopped from

questioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction
over the person of Manuel should not be an issue in this case. A protracted discourse on jurisdiction
is, nevertheless, demanded by the fact that jurisdiction has been raised as an issue from the lower
court, to the Court of Appeals and, finally, before this Court. For the sake of clarity, and in order to
finally settle the controversy and fully dispose of all the issues in this case, it was deemed imperative
to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial court’s
jurisdiction was filed more than six years after her amended answer was filed. According to petitioner,
respondent had several opportunities, at various stages of the proceedings, to assail the trial court’s
jurisdiction but never did so for six straight years. Citing the doctrine laid down in the case of Tijam, et
al. v. Sibonghanoy, et al.30 petitioner claimed that respondent’s failure to raise the question of
jurisdiction at an earlier stage bars her from later questioning it, especially since she actively
participated in the proceedings conducted by the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has
several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3)
jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res or
the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches
is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue
involved was the authority of the then Court of First Instance to hear a case for the collection of a sum
of money in the amount of ₱1,908.00 which amount was, at that time, within the exclusive original
jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the
jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga v.
Court of Appeals,32 the issue for consideration was the authority of the regional trial court to hear and
decide an action for reformation of contract and damages involving a subdivision lot, it being argued
therein that jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant to PD 957
(The Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge, MTC,
Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction over the
complaint for ejectment because the issue of ownership was raised in the pleadings. Finally, in People
v. Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was charged,
falls within the concurrent jurisdiction of municipal courts or city courts and the then courts of first
instance, and that the judgment of the court of first instance, to which she had appealed the municipal
court's conviction, should be deemed null and void for want of jurisdiction as her appeal should have
been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts
concerned over the subject matter of the case based on estoppel by laches, declaring that parties
cannot be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to
which they submitted their cause voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s
jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no
application in this case. Instead, the principles relating to jurisdiction over the person of the parties are
pertinent herein.

The Rules of Court provide:

RULE 9
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings
or the evidence on record that the court has no jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim.

RULE 15
MOTIONS

Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking a
pleading, order, judgment, or proceeding shall include all objections then available, and all objections
not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even
if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x
Lack of jurisdiction over the subject matter can always be raised anytime, even for the first time on
appeal, since jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel
by laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those
defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked
when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense. 37 If the
objection is not raised either in a motion to dismiss or in the answer, the objection to the jurisdiction
over the person of the plaintiff or the defendant is deemed waived by virtue of the first sentence of the
above-quoted Section 1 of Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the
first time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss
and is, consequently, not estopped from raising the question of jurisdiction. As the question of
jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed waived
if not raised in the answer or a motion to dismiss. In any case, respondent cannot claim the defense
since "lack of jurisdiction over the person, being subject to waiver, is a personal defense which can
only be asserted by the party who can thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial
court did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by which
the defendant is notified of the action brought against him. Service of such writ is the means by which
the court acquires jurisdiction over his person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was
no valid service of summons upon him, precisely because he was already dead even before the
complaint against him and his wife was filed in the trial court. The issues presented in this case are
similar to those in the case of Sarsaba v. Vda. de Te.41

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from
employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the
possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno
and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle
and damages, with prayer for the delivery of the truck pendente lite was eventually filed against
Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion
to dismiss was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he
filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the
principal defendants, in view of the fact that Sereno was already dead when the complaint for recovery
of possession was filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the
issues submitted for resolution in both cases is similar: whether or not a case, where one of the named
defendants was already dead at the time of its filing, should be dismissed so that the claim may be
pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The
petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants
died before summons was served on him, the trial court should have dismissed the complaint against
all the defendants and the claim should be filed against the estate of the deceased defendant. The
petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but
as to all the defendants, considering that the RTC did not acquire jurisdiction over the person of
Sereno.42 This is exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person of
Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to
the person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his
death. Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of
having the case dismissed against all of the defendants. Failure to serve summons on Sereno’s person
will not be a cause for the dismissal of the complaint against the other defendants, considering that
they have been served with copies of the summons and complaints and have long submitted their
respective responsive pleadings. In fact, the other defendants in the complaint were given the chance
to raise all possible defenses and objections personal to them in their respective motions to dismiss
and their subsequent answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno
only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to
dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:

SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case
that a final adjudication cannot be made in his or her absence, without injuring or affecting that interest.
He or she is a party who has not only an interest in the subject matter of the controversy, but "an
interest of such nature that a final decree cannot be made without affecting that interest or leaving the
controversy in such a condition that its final determination may be wholly inconsistent with equity and
good conscience. It has also been considered that an indispensable party is a person in whose
absence there cannot be a determination between the parties already before the court which is
effective, complete or equitable." Further, an indispensable party is one who must be included in an
action before it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief between him or her and those
already parties to the action, or if he or she has no interest in the subject matter of the action." It is not
a sufficient reason to declare a person to be an indispensable party simply because his or her presence
will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not
an indispensable party to the collection case, for the simple reason that the obligation of Manuel and
his wife, respondent herein, is solidary.

The contract between petitioner, on the one hand and respondent and respondent’s husband, on the
other, states:

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY
RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (₱1,400,000.00)] x
x x.47

The provisions and stipulations of the contract were then followed by the respective signatures of
respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216 of the
Civil Code, petitioner may collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any one of the solidary debtors
or some or all of them simultaneously. The demand made against one of them shall not be an obstacle
to those which may subsequently be directed against the others, so long as the debt has not been
fully collected."

In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel
is not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of
Rule 86 of the Rules of Court. The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for
money against the decedent, arising from contract, express or implied, whether the same be due, not
due, or contingent, all claims for funeral expenses and judgment for money against the decedent, must
be filed within the time limited in the notice; otherwise, they are barred forever, except that they may
be set forth as counterclaims in any action that the executor or administrator may bring against the
claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another
debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to
the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the
Revised Rules of Court, which latter provision has been retained in the present Rules of Court without
any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et.
al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken,
this Court held that where two persons are bound in solidum for the same debt and one of them dies,
the whole indebtedness can be proved against the estate of the latter, the decedent’s liability being
absolute and primary; x x x. It is evident from the foregoing that Section 6 of Rule 87 provides the
procedure should the creditor desire to go against the deceased debtor, but there is certainly nothing
in the said provision making compliance with such procedure a condition precedent before an ordinary
action against the surviving solidary debtors, should the creditor choose to demand payment from the
latter, could be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the
Civil Code expressly allows the creditor to proceed against any one of the solidary debtors or some or
all of them simultaneously. There is, therefore, nothing improper in the creditor’s filing of an action
against the surviving solidary debtors alone, instead of instituting a proceeding for the settlement of
the estate of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v.
Asuncion51where the Supreme Court pronounced:

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets
up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the
estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary
obligation) has the option whether to file or not to file a claim against the estate of the solidary debtor.
xxx

xxxx

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said
provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all
of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against
whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor)
may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim
in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against
the surviving debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to
require the creditor to proceed against the estate, making it a condition precedent for any collection
action against the surviving debtors to prosper, would deprive him of his substantive rightsprovided by
Article 1216 of the New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of
Court, petitioner has no choice but to proceed against the estate of [the deceased debtor] only.
Obviously, this provision diminishes the [creditor’s] right under the New Civil Code to proceed against
any one, some or all of the solidary debtors. Such a construction is not sanctioned by principle, which
is too well settled to require citation, that a substantive law cannot be amended by a procedural rule.
Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over
Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed
as against respondent only. That petitioner opted to collect from respondent and not from the estate
of Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as
against her, should be dismissed so that petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel as

party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the
capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in a
separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered
a misjoinder, as in fact, the action would have proceeded against him had he been alive at the time
the collection case was filed by petitioner. This being the case, the remedy provided by Section 11 of
Rule 3 does not obtain here. The name of Manuel as party-defendant cannot simply be dropped from
the case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te,52whose facts, as
mentioned earlier, resemble those of this case, should be followed herein. There, the Supreme Court
agreed with the trial court when it resolved the issue of jurisdiction over the person of the deceased
Sereno in this wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person
of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is
concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its
annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein,
does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were
validly served with summons and the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to
Dismiss the Complaint which was denied by the Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a
claim against the estate of Patricio Sereno, but the case with respect to the three (3) other accused
[sic] will proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the
Rules of Court, which states that: only natural or juridical persons, or entities authorized by law may
be parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice,
the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and
possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully
prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes
a judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding
in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or
judgment until a party defendant who actually or legally exists and is legally capable of being sued, is
brought before it. It has even been held that the question of the legal personality of a party defendant
is a question of substance going to the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving
spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground
1âw phi1

that the defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent,
a decedent does not have the capacity to be sued and may not be named a party defendant in a court
action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law,
the complaint may be dismissed on the ground that the pleading asserting the claim states no cause
of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of
Court, because a complaint cannot possibly state a cause of action against one who cannot be a party
to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the
dismissal of the case as against him, thus did the trial court err when it ordered the substitution of
Manuel by his heirs. Substitution is proper only where the party to be substituted died during the
pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which
states:

Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal representative or
representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired
jurisdiction over his person and, in effect, there was no party to be substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution
dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET
ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22 December 2004,
respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24,
Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672 against respondent
Lolita G. Toledo only, in accordance with the above pronouncements of the Court, and to decide the
case with dispatch.

SO ORDERED.

14. PEOPLE V. HENRY T. GO

G.R. No. 168539 March 25, 2014

PEOPLE OF THE PHILIPPINES, Petitioner,

vs.
HENRY T. GO, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari assailing the Resolution 1 of the Third Division2 of
the Sandiganbayan (SB) dated June 2, 2005 which quashed the Information filed against herein
respondent for alleged violation of Section 3 (g) of Republic Act No. 3019 (R.A. 3019), otherwise
known as the Anti-Graft and Corrupt Practices Act.

The Information filed against respondent is an offshoot of this Court's Decision 3 in Agan, Jr. v.
Philippine International Air Terminals Co., Inc. which nullified the various contracts awarded by the
Government, through the Department of Transportation and Communications (DOTC), to Philippine
Air Terminals, Co., Inc. (PIATCO) for the construction, operation and maintenance of the Ninoy Aquino
International Airport International Passenger Terminal III (NAIA IPT III). Subsequent to the above
Decision, a certain Ma. Cecilia L. Pesayco filed a complaint with the Office of the Ombudsman against
several individuals for alleged violation of R.A. 3019. Among those charged was herein respondent,
who was then the Chairman and President of PIATCO, for having supposedly conspired with then
DOTC Secretary Arturo Enrile (Secretary Enrile) in entering into a contract which is grossly and
manifestly disadvantageous to the government.
On September 16, 2004, the Office of the Deputy Ombudsman for Luzon found probable cause to
indict, among others, herein respondent for violation of Section 3(g) of R.A. 3019. While there was
likewise a finding of probable cause against Secretary Enrile, he was no longer indicted because he
died prior to the issuance of the resolution finding probable cause.

Thus, in an Information dated January 13, 2005, respondent was charged before the SB as follows:

On or about July 12, 1997, or sometime prior or subsequent thereto, in Pasay City, Metro Manila,
Philippines and within the jurisdiction of this Honorable Court, the late ARTURO ENRILE, then
Secretary of the Department of Transportation and Communications (DOTC), committing the offense
in relation to his office and taking advantage of the same, in conspiracy with accused, HENRY T. GO,
Chairman and President of the Philippine International Air Terminals, Co., Inc. (PIATCO), did then and
there, willfully, unlawfully and criminally enter into a Concession Agreement, after the project for the
construction of the Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT
III) was awarded to Paircargo Consortium/PIATCO, which Concession Agreement substantially
amended the draft Concession Agreement covering the construction of the NAIA IPT III under Republic
Act 6957, as amended by Republic Act 7718 (BOT law), specifically the provision on Public Utility
Revenues, as well as the assumption by the government of the liabilities of PIATCO in the event of
the latter's default under Article IV, Section 4.04 (b) and (c) in relation to Article 1.06 of the Concession
Agreement, which terms are more beneficial to PIATCO while manifestly and grossly disadvantageous
to the government of the Republic of the Philippines.4

The case was docketed as Criminal Case No. 28090.

On March 10, 2005, the SB issued an Order, to wit:

The prosecution is given a period of ten (10) days from today within which to show cause why this
case should not be dismissed for lack of jurisdiction over the person of the accused considering that
the accused is a private person and the public official Arturo Enrile, his alleged co-conspirator, is
already deceased, and not an accused in this case.5

The prosecution complied with the above Order contending that the SB has already acquired
jurisdiction over the person of respondent by reason of his voluntary appearance, when he filed a
motion for consolidation and when he posted bail. The prosecution also argued that the SB has
exclusive jurisdiction over respondent's case, even if he is a private person, because he was alleged
to have conspired with a public officer.6

On April 28, 2005, respondent filed a Motion to Quash7 the Information filed against him on the ground
that the operative facts adduced therein do not constitute an offense under Section 3(g) of R.A. 3019.
Respondent, citing the show cause order of the SB, also contended that, independently of the
deceased Secretary Enrile, the public officer with whom he was alleged to have conspired, respondent,
who is not a public officer nor was capacitated by any official authority as a government agent, may
not be prosecuted for violation of Section 3(g) of R.A. 3019.

The prosecution filed its Opposition.8

On June 2, 2005, the SB issued its assailed Resolution, pertinent portions of which read thus:

Acting on the Motion to Quash filed by accused Henry T. Go dated April 22, 2005, and it appearing
that Henry T. Go, the lone accused in this case is a private person and his alleged co-conspirator-
public official was already deceased long before this case was filed in court, for lack of jurisdiction over
the person of the accused, the Court grants the Motion to Quash and the Information filed in this case
is hereby ordered quashed and dismissed.9

Hence, the instant petition raising the following issues, to wit:

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE IN
GRANTING THE DEMURRER TO EVIDENCE AND IN DISMISSING CRIMINAL CASE NO. 28090
ON THE GROUND THAT IT HAS NO JURISDICTION OVER THE PERSON OF RESPONDENT GO.

II

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR APPLICABLE JURISPRUDENCE, IN
RULING THAT IT HAS NO JURISDICTION OVER THE PERSON OF RESPONDENT GO DESPITE
THE IRREFUTABLE FACT THAT HE HAS ALREADY POSTED BAIL FOR HIS PROVISIONAL
LIBERTY

III

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED WHEN, IN COMPLETE DISREGARD
OF THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION, IT QUASHED THE
INFORMATION AND DISMISSED CRIMINAL CASE NO. 2809010

The Court finds the petition meritorious.

Section 3 (g) of R.A. 3019 provides:

Sec. 3. Corrupt practices of public officers. – In addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:

xxxx

(g) Entering, on behalf of the Government, into any contract or transaction manifestly and grossly
disadvantageous to the same, whether or not the public officer profited or will profit thereby.

The elements of the above provision are:

 (1) that the accused is a public officer;

(2) that he entered into a contract or transaction on behalf of the government; and

(3) that such contract or transaction is grossly and manifestly disadvantageous to the
government.11

At the outset, it bears to reiterate the settled rule that private persons, when acting in conspiracy with
public officers, may be indicted and, if found guilty, held liable for the pertinent offenses under Section
3 of R.A. 3019, in consonance with the avowed policy of the anti-graft law to repress certain acts of
public officers and private persons alike constituting graft or corrupt practices act or which may lead
thereto.12 This is the controlling doctrine as enunciated by this Court in previous cases, among which
is a case involving herein private respondent.13

The only question that needs to be settled in the present petition is whether herein respondent, a
private person, may be indicted for conspiracy in violating Section 3(g) of R.A. 3019 even if the public
officer, with whom he was alleged to have conspired, has died prior to the filing of the Information.

Respondent contends that by reason of the death of Secretary Enrile, there is no public officer who
was charged in the Information and, as such, prosecution against respondent may not prosper.

The Court is not persuaded.

It is true that by reason of Secretary Enrile's death, there is no longer any public officer with whom
respondent can be charged for violation of R.A. 3019. It does not mean, however, that the allegation
of conspiracy between them can no longer be proved or that their alleged conspiracy is already
expunged. The only thing extinguished by the death of Secretary Enrile is his criminal liability. His
death did not extinguish the crime nor did it remove the basis of the charge of conspiracy between him
and private respondent. Stated differently, the death of Secretary Enrile does not mean that there was
no public officer who allegedly violated Section 3 (g) of R.A. 3019. In fact, the Office of the Deputy
Ombudsman for Luzon found probable cause to indict Secretary Enrile for infringement of Sections 3
(e) and (g) of R.A. 3019.14 Were it not for his death, he should have been charged.

The requirement before a private person may be indicted for violation of Section 3(g) of R.A. 3019,
among others, is that such private person must be alleged to have acted in conspiracy with a public
officer. The law, however, does not require that such person must, in all instances, be indicted together
with the public officer. If circumstances exist where the public officer may no longer be charged in
court, as in the present case where the public officer has already died, the private person may be
indicted alone.

Indeed, it is not necessary to join all alleged co-conspirators in an indictment for conspiracy.15 If two or
more persons enter into a conspiracy, any act done by any of them pursuant to the agreement is, in
contemplation of law, the act of each of them and they are jointly responsible therefor.16 This means
that everything said, written or done by any of the conspirators in execution or furtherance of the
common purpose is deemed to have been said, done, or written by each of them and it makes no
difference whether the actual actor is alive or dead, sane or insane at the time of trial.17 The death of
one of two or more conspirators does not prevent the conviction of the survivor or survivors.18 Thus,
this Court held that:

x x x [a] conspiracy is in its nature a joint offense. One person cannot conspire alone. The crime
depends upon the joint act or intent of two or more persons. Yet, it does not follow that one person
cannot be convicted of conspiracy. So long as the acquittal or death of a co-conspirator does not
remove the bases of a charge for conspiracy, one defendant may be found guilty of the offense.19

The Court agrees with petitioner's contention that, as alleged in the Information filed against
respondent, which is deemed hypothetically admitted in the latter's Motion to Quash, he (respondent)
conspired with Secretary Enrile in violating Section 3 (g) of R.A. 3019 and that in conspiracy, the act
of one is the act of all. Hence, the criminal liability incurred by a co-conspirator is also incurred by the
other co-conspirators.

Moreover, the Court agrees with petitioner that the avowed policy of the State and the legislative intent
to repress "acts of public officers and private persons alike, which constitute graft or corrupt
practices,"20 would be frustrated if the death of a public officer would bar the prosecution of a private
person who conspired with such public officer in violating the Anti-Graft Law.

In this regard, this Court's disquisition in the early case of People v. Peralta21 as to the nature of and
the principles governing conspiracy, as construed under Philippine jurisdiction, is instructive, to wit:

x x x A conspiracy exists when two or more persons come to an agreement concerning the commission
of a felony and decide to commit it. Generally, conspiracy is not a crime except when the law
specifically provides a penalty therefor as in treason, rebellion and sedition. The crime of conspiracy
known to the common law is not an indictable offense in the Philippines. An agreement to commit a
crime is a reprehensible act from the view-point of morality, but as long as the conspirators do not
perform overt acts in furtherance of their malevolent design, the sovereignty of the State is not
outraged and the tranquility of the public remains undisturbed.

However, when in resolute execution of a common scheme, a felony is committed by two or more
malefactors, the existence of a conspiracy assumes pivotal importance in the determination of the
liability of the perpetrators. In stressing the significance of conspiracy in criminal law, this Court in U.S.
vs. Infante and Barreto opined that

While it is true that the penalties cannot be imposed for the mere act of conspiring to commit a crime
unless the statute specifically prescribes a penalty therefor, nevertheless the existence of a conspiracy
to commit a crime is in many cases a fact of vital importance, when considered together with the other
evidence of record, in establishing the existence, of the consummated crime and its commission by
the conspirators.

Once an express or implied conspiracy is proved, all of the conspirators are liable as co-principals
regardless of the extent and character of their respective active participation in the commission of the
crime or crimes perpetrated in furtherance of the conspiracy because in contemplation of law the act
of one is the act of all. The foregoing rule is anchored on the sound principle that "when two or more
persons unite to accomplish a criminal object, whether through the physical volition of one, or all,
proceeding severally or collectively, each individual whose evil will actively contributes to the wrong-
doing is in law responsible for the whole, the same as though performed by himself alone." Although
it is axiomatic that no one is liable for acts other than his own, "when two or more persons agree or
conspire to commit a crime, each is responsible for all the acts of the others, done in furtherance of
the agreement or conspiracy." The imposition of collective liability upon the conspirators is clearly
explained in one case where this Court held that x x x it is impossible to graduate the separate liability
of each (conspirator) without taking into consideration the close and inseparable relation of each of
them with the criminal act, for the commission of which they all acted by common agreement x x x.
The crime must therefore in view of the solidarity of the act and intent which existed between the x x
x accused, be regarded as the act of the band or party created by them, and they are all equally
responsible x x x

Verily, the moment it is established that the malefactors conspired and confederated in the commission
of the felony proved, collective liability of the accused conspirators attaches by reason of the
conspiracy, and the court shall not speculate nor even investigate as to the actual degree of
participation of each of the perpetrators present at the scene of the crime. Of course, as to any
conspirator who was remote from the situs of aggression, he could be drawn within the enveloping
ambit of the conspiracy if it be proved that through his moral ascendancy over the rest of the
conspirators the latter were moved or impelled to carry out the conspiracy.

In fine, the convergence of the wills of the conspirators in the scheming and execution of the crime
amply justifies the imputation to all of them the act of any one of them. It is in this light that conspiracy
is generally viewed not as a separate indictable offense, but a rule for collectivizing criminal liability.

xxxx

x x x A time-honored rule in the corpus of our jurisprudence is that once conspiracy is proved, all of
the conspirators who acted in furtherance of the common design are liable as co-principals. This rule
of collective criminal liability emanates from the ensnaring nature of conspiracy. The concerted action
of the conspirators in consummating their common purpose is a patent display of their evil partnership,
and for the consequences of such criminal enterprise they must be held solidarily liable.22

This is not to say, however, that private respondent should be found guilty of conspiring with Secretary
Enrile. It is settled that the absence or presence of conspiracy is factual in nature and involves
evidentiary matters.23 Hence, the allegation of conspiracy against respondent is better left ventilated
before the trial court during trial, where respondent can adduce evidence to prove or disprove its
presence.

Respondent claims in his Manifestation and Motion24 as well as in his Urgent Motion to Resolve25 that
in a different case, he was likewise indicted before the SB for conspiracy with the late Secretary Enrile
in violating the same Section 3 (g) of R.A. 3019 by allegedly entering into another agreement (Side
Agreement) which is separate from the Concession Agreement subject of the present case. The case
was docketed as Criminal Case No. 28091. Here, the SB, through a Resolution, granted respondent's
motion to quash the Information on the ground that the SB has no jurisdiction over the person of
respondent. The prosecution questioned the said SB Resolution before this Court via a petition for
review on certiorari. The petition was docketed as G.R. No. 168919. In a minute resolution dated
August 31, 2005, this Court denied the petition finding no reversible error on the part of the SB. This
Resolution became final and executory on January 11, 2006. Respondent now argues that this Court's
resolution in G.R. No. 168919 should be applied in the instant case.

The Court does not agree. Respondent should be reminded that prior to this Court's ruling in G.R. No.
168919, he already posted bail for his provisional liberty. In fact, he even filed a Motion for
Consolidation26 in Criminal Case No. 28091. The Court agrees with petitioner's contention that private
respondent's act of posting bail and filing his Motion for Consolidation vests the SB with jurisdiction
over his person. The rule is well settled that the act of an accused in posting bail or in filing motions
seeking affirmative relief is tantamount to submission of his person to the jurisdiction of the court.27

Thus, it has been held that:

When a defendant in a criminal case is brought before a competent court by virtue of a warrant of
arrest or otherwise, in order to avoid the submission of his body to the jurisdiction of the court he must
raise the question of the court’s jurisdiction over his person at the very earliest opportunity. If he gives
bail, demurs to the complaint or files any dilatory plea or pleads to the merits, he thereby gives the
court jurisdiction over his person. (State ex rel. John Brown vs. Fitzgerald, 51 Minn., 534)

xxxx

As ruled in La Naval Drug vs. CA [236 SCRA 78, 86]:

"[L]ack of jurisdiction over the person of the defendant may be waived either expressly or impliedly.
When a defendant voluntarily appears, he is deemed to have submitted himself to the jurisdiction of
the court. If he so wishes not to waive this defense, he must do so seasonably by motion for the
purpose of objecting to the jurisdiction of the court; otherwise, he shall be deemed to have submitted
himself to that jurisdiction."

Moreover, "[w]here the appearance is by motion for the purpose of objecting to the jurisdiction of the
court over the person, it must be for the sole and separate purpose of objecting to said jurisdiction. If
the appearance is for any other purpose, the defendant is deemed to have submitted himself to the
jurisdiction of the court. Such an appearance gives the court jurisdiction over the person."

Verily, petitioner’s participation in the proceedings before the Sandiganbayan was not confined to his
opposition to the issuance of a warrant of arrest but also covered other matters which called for
respondent court’s exercise of its jurisdiction. Petitioner may not be heard now to deny said court’s
jurisdiction over him. x x x.28

In the instant case, respondent did not make any special appearance to question the jurisdiction of the
SB over his person prior to his posting of bail and filing his Motion for Consolidation. In fact, his Motion
to Quash the Information in Criminal Case No. 28090 only came after the SB issued an Order requiring
the prosecution to show cause why the case should not be dismissed for lack of jurisdiction over his
person.
As a recapitulation, it would not be amiss to point out that the instant case involves a contract entered
into by public officers representing the government. More importantly, the SB is a special criminal court
which has exclusive original jurisdiction in all cases involving violations of R.A. 3019 committed by
certain public officers, as enumerated in P.D. 1606 as amended by R.A. 8249. This includes private
individuals who are charged as co-principals, accomplices or accessories with the said public officers.
In the instant case, respondent is being charged for violation of Section 3(g) of R.A. 3019, in conspiracy
with then Secretary Enrile. Ideally, under the law, both respondent and Secretary Enrile should have
been charged before and tried jointly by the Sandiganbayan. However, by reason of the death of the
latter, this can no longer be done. Nonetheless, for reasons already discussed, it does not follow that
the SB is already divested of its jurisdiction over the person of and the case involving herein
respondent. To rule otherwise would mean that the power of a court to decide a case would no longer
be based on the law defining its jurisdiction but on other factors, such as the death of one of the alleged
offenders.

Lastly, the issues raised in the present petition involve matters which are mere incidents in the main
case and the main case has already been pending for over nine (9) years. Thus, a referral of the case
to the Regional Trial Court would further delay the resolution of the main case and it would, by no
means, promote respondent's right to a speedy trial and a speedy disposition of his case.

WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated June 2, 2005,
granting respondent's Motion to Quash, is hereby REVERSED and SET ASIDE. The Sandiganbayan
is forthwith DIRECTED to proceed with deliberate dispatch in the disposition of Criminal Case No.
28090.

SO ORDERED.

15. CITY OF MANILA V. JUDGE CUERDO

EN BANC

G.R. No. 175723 February 4, 2014

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS. LIBERTY M.
TOLEDO, in her capacity as the City Treasurer of Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding Judge of the Regional Trial
Court, Branch 112, Pasay City; SM MART, INC.; SM PRIME HOLDINGS, INC.; STAR
APPLIANCES CENTER; SUPERVALUE, INC.; ACE HARDWARE PHILIPPINES, INC.; WATSON
PERSONAL CARE STORES, PHILS., INC.; JOLLIMART PHILS., CORP.; SURPLUS MARKETING
CORPORATION and SIGNATURE LINES, Respondents.

DECISION

PERALTA, J.:
Before the Court is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to
reverse and set aside the Resolutions1 dated April 6, 2006 and November 29, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 87948.

The antecedents of the case, as summarized by the CA, are as follows:

The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty Toledo,
assessed taxes for the taxable period from January to December 2002 against private respondents
SM Mart, Inc., SM Prime Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace Hardware
Philippines, Inc., Watsons Personal Care Stores Phils., Inc., Jollimart Philippines Corp., Surplus
Marketing Corp. and Signature Lines. In addition to the taxes purportedly due from private respondents
pursuant to Section 14, 15, 16, 17 of the Revised Revenue Code of Manila (RRCM), said assessment
covered the local business taxes petitioners were authorized to collect under Section 21 of the same
Code. Because payment of the taxes assessed was a precondition for the issuance of their business
permits, private respondents were constrained to pay the ₱19,316,458.77 assessment under protest.

On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay City] the
complaint denominated as one for "Refund or Recovery of Illegally and/or Erroneously-Collected Local
Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction"

which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at Branch 112].
In the amended complaint they filed on February 16, 2004, private respondents alleged that, in relation
to Section 21 thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the RRCM were violative of the
limitations and guidelines under Section 143 (h) of Republic Act. No. 7160 [Local Government Code]
on double taxation. They further averred that petitioner city's Ordinance No. 8011 which amended
pertinent portions of the RRCM had already been declared to be illegal and unconstitutional by the
Department of Justice.2

In its Order3 dated July 9, 2004, the RTC granted private respondents' application for a writ of
preliminary injunction.

Petitioners filed a Motion for Reconsideration4 but the RTC denied it in its Order5 dated October 15,
2004.

Petitioners then filed a special civil action for certiorari with the CA assailing the July 9, 2004 and
October 15, 2004 Orders of the RTC.6

In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for certiorari
holding that it has no jurisdiction over the said petition. The CA ruled that since appellate jurisdiction
over private respondents' complaint for tax refund, which was filed with the RTC, is vested in the Court
of Tax Appeals (CTA), pursuant to its expanded jurisdiction under Republic Act No. 9282 (RA 9282),
it follows that a petition for certiorari seeking nullification of an interlocutory order issued in the said
case should, likewise, be filed with the CTA.

Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution dated November
29, 2006.
Hence, the present petition raising the following issues:

I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the case for lack
of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting
to lack or excess of jurisdiction in enjoining by issuing a Writ of Injunction the petitioners, their
agents and/or authorized representatives from implementing Section 21 of the Revised
Revenue Code of Manila, as amended, against private respondents.

III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in issuing the Writ of Injunction despite failure of
private respondents to make a written claim for tax credit or refund with the City Treasurer of
Manila.

IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction considering that under Section 21 of the Manila
Revenue Code, as amended, they are mere collecting agents of the City Government.

V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting
to lack or excess of jurisdiction in issuing the Writ of Injunction because petitioner City of Manila
and its constituents would result to greater damage and prejudice thereof. (sic)8

Without first resolving the above issues, this Court finds that the instant petition should be denied for
being moot and academic.

Upon perusal of the original records of the instant case, this Court discovered that a Decision 9 in the
main case had already been rendered by the RTC on August 13, 2007, the dispositive portion of which
reads as follows:

WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor of the plaintiff
and against the defendant to grant a tax refund or credit for taxes paid pursuant to Section 21 of the
Revenue Code of the City of Manila as amended for the year 2002 in the following amounts:

To plaintiff SM Mart, Inc. - P 11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

 To plaintiff Watsons Personal Care Health - 231,453.62

Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

TOTAL: - P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code of Manila from
herein plaintiff.

SO ORDERED.10

The parties did not inform the Court but based on the records, the above Decision had already become
final and executory per the Certificate of Finality11 issued by the same trial court on October 20, 2008.
In fact, a Writ of Execution12 was issued by the RTC on November 25, 2009. In view of the foregoing,
it clearly appears that the issues raised in the present petition, which merely involve the incident on
the preliminary injunction issued by the RTC, have already become moot and academic considering
that the trial court, in its decision on the merits in the main case, has already ruled in favor of
respondents and that the same decision is now final and executory. Well entrenched is the rule that
where the issues have become moot and academic, there is no justiciable controversy, thereby
rendering the resolution of the same of no practical use or value.13

In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by petitioners owing
to its significance and for future guidance of both bench and bar. It is a settled principle that courts will
decide a question otherwise moot and academic if it is capable of repetition, yet evading review.14

However, before proceeding, to resolve the question on jurisdiction, the Court deems it proper to
likewise address a procedural error which petitioners committed.

Petitioners availed of the wrong remedy when they filed the instant special civil action for certiorari
under Rule 65 of the Rules of Court in assailing the Resolutions of the CA which dismissed their
petition filed with the said court and their motion for reconsideration of such dismissal. There is no
dispute that the assailed Resolutions of the CA are in the nature of a final order as they disposed of
the petition completely. It is settled that in cases where an assailed judgment or order is considered
final, the remedy of the aggrieved party is appeal. Hence, in the instant case, petitioner should have
filed a petition for review on certiorari under Rule 45, which is a continuation of the appellate process
over the original case.15
Petitioners should be reminded of the equally-settled rule that a special civil action for certiorari under
Rule 65 is an original or independent action based on grave abuse of discretion amounting to lack or
excess of jurisdiction and it will lie only if there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law.16 As such, it cannot be a substitute for a lost appeal.17

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in the interest of
substantial justice, this Court has, before, treated a petition for certiorari as a petition for review on
certiorari, particularly (1) if the petition for certiorari was filed within the reglementary period within
which to file a petition for review on certiorari; (2) when errors of judgment are averred; and (3) when
there is sufficient reason to justify the relaxation of the rules.18 Considering that the present petition
was filed within the 15-day reglementary period for filing a petition for review on certiorari under Rule
45, that an error of judgment is averred, and because of the significance of the issue on jurisdiction,
the Court deems it proper and justified to relax the rules and, thus, treat the instant petition for certiorari
as a petition for review on certiorari.

Having disposed of the procedural aspect, we now turn to the central issue in this case. The basic
question posed before this Court is whether or not the CTA has jurisdiction over a special civil action
for certiorari assailing an interlocutory order issued by the RTC in a local tax case.

This Court rules in the affirmative.

On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the CTA and giving
to the said court jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto,
or other matters arising under the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges; seizure, detention or release of property affected fines,
forfeitures or other penalties imposed in relation thereto; or other matters arising under the
Customs Law or other law or part of law administered by the Bureau of Customs; and

(3) Decisions of provincial or City Boards of Assessment Appeals in cases involving the
assessment and taxation of real property or other matters arising under the Assessment Law,
including rules and regulations relative thereto.

On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282) amending RA
1125 by expanding the jurisdiction of the CTA, enlarging its membership and elevating its rank to the
level of a collegiate court with special jurisdiction. Pertinent portions of the amendatory act provides
thus:

Sec. 7. Jurisdiction. - The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific
period of action, in which case the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges, seizure, detention or release of property affected, fines,
forfeitures or other penalties in relation thereto, or other matters arising under the Customs
Law or other laws administered by the Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs which are adverse to the Government
under Section 2315 of the Tariff and Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product,
commodity or article, involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act
No. 8800, where either party may appeal the decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs Code and other laws administered by the
Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses or
felonies mentioned in this paragraph where the principal amount of taxes and fees, exclusive
of charges and penalties, claimed is less than One million pesos (₱1,000,000.00) or where
there is no specified amount claimed shall be tried by the regular Courts and the jurisdiction of
the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil action for the recovery of civil
liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CTA, the filing of the criminal action being deemed
 to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such
civil action separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provides, however, that collection cases
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
less than One million pesos (₱1,000,000.00) shall be tried by the proper Municipal Trial Court,
Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the
Exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.19

A perusal of the above provisions would show that, while it is clearly stated that the CTA has exclusive
appellate jurisdiction over decisions, orders or resolutions of the RTCs in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction, there is no
categorical statement under RA 1125 as well as the amendatory RA 9282, which provides that th e
CTA has jurisdiction over petitions for certiorari assailing interlocutory orders issued by the RTC in
local tax cases filed before it.

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied
from the mere existence of appellate jurisdiction.20 Thus, in the cases of Pimentel v.
COMELEC,21 Garcia v. De Jesus,22 Veloria v. COMELEC,23Department of Agrarian Reform
Adjudication Board v. Lubrica,24 and Garcia v. Sandiganbayan,25 this Court has ruled against the
jurisdiction of courts or tribunals over petitions for certiorari on the ground that there is no law which
expressly gives these tribunals such power.26 It must be observed, however, that with the exception of
Garcia v. Sandiganbayan,27 these rulings pertain not to regular courts but to tribunals exercising quasi-
judicial powers. With respect to the Sandiganbayan, Republic Act No. 824928 now provides that the
special criminal court has exclusive original jurisdiction over petitions for the issuance of the writs of
mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes
in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme
Court, in the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus.
With respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the
appellate court, also in the exercise of its original jurisdiction, the power to issue, among others, a writ
of certiorari,whether or not in aid of its appellate jurisdiction. As to Regional Trial Courts, the power to
issue a writ of certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of BP
129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be
vested in one Supreme Court and in such lower courts as may be established by law and that judicial
power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling
within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have
the authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also
such power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There
is no perceivable reason why the transfer should only be considered as partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason &
Co., Inc. v. Jaramillo, et al.29 that "if a case may be appealed to a particular court or judicial tribunal or
body, then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction."30 This principle was affirmed in De Jesus v. Court of
Appeals,31 where the Court stated that "a court may issue a writ of certiorari in aid of its appellate
jurisdiction if said court has jurisdiction to review, by appeal or writ of error, the final orders or decisions
of the lower court."32 The rulings in J.M. Tuason and De Jesus were reiterated in the more recent cases
of Galang, Jr. v. Geronimo33 and Bulilis v. Nuez.34

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction
is conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with
the CA, this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of
jurisdiction over basically the same subject matter – precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice.35 The Court cannot accept that such was the
legislative motive, especially considering that the law expressly confers on the CTA, the tribunal with
the specialized competence over tax and tariff matters, the role of judicial review over local tax cases
without mention of any other court that may exercise such power. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private respondents' complaint for tax refund is
vested in the CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To rule otherwise would lead to
an absurd situation where one court decides an appeal in the main case while another court rules on
an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed
with the RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against
interlocutory orders of the RTC but giving to the CTA the jurisdiction over the appeal from the decision
of the trial court in the same case. It is more in consonance with logic and legal soundness to conclude
that the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by the RTC carries
with it the power to issue a writ of certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction
should co-exist with, and be a complement to, its appellate jurisdiction to review, by appeal, the final
orders and decisions of the RTC, in order to have complete supervision over the acts of the latter.36

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it
effectively, to make all orders that will preserve the subject of the action, and to give effect to the final
determination of the appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate jurisdiction, has authority
to control all auxiliary and incidental matters necessary to the efficient and proper exercise of that
jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the performance of any act
1âw phi 1

which might interfere with the proper exercise of its rightful jurisdiction in cases pending before it.37

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction
should have powers which are necessary to enable it to act effectively within such jurisdiction. These
should be regarded as powers which are inherent in its jurisdiction and the court must possess them
in order to enforce its rules of practice and to suppress any abuses of its process and to defeat any
attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall
possess all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant
of jurisdiction, in addition to those expressly conferred on them. These inherent powers are such
powers as are necessary for the ordinary and efficient exercise of jurisdiction; or are essential to the
existence, dignity and functions of the courts, as well as to the due administration of justice; or are
directly appropriate, convenient and suitable to the execution of their granted powers; and include the
power to maintain the court's jurisdiction and render it effective in behalf of the litigants.38
Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary
to effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the
necessary and usual incidental powers essential to effectuate it, and, subject to existing laws and
constitutional provisions, every regularly constituted court has power to do all things that are
reasonably necessary for the administration of justice within the scope of its jurisdiction and for the
enforcement of its judgments and mandates."39 Hence, demands, matters or questions ancillary or
incidental to, or growing out of, the main action, and coming within the above principles, may be taken
cognizance of by the court and determined, since such jurisdiction is in aid of its authority over the
principal matter, even though the court may thus be called on to consider and decide matters which,
as original causes of action, would not be within its cognizance.40

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to
take cognizance of petitions for certiorari questioning interlocutory orders issued by the RTC in a local
tax case is included in the powers granted by the Constitution as well as inherent in the exercise of its
appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as quasi-judicial
tribunals are concerned, the authority to issue writs of certiorari must still be expressly conferred by
the Constitution or by law and cannot be implied from the mere existence of their appellate jurisdiction.
This doctrine remains as it applies only to quasi-judicial bodies.

WHEREFORE, the petition is DENIED.

SO ORDERED.

16. ST. MARY CRUSADE FOUNDATION, INC, V. RIEL

G.R. No. 176508 January 12, 2015

SAINT MARY CRUSADE TO ALLEVIATE POVERTY OF BRETHREN FOUNDATION,

INC., Petitioner,
vs.
HON. TEODORO T. RIEL, ACTING PRESIDING JUDGE, REGIONAL TRIAL COURT, NATIONAL
CAPITAL JUDICIAL REGION, BRANCH 85, QUEZON CITY, Respondent.

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

UNIVERSITY OF THE PHILIPPINES, Intervenor.

DECISION

BERSAMIN, J.:

A petition for the judicial reconstitution of a Torrens title must strictly comply with the requirements
prescribed in Republic Act No. 26;1 otherwise, the petition should be dismissed.
This case is a direct resort to the Court by petition for certiorari and mandamus. The petitioner applied
for the judicial reconstitution of Original Certificate of Title (OCT) No. 1609 of the Register of Deeds of
Quezon City, and for the issuance of a new OCT in place thereof, docketed as L.R.C. Case No. Q-
18987 (04), but respondent Acting Presiding Judge of Branch 85 of the Regional Trial Court (RTC) in
Quezon City dismissed the petition for reconstitution through the assailed order dated September 12,
2006. The petitioner alleges that the respondent Judge thereby committed grave abuse of discretion
and unlawful neglect of performance of an act specifically enjoined upon him. Equally assailed is the
ensuing denial of its motion for reconsideration through the order dated February 5, 2007.

The antecedents follow.

On October 28, 2004, the petitioner claimed in its petition for reconstitution that the original copy of
OCT No. 1609 had been burnt and lost in the fire that gutted the Quezon City Register of Deeds in the
late 80’s. Initially, respondent Judge gave due course to the petition, but after the preliminary hearing,
he dismissed the petition for reconstitution through the first assailed order of September 12, 2006,2 to
wit:

With the receipt of Report dated July 14, 2006 from Land Registration Authority (LRA) recommending
that the petition be dismissed, and considering the Opposition filed by the Republic of the Philippines
and University of the Philippines, the above-entitled petition is hereby ordered DISMISSED.

On October 11, 2006, the petitioner moved for reconsideration of the dismissal,3 attaching the following
documents to support its petition for reconstitution, namely: (1) the copy of the original application for
registration dated January 27, 1955; (2) the notice of initial hearing dated June 23, 1955; (3) the letter
of transmittal to the Court of First Instance in Quezon City; (4) the copy of the Spanish Testimonial
Title No. 3261054 dated March 25, 1977 in the name of Eladio Tiburcio; (5) the copy of Tax
Assessment No. 14238; and (6) the approved Plan SWD-37457.

On February 5, 2007, the RTC denied the motion for reconsideration for lack of any cogent or justifiable
ground to reconsider.4

Hence, on February 22, 2007, the petitioner came directly to the Court alleging that respondent Judge
had "unfairly abused his discretion and unlawfully neglected the performance of an act which is
specifically enjoined upon him as a duly [sic] under Rule 7, Section 8, of the Revised Rules of
Court;"5 that "in finally dismissing the herein subject Petition for Reconsideration, respondent
Honorable Acting Presiding Judge has acted without and in excess of his authority and with grave
abuse of discretion to the further damage and prejudice of the herein petitioner;"6 and that it had no
other remedy in the course of law except through the present petition for certiorari and mandamus.

Issues

The Court directed respondent Judge and the Office of the Solicitor General (OSG) to comment on
the petition for certiorari and mandamus. Respondent Judge submitted his comment on May 23,
2007,7 and the OSG its comment on July 19, 2007.8 On November 13, 2007, the University of the
Philippines (UP) sought leave to intervene, attaching to its motion the intended comment/opposition-
in-intervention.9 The motion for the UP’s intervention was granted on November 28, 2007.10 In turn, the
petitioner presented its consolidated reply on February 8, 2008.11 The parties, except respondent
Judge, then filed their memoranda in compliance with the Court’s directive.

Respondent Judge justified the dismissal of the petition for reconstitution by citing the opposition by
the OSG and the UP, as well as the recommendation of the Land Registration Authority (LRA). He
pointed out that the petitioner did not present its purported Torrens title to be reconstituted; that the
petitioner’s claim was doubtful given the magnitude of 4,304,623 square meters as the land area
involved;12 and that the UP’s ownership of the portion of land covered by petitioner’s claim had long
been settled by the Court in a long line of cases.13

The OSG and the UP argued that by directly coming to the Court by petition for certiorari and
mandamus, the petitioner had availed itself of the wrong remedies to substitute for its lostappeal; that
the correct recourse for the petitioner was an appeal considering that the two assailed orders already
finally disposed of the case; that the petitioner intended its petition for certiorari and mandamus to
reverse the final orders;14 that the petitioner further failed to observe the doctrine of hierarchy of courts,
despite the Court of Appeals (CA) having concurrent jurisdiction with the Court over special civil
actions under Rule 65;15 that the RTC would have gravely erred had it proceeded on the petition for
reconstitution despite the petitioner not having notified the adjoining owners of the land or other parties
with interest over the land;16 that the petitioner had no factual and legal bases for reconstitution due to
its failure to prove the existence and validity of the certificate of title sought to be reconstituted, in
addition to the ownership of the land covered by the petition for reconstitution being already settled in
a long line of cases; that the petitioner’s claim over the land was derived from the Deed of Assignment
executed by one Marcelino Tiburcio – the same person whose claim had long been settled and
disposed of in Tiburcio v. People’s Homesite and Housing Corporation and University of the
Philippines (106 Phil. 477), which vested title in the UP, and in Cañero v. University of the Philippines
(437 SCRA 630); and that the Deed of Transfer and Conveyance dated November 26, 1925 executed
by Tiburcio in favor of St. Mary Village Association, Inc. was not a basis for the judicial reconstitution
of title accepted under Section 2 of Republic Act No. 26.

In its memorandum, the petitioner indicates that the RTC gravely abused its discretion amounting to
lackor excess of its jurisdiction in dismissing its petition for reconstitution on the basis of the
recommendation of the LRA and the opposition of the Republic and the UPdespite having initially
given due course to the petition for reconstitution. It urges that the dismissal should be overturned
because it was not given a chance to comment on the recommendation of the LRA, or to controvert
the oppositions filed.17 It contends that the LRA report did not substantiate the allegation of dismissal
of the application for registration of Marcelino Tiburcio on October 17, 1955, in addition to the veracity
of the report being questionable by virtue of its not having been under oath.18

Ruling

The petition for certiorari and mandamus, being devoid of procedural and substantive merit, is
dismissed.

Firstly, certiorari, being an extraordinary remedy, is granted only under the conditions defined by the
Rules of Court. The conditions are that: (1) the respondent tribunal, board or officer exercising judicial
or quasi judicial functions has acted without or inexcess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of jurisdiction; and (2) there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law.19Without jurisdiction means that the court
acted with absolute lack of authority; there is excess of jurisdiction when the court transcends its power
or acts without any statutory authority; grave abuse of discretionimplies such capricious and whimsical
exercise of judgment as to be equivalent to lack or excess of jurisdiction; in other words, power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility; and
such exercise isso patent or so gross as to amount to an evasion of a positive duty or to a virtual
refusal either to perform the duty enjoined or to act at all in contemplation of law.20

The petition for certiorari and mandamus did not show how respondent Judge could have been guilty
of lacking or exceeding his jurisdiction, or could have gravely abused his discretion amounting to lack
or excess of jurisdiction. Under Section 1221 of Republic Act No. 26, the law on the judicial
reconstitution of a Torrens title, the Regional Trial Court (as the successor of the Court of First
Instance) had the original and exclusive jurisdiction to act on the petition for judicial reconstitution of
title. Hence, the RTC neither lacked nor exceeded its authority in acting on and dismissing the petition.
Nor did respondent Judge gravely abuse his discretion amounting to lack or excess of jurisdiction
considering that the petition for reconstitution involved land already registered in the name of the UP,
as confirmed by the LRA. Instead, it would have been contrary to law had respondent Judge dealt with
and granted the petition for judicial reconstitution of title of the petitioner.

Secondly, the petitioner did not present the duplicate or certified copy of OCT No. 1609. Thereby, it
disobeyed Section 2 and Section 3 of Republic Act No. 26, the provisions that expressly listed the
acceptable bases for judicial reconstitution of an existing Torrens title, to wit: Sec. 2. Original
certificates of titleshall be reconstituted from such of the sources hereunder enumerated asmay be
available, in the following order:

(a) The owner's duplicate of the certificate of title;

(b) The co-owner's, mortgagee's,or lessee's duplicate of the certificate of title;

(c) A certified copy of the certificate of title, previously issued by the register of deeds or by a
legal custodian thereof;

(d) An authenticated copy of the decree of registration or patent, as the case may be, pursuant
to which the original certificate of title was issued;

(e) A document, on file in the registry of deeds, by which the property, the description of which
is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of
said document showing that its original had been registered; and

(f) Any other document which, in the judgment of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate of title.

Sec. 3. Transfer certificates of title shall be reconstituted from such of the sources hereunder
enumerated asmay be available, in the following order:
 (a) The owner's duplicate of the certificate of title;

(b) The co-owner's, mortgagee's,or lessee's duplicate of the certificate of title;

(c) A certified copy of the certificate of title, previously issued by the register of deeds or by a
legal custodian thereof;

(d) The deed of transfer or other document, on file in the registry of deeds, containing the
description of the property, or an authenticated copy thereof, showing that its original had been
registered, and pursuant to which the lost or destroyed transfer certificate of title was issued;

(e) A document, on file in the registry of deeds, by which the property, the description of which
is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of
said document showing that its original had been registered; and

(f) Any other document which, in the judgment of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate of title.

Thirdly, with the questioned orders of the RTC having finally disposed of the application for judicial
reconstitution, nothing more was left for the RTC to do in the case. As of then, therefore, the correct
recourse for the petitioner was to appeal to the Court of Appeals by notice of appeal within 15 days
from notice of the denial of its motion for reconsideration. By allowing the period of appeal toelapse
without taking action, it squandered its right to appeal. Its present resort to certiorari is impermissible,
for an extraordinary remedy like certiorari cannot be a substitute for a lost appeal. That the
extraordinary remedy of certiorari is not an alternative to an available remedy inthe ordinary course of
law is clear from Section 1 of Rule 65, which requires that there must be no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law. Indeed, no error of judgment by a court
will be corrected by certiorari, which corrects only jurisdictional errors.22

Fourthly, the filing of the instant special civil action directly in this Court is in disregard of the doctrine
of hierarchy of courts. Although the Court has concurrent jurisdiction with the Court of Appeals in
issuing the writ of certiorari, direct resort is allowed only when there are special, extraordinary or
compelling reasons that justify the same. The Court enforces the observance of the hierarchy of courts
in order to free itself from unnecessary, frivolous and impertinent cases and thus afford time for it to
deal with the more fundamental and more essential tasks that the Constitution has assigned to
it.23 There being no special, important or compelling reason, the petitioner thereby violated the
observance of the hierarchy of courts, warranting the dismissal of the petition for certiorari.

Finally, the land covered by the petition for judicial reconstitution related to the same area that formed
the UP campus. The UP’s registered ownership of the land comprising its campus has long been
1âwphi1

settled under the law. Accordingly, the dismissal of the petition for judicial reconstitution by respondent
Judge only safeguarded the UP’s registered ownership. In so doing, respondent Judge actually
heeded the clear warnings to the lower courts and the Law Profession in general against mounting or
abetting any attack against such ownership. One such warning was that in Cañero v. University of the
Philippines,24 as follows:
We strongly admonish courts and unscrupulous lawyers to stop entertaining spurious cases seeking
further to assail respondent UP’s title. These cases open the dissolute avenues of graft to
unscrupulous land-grabbers who prey like vultures upon the campus of respondent UP. By such
actions, they wittingly or unwittingly aid the hucksters who want to earn a quick buck by misleading
the gullible to buy the Philippine counterpart of the proverbial London Bridge. It is well past time for
courts and lawyers to cease wasting their time and resources on these worthless causes and take
judicial notice of the fact that respondent UP’s title had already been validated countless times by this
Court. Any ruling deviating from such doctrine is to be viewed as a deliberate intent to sabotage the
rule of law and will no longer be countenanced.25

WHEREFORE, the Court DISMISSES the petition for certiorari and mandamus for lack of merit; and
ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

17. DUNCANO V. SANDIGANBAYAN

G.R. No. 191894 July 15, 2015

DANILO A. DUNCANO, Petitioner,

vs.
HON. SANDIGANBAYAN (2nd DIVISION), and HON. OFFICE OF THE SPECIAL
PROSECUTOR, Respondents.

DECISION

PERALTA, J.:

This petition for certiorari under Rule 65 of the Rules of Court (Rules) with prayer for issuance of
preliminary injunction and/or temporary restraining order seeks to reverse and set aside the August
18, 2009 Resolution1 and February 8, 2010 Order2 of respondent Sandiganbayan Second Division in
Criminal Case No. SB-09-CRM-0080, which denied petitioner's Motion to Dismiss on the ground of
la9k of jurisdiction.

The facts are plain and undisputed.

Petitioner Danilo A. Duncano is, at the time material to the case, the Regional Director of the Bureau
of Internal Revenue (BIR) with Salary Grade 26 as classified under Republic Act (R.A.) No. 6758.3 On
March 24, 2009,4 the Office of the Special Prosecutor (OSP), Office of the Ombudsman, filed a criminal
case against him for violation of Section 8, in relation to Section 11 of R.A. No. 6713,5 allegedly
committed as follows:
That on or about April 15, 2003, or sometime prior or subsequent thereto, in Quezon City, Philippines,
and within the jurisdiction of this Honorable Court, accused DANILODUNCANO y ACIDO, a high
ranking public officer, being the Regional Director of Revenue Region No. 7, of the Bureau of Internal
Revenue, Quezon City, and as such is under an obligation to accomplish and submit declarations
under oath of his assets, liabilities and net worth and financial and business interests, did then and
there, wilfully, unlawfully and criminally fail to disclose in his Sworn Statement of Assets and Liabilities
and Networth (SALN) for the year 2002, his financial and business interests/connection in Documail
Provides Corporation and Don Plus Trading of which he and his family are the registered owners
thereof, and the 1993 Nissan Patrol motor vehicle registered in the name of his son VINCENT LOUIS
P. DUNCANO which are part of his assets, to the damage and prejudice of public interest.

CONTRARY TO LAW.6

Prior to his arraignment, petitioner filed a Motion to Dismiss With Prayer to Defer the Issuance of
Warrant of Arrest7before respondent Sandiganbayan Second Division. As the OSP alleged, he
admitted that he is a Regional Director with Salary Grade 26. Citing Inding v. Sandiganbayan 8 and
Serana v. Sandiganbayan, et al.,9 he asserted that under Presidential Decree (P.D.) No. 1606, as
amended by Section 4 (A) (1) of R.A No. 8249,10 the Sandiganbayan has no jurisdiction to try and hear
the case because he is an official of the executive branch occupying the position of a Regional Director
but with a compensation that is classified as below Salary Grade 27.

In its Opposition,11 the OSP argued that a reading of Section 4 (A) (1) (a) to (g) of the subject law would
clearly show that the qualification as to Salary Grade 27 and higher applies only to officials of the
executive branch other than the Regional Director and those specifically enumerated. This is so since
the term "Regional Director" and "higher" are separated by the conjunction "and," which signifies that
these two positions are different, apart and distinct, words but are conjoined together "relating one to
the other" to give effect to the purpose of the law. The fact that the position of Regional Director was
specifically mentioned without indication as to its salary grade signifies the lawmakers’ intention that
officials occupying such position, regardless of salary grade, fall within the original and exclusive
jurisdiction of the Sandiganbayan. This issue, it is claimed, was already resolved in Inding. Finally, the
OSP contended that the filing of the motion to dismiss is premature considering that the
Sandiganbayan has yet to acquire jurisdiction over the person of the accused.

Still not to be outdone, petitioner invoked the applicability of Cuyco v. Sandiganbayan12 and Organo v.
Sandiganbayan13 in his rejoinder.

On August 18, 2009, the Sandiganbayan Second Division promulgated its Resolution, disposing:
WHEREFORE, in the light of the foregoing, the Court hereby DENIES the instant Motion to Dismiss
for being devoid of merit. Let a Warrant of Arrest be therefore issued against the accused.

SO ORDERED.14

The respondent court ruled that the position of Regional Director is one of those exceptions where the
Sandiganbayan has jurisdiction even if such position is not Salary Grade 27. It was opined that Section
4 (A) (1) of R.A No. 8249 unequivocally provides that respondent court has jurisdiction over officials
of the executive branch of the government occupying the position of regional director and higher,
otherwise classified as Salary Grade 27 and higher, of R.A. No. 6758, including those officials who
are expressly enumerated in subparagraphs (a) to (g). In support of the ruling, this Court’s
pronouncements in Indingand Binay v. Sandiganbayan15 were cited.

Petitioner filed a Motion for Reconsideration, but it was denied;16 Hence, this petition.

Instead of issuing a temporary restraining order or writ of preliminary injunction, the Court required
respondents to file a comment on the petition without necessarily giving due course thereto.17 Upon
compliance of the OSP, a Rejoinder (supposedly a Reply) was filed by petitioner.

At the heart of the controversy is the determination of whether, according to P.D. No. 1606, as
amended by Section 4 (A) (1) of R.A No. 8249, only Regional Directors with Salary Grade of 27 and
higher, as classified under R.A. No. 6758, fall within the exclusive jurisdiction of the Sandiganbayan.
Arguing that he is not included among the public officials specifically enumerated in Section 4 (A) (1)
(a) to (g) of the law and heavily relying as well on Cuyco, petitioner insists that respondent court lacks
jurisdiction over him, who is merely a Regional Director with Salary Grade 26. On the contrary, the
OSP maintains that a Regional Director, irrespective of salary grade, falls within the exclusive original
jurisdiction of the Sandiganbayan. We find merit in the petition.

The creation of the Sandiganbayan was mandated by Section 5, Article XIII of the 1973
Constitution.18 By virtue of the powers vested in him by the Constitution and pursuant to Proclamation
No. 1081, dated September 21, 1972, former President Ferdinand E. Marcos issued P.D. No.
1486.19 The decree was later amended by P.D. No. 1606,20Section 20 of Batas Pambansa Blg.
129,21 P.D. No. 1860,22 and P.D. No. 1861.23

With the advent of the 1987 Constitution, the special court was retained as provided for in Section 4,
Article XI thereof.24 Aside from Executive Order Nos. 1425 and 14-a,26 and R.A. 7080,27 which expanded
the jurisdiction of the Sandiganbayan, P.D. No. 1606 was further modified by R.A. No. 7975, 28 R.A.
No. 8249,29 and just this year, R.A. No. 10660.30

For the purpose of this case, the relevant provision is Section 4 of R.A. No. 8249, which states: SEC.
4. Section 4 of the same decree is hereby further amended to read as follows:

"SEC. 4. Jurisdiction.– The Sandiganbayan shall exercise exclusive original jurisdiction in all cases
involving:

"A. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt
Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal
Code, where one or more of the accused are officials occupying the following positions in the
government, whether in a permanent, acting or interim capacity, at the time of the commission of the
offense:

"(1) Officials of the executive branch occupying the positions of regional director and higher, otherwise
classified as Grade ‘27’ and higher, of the Compensation and Position Classification Act of 1989
(Republic Act No. 6758), specifically including:
 "(a) Provincial governors, vice-governors, members of the sangguniang panlalawigan, and
provincial treasurers, assessors, engineers, and other provincial department heads;

"(b) City mayor, vice-mayors, members of the sangguniang panlungsod, city treasurers,
assessors, engineers, and other city department heads;

"(c) Officials of the diplomatic service occupying the position of consul and higher;

"(d) Philippine army and air force colonels, naval captains, and all officers of higher rank;

"(e) Officers of the Philippine National Police while occupying the position of provincial director
and those holding the rank of senior superintendent or higher;

"(f) City and provincial prosecutors and their assistants, and officials and prosecutors in the
Office of the Ombudsman and special prosecutor;

"(g) Presidents, directors or trustees, or managers of government-owned or controlled

corporations, state universities or educational institutions or foundations.

"(2) Members of Congress and officials thereof classified as Grade ‘27’ and up under the
Compensation and Position Classification Act of 1989;

"(3) Members of the judiciary without prejudice to the provisions of the Constitution;

"(4) Chairmen and members of Constitutional Commission, without prejudice to the provisions
of the Constitution; and

"(5) All other national and local officials classified as Grade ‘27’ and higher under the
Compensation and Position Classification Act of 1989.

"B. Other offenses or felonies whether simple or complexed with other crimes committed by the public
officials and employees mentioned in subsection a of this section in relation to their office.

"C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and
14-A, issued in 1986.

x x x"

Based on the afore-quoted, those that fall within the original jurisdiction of the Sandiganbayan are: (1)
officials of the executive branch with Salary Grade 27 or higher, and (2) officials specifically
enumerated in Section 4 (A) (1) (a) to (g), regardless of their salary grades.31 While the first part of
Section 4 (A) covers only officials of the executive branch with Salary Grade 27 and higher, its second
part specifically includes other executive officials whose positions may not be of Salary Grade 27 and
higher but who are by express provision of law placed under the jurisdiction of the Sandiganbayan.32
That the phrase "otherwise classified as Grade ‘27’ and higher" qualifies "regional director and higher"
is apparent from the Sponsorship Speech of Senator Raul S. Roco on Senate Bill Nos. 1353and 844,
which eventually became R.A. Nos. 7975 and 8249, respectively:

As proposed by the Committee, the Sandiganbayan shall exercise original jurisdiction over the cases
assigned to it only in instances where one or more of the principal accused are officials occupying the
positions of regional director and higher or are otherwise classified as Grade 27 and higher by the
Compensation and Position Classification Act of 1989, whether in a permanent, acting or interim
capacity at the time of the commission of the offense. The jurisdiction, therefore, refers to a certain
grade upwards, which shall remain with the Sandiganbayan.33 (Emphasis supplied)

To speed up trial in the Sandiganbayan, Republic Act No. 7975 was enacted for that Court to
concentrate on the "larger fish" and leave the "small fry" to the lower courts. This law became effective
on May 6, 1995 and it provided a two-pronged solution to the clogging of the dockets of that court, to
wit:

It divested the Sandiganbayan of jurisdiction over public officials whose salary grades were at Grade
"26" or lower, devolving thereby these cases to the lower courts, and retaining the jurisdiction of the
Sandiganbayan only over public officials whose salary grades were at Grade "27" or higher and over
other specific public officials holding important positions in government regardless of salary grade; x
x x34 (Emphasis supplied)

The legislative intent is to allow the Sandiganbayan to devote its time and expertise to big-time cases
involving the so-called "big fishes" in the government rather than those accused who are of limited
means who stand trial for "petty crimes," the so-called "small fry," which, in turn, helps the court
decongest its dockets.35

Yet, those that are classified as Salary Grade 26 and below may still fall within the jurisdiction of the
Sandiganbayan, provided that they hold the positions enumerated by the law.36 In this category, it is
the position held, not the salary grade, which determines the jurisdiction of the Sandiganbayan.37 The
specific inclusion constitutes an exception to the general qualification relating to "officials of the
executive branch occupying the positions of regional director and higher, otherwise classified as Grade
‘27’ and higher, of the Compensation and Position Classification Act of 1989."38 As ruled in Inding:

Following this disquisition, the paragraph of Section 4 which provides that if the accused is occupying
a position lower than SG 27, the proper trial court has jurisdiction, can only be properly interpreted as
applying to those cases where the principal accused is occupying a position lower than SG 27 and not
among those specifically included in the enumeration in Section 4 a. (1) (a) to (g). Stated otherwise,
except for those officials specifically included in Section 4 a. (1) (a) to (g), regardless of their salary
grades, over whom the Sandiganbayan has jurisdiction, all other public officials below SG 27 shall be
under the jurisdiction of the proper trial courts "where none of the principal accused are occupying
positions corresponding to SG 27 or higher." By this construction, the entire Section 4 is given effect.
The cardinal rule, after all, in statutory construction is that the particular words, clauses and phrases
should not be studied as detached and isolated expressions, but the whole and every part of the
statute must be considered in fixing the meaning of any of its parts and in order to produce a
harmonious whole. And courts should adopt a construction that will give effect to every part of a statute,
if at all possible. Ut magis valeat quam pereat or that construction is to be sought which gives effect
to the whole of the statute – its every word.39

Thus, to cite a few, We have held that a member of the Sangguniang Panlungsod,40 a department
manager of the Philippine Health Insurance Corporation (Philhealth),41 a student regent of the
University of the Philippines,42 and a Head of the Legal Department and Chief of the Documentation
with corresponding ranks of Vice-Presidents and Assistant Vice-President of the Armed Forces of the
Philippines Retirement and Separation Benefits System (AFP-RSBS)43 fall within the jurisdiction of the
Sandiganbayan.

Petitioner is not an executive official with Salary Grade 27 or higher. Neither does he hold any position
particularly enumerated in Section 4 (A) (1) (a) to (g). As he correctly argues, his case is, in fact, on
all fours with Cuyco. Therein, the accused was the Regional Director of the Land Transportation
1avv phi1

Office, Region IX, Zamboanga City, but at the time of the commission of the crime in 1992, his position
was classified as Director II with Salary Grade 26.44It was opined: Petitioner contends that at the time
of the commission of the offense in 1992, he was occupying the position of Director II, Salary Grade
26, hence, jurisdiction over the cases falls with the Regional Trial Court.

We sustain petitioner's contention.

The Sandiganbayan has no jurisdiction over violations of Section 3(a) and (e), Republic Act No. 3019,
as amended, unless committed by public officials and employees occupying positions of regional
director and higher with Salary Grade "27" or higher, under the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758) in relation to their office.

In ruling in favor of its jurisdiction, even though petitioner admittedly occupied the position of Director
II with Salary Grade "26" under the Compensation and Position Classification Act of 1989 (Republic
Act No. 6758), the Sandiganbayan incurred in serious error of jurisdiction, and acted with grave abuse
of discretion amounting to lack of jurisdiction in suspending petitioner from office, entitling petitioner to
the reliefs prayed for.45

In the same way, a certification issued by the OIC – Assistant Chief, Personnel Division of the BIR
shows that, although petitioner is a Regional Director of the BIR, his position is classified as Director
II with Salary Grade 26.46

There is no merit in the OSP’s allegation that the petition was prematurely filed on the ground that
respondent court has not yet acquired jurisdiction over the person of petitioner. Records disclose that
when a warrant of arrest was issued by respondent court, petitioner voluntarily surrendered and posted
a cash bond on September 17, 2009.Also, he was arraigned on April 14, 2010,prior to the filing of the
petition on April 30, 2010.

WHEREFORE, the foregoing considered, the instant petition for certiorari is GRANTED. The August
18, 2009 Resolution and February 8, 2010 Order of the Sandiganbayan Second Division, which denied
petitioner's Motion to Dismiss on the ground of lack of jurisdiction, are REVERSED AND SET ASIDE.

SO ORDERED.
 18. CE CASECNAN WATER AND ENERGY INC. V. PROVINCE OF NUEVA ECIJA

G.R. No. 196278 June 17, 2015

CE CASECNAN WATER and ENERGY COMPANY, INC., Petitioner,

vs.
THE PROVINCE OF NUEVA ECIJA, THEOFFICEOFTHEPROVINCIAL ASSESSOR OF NUEVA
ECIJA, and THEOFFICEOFTHEPROVINCIAL TREASURER OF NUEVA ECIJA, as represented by
HON. AURELIO UMALI, HON. FLORANTE FAJARDO and HON. EDILBERTO PANCHO,
respectively, or their lawful successors,Respondents,
NATIONAL IRRIGATION ADMINISTRATION and DEPARTMENT OF FINANCE, As Necessary
Parties.

DECISION

DEL CASTILLO, J.:

The Court of Tax Appeals (CTA) has exclusive jurisdiction over a special civil action for certiorari
assailing an interlocutory order issued by the Regional Trial Court (RTC) in a local tax case.

This Petition for Review on Certiorari1 assails the November 2, 2010 Decision2 of the Court of Appeals
(CA) in CA-GR SP No. 108441 which dismissed for lack of jurisdiction the Petition for Certiorari of
petitioner CE Casecnan Water and Energy Company, Inc.(petitioner) against the Province of Nueva
Ecija, the Office of the Provincial Assessor of Nueva Ecija (Office of the Provincial Assessor) and the
Office of the Provincial Treasurer of Nueva Ecija (Office of the Provincial Treasurer) (respondents).
Also assailed is the March 24, 2011 Resolution3 of the CA denying petitioner’s Motion for
Reconsideration.4

Factual Antecedents

On June 26, 1995, petitioner and the National Irrigation Administration (NIA) entered into a build-
operate-transfer (BOT) contract known as the "Amended and Restated Casecnan Project
Agreement"5 (Casecnan Contract) relative to the construction and development of the Casecnan Multi-
Purpose Irrigation and Power Project (Casecnan Project) in Pantabangan, Nueva Ecija and Alfonso
Castaneda, Nueva Vizcaya. The Casecnan Project is a combined irrigation and hydroelectric power
generation facility using the Pantabangan Dam in Nueva Ecija. On September 29, 2003, petitioner and
NIA executed a Supplemental Agreement6 amending Article II of the Casecnan Contract which
pertains to payment of taxes. Article 2.2 thereof states that NIA must reimburse petitioner for real
property taxes (RPT) provided the same was paid upon NIA’s directive and with the concurrence of
the Department of Finance.

On September 6, 2005, petitioner received from the Office of the Provincial Assessor a Notice of
Assessment of Real Property dated August 2, 2005, which indicates that for the years 2002 to 2005,
its RPT due was 248,676,349.60. Petitioner assailed the assessment with the Nueva Ecija Local Board
of Assessment Appeals (Nueva Ecija LBAA) which dismissed it on January 26, 2006. Undeterred,
petitioner filed a Notice of Appeal with the Nueva Ecija Central Board of Assessment Appeals (Nueva
Ecija CBAA). During the pendency thereof, respondents collected from petitioner the RPT due under
the said assessment as well as those pertaining to the years 2006 up to the second quarter of 2008,
totalling ₱363,703,606.88. Petitioner paid the assessed RPT under protest; it also initiated
proceedings questioning the validity of the collection with respect to the years 2006 up to the second
quarter of 2008. Thereafter, petitioner received a letter7 dated July 9, 2008 from the Office of the
Provincial Treasurer stating that it has RPT in arrears for the years 2002 up to the second quarter of
2008 amounting to ₱1,277,474,342.10. Petitioner received another letter8 dated August 29, 2008 from
the same office clarifying that its arrearages in RPT actually amounted to ₱1,279,997,722.70 (2008
RPT Reassessment). Again, petitioner questioned this assessment through an appeal before the
Nueva Ecija LBAA. While the same was pending, petitioner received from respondents a letter dated
September 10, 2008 demanding payment for its alleged RPT arrearages.

Hence, on September 23, 2008, petitioner filed with the RTC of San Jose City, Nueva Ecija a
Complaint9 for injunction and damages with application for temporary restraining order (TRO) and
preliminary injunction10 praying to restrain the collection of the 2008 RPT Reassessment. Petitioner
emphasized, among others, that it was not the one which should pay the taxes but NIA.

Ruling of the Regional Trial Court

On September 24, 2008, the RTC denied petitioner’s application for a 72-hour TRO.11 Meanwhile,
petitioner received from the Office of the Provincial Treasurer a letter dated September 22, 2008
further demanding payment for RPT covering the third quarter of 2008 (2008-3Q Assessment). Thus,
petitioner filed on September 29, 2008 an Amended Complaint12 asking the RTC to likewise enjoin
respondents from collecting RPT based on the 2008-3Q Assessment in the amount of
₱53,346,755.18.

On October 2, 2008, the RTC issued a 20-day TRO13 enjoining respondents from collecting from
petitioner the RPT covered by the 2008 RPT Reassessment amounting to ₱1,279,997,722.70,
including surcharges and penalties.

Subsequently, however, the RTC denied petitioner’s application for writ of preliminary injunction in its
Order14 of October 24, 2008.It also denied petitioner’s Motion for Reconsideration thereof in an
Order15 dated January 30, 2009.

On April 24, 2009, petitioner filed with the CA a Petition for Certiorari 16 under Rule 65 of the Rules of
Court seeking to annul and set aside the aforementioned October 24, 2008 and January 30, 2009
RTC Orders.

Ruling of the Court of Appeals

In its November 2, 2010 Decision,17 the CA observed that the Petition for Certiorari before it was
actually an offshoot of the 2008 RPT Reassessment. And since in resolving the issue of whether the
RTC committed grave abuse of discretion in denying petitioner’s application for a writ of preliminary
injunction, the issue of the validity of the assessment and the collection of the RPT against petitioner
must also be resolved, thus jurisdiction over the case lies within the Court of Tax Appeals
(CTA).Hence, the CA ruled:

WHEREFORE, premises considered, the Petition for Certiorari is hereby DENIED DUE COURSE and
accordingly, DISMISSED for lack of jurisdiction.

SO ORDERED.18

Petitioner sought reconsideration; however, it was denied in a Resolution19 dated March 24, 2011.

Undaunted, petitioner filed this Petition imputing upon the CA grave error in:

x x x ruling that it is the Court of Tax Appeals (and not the Court of Appeals) which has jurisdiction
over the CA Injunction Case.20

Petitioner’s Arguments

In its Petition21 and Reply,22 petitioner argues that it is the CA, not the CTA, which has jurisdiction over
the subject matter of its Petition for Certiorari. Petitioner maintains that its petition relates to an ordinary
civil action for injunction and not to a local tax case. It insists that in both the RTC injunction case and
the Petition for Certiorari before the CA, petitioner was not protesting respondents’ assessment of RPT
against it; what it was seeking was respondents’ enjoinment from committing or continuing to commit
acts that would probably violate its right. In particular, petitioner points out that the RTC injunction case
was intended to enjoin respondents from collecting payment during the pendency of the case with the
LBAA challenging the validity of the 2008 RPT Reassessment. Petitioner explains that the said
injunction case was filed with the RTC because the LBAA has no injunctive power.

Respondents’ Arguments

In their Comment,23 respondents argue that in resolving the issue on the propriety of issuing a writ of
injunction, the CA will have to inevitably pass upon the propriety of the assessment of RPT on the
Casecnan Project, a local tax matter which is within the jurisdiction of the CTA. Respondents also
echo the CA pronouncement that petitioner failed to exhaust administrative remedies with respect to
the assessment and collection of RPT.

Our Ruling

There is no merit in the Petition.

It is the CTA which has the power to rule

on a Petition for Certiorari assailing an
interlocutory order of the RTC relating
to a local tax case.
Jurisdiction over the subject matter is required for a court to act on any controversy. It is conferred by
law and not by the consent or waiver upon a court. As such, if a court lacks jurisdiction over an action,
it cannot decide the case on the merits and must dismiss it.24

With respect to the CTA, its jurisdiction was expanded and its rank elevated to that of a collegiate court
with special jurisdiction by virtue of Republic Act No. 9282.25 This expanded jurisdiction of the CTA
includes its exclusive appellate jurisdiction to review by appeal the decisions, orders or resolutions of
the RTC in local tax cases originally decided or resolved by the RTC in the exercise of its original or
appellate jurisdiction.26

In the recent case of City of Manila v. Grecia-Cuerdo,27 the Court ruled that the CTA likewise has the
jurisdiction to issue writs of certiorari or to determine whether there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in
cases falling within the CTA’s exclusive appellate jurisdiction, thus:

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be
vested in one Supreme Court and in such lower courts as may be established by law and that judicial
power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling
within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases. 28 (Citations omitted and
emphasis supplied)

Further, the Court in City of Manila, citing J. M. Tuason & Co., Inc. v. Jaramillo,29 De Jesus v. Court of
Appeals,30 as well as the more recent cases of Galang, Jr. v. Hon. Judge Geronimo31 and Bulilis v.
Nuez,32 held that:

Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason &
Co., Inc. v. Jaramillo, et al. that ‘if a case may be appealed to a particular court or judicial tribunal or
body, then said court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction.’ This principle was affirmed in De Jesus v. Court of Appeals,
where the Court stated that ‘a court may issue a writ of certiorari in aid of its appellate jurisdiction if
said court has jurisdiction to review, by appeal or writ of error, the final orders or decisions of the lower
court.’ The rulings in J.M. Tuason and De Jesus were reiterated in the more recent cases of Galang,
Jr. v. Geronimo and Bulilis v. Nuez.

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction
is conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer.33 (Citations omitted)
Anent petitioner’s contention that it is the CA which has jurisdiction over a certiorari petition assailing
an interlocutory order issued by the RTC in a local tax case, the Court had this to say: If this Court
were to sustain petitioners’ contention that jurisdiction over their certiorari petition lies with the CA, this
Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter – precisely the split-jurisdiction situation which is anathema to the
orderly administration of justice. The Court cannot accept that such was the legislative motive,
especially considering that the law expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local tax cases without mention
of any other court that may exercise such power. Thus, the Court agrees with the ruling of the CA that
since appellate jurisdiction over private respondents’ complaint for tax refund is vested in the CTA, it
follows that a petition for certiorari seeking nullification of an interlocutory order issued in the said case
should, likewise, be filed with the same court. To rule otherwise would lead to an absurd situation
where one court decides an appeal in the main case while another court rules on an incident in the
very same case.

xxxx

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it
effectively, to make all orders that will preserve the subject of the action, and to give effect to the final
determination of the appeal. It carries with it the power to protect that jurisdiction and to make the
decisions of the court thereunder effective. The court, in aid of its appellate jurisdiction, has authority
to control all auxiliary and incidental matters necessary to the efficient and proper exercise of that
jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the performance of any act
which might interfere with the proper exercise of its rightful jurisdiction in cases pending before
it.34 (Citations omitted and emphasis supplied) Given these, it is settled that it is the CTA which has
exclusive jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by
the RTC in a local tax case.

The RTC injunction case is a local tax >case.

In maintaining that it is the CA that has jurisdiction over petitioner’s certiorari petition, the latter argues
that the injunction case it filed with the RTC is not a local tax case but an ordinary civil action. It insists
that it is not protesting the assessment of RPT against it but only prays that respondents be enjoined
from collecting the same.

The Court finds, however, that in praying to restrain the collection of RPT, petitioner also implicitly
questions the propriety of the assessment of such RPT. This is because in ruling as to whether to
1awp++i1

restrain the collection, the RTC must first necessarily rule on the propriety of the assessment. In other
words, in filing an action for injunction to restrain collection, petitioner was in effect also challenging
the validity of the RPT assessment. As aptly discussed by the CA:

x x x [T]he original action filed with the RTC is one for Injunction, with an application for Temporary
Restraining Order and a Writ of Preliminary Injunction to enjoin the province of Nueva Ecija from further
collecting the alleged real property tax liability assessed against it. Simply because the action is an
application for injunctive relief does not necessarily mean that it may no longer be considered as a
local tax case. The subject matter and the issues, not the name or designation of the remedy, should
control. While an ancillary action for injunction may not be a main case, the court [still has] to
determine, even in a preliminary matter, the applicable tax laws, rules and jurisprudence. x x x35

Moreover, in National Power Corporation v. Municipal Government of Navotas,36 as well as in City of

Lapu-Lapu v. Philippine Economic Zone Authority,37 this Court already held that local tax cases include
RPT.

No doubt, the injunction case before the RTC is a local tax case. And as earlier discussed, a certiorari
petition questioning an interlocutory order issued in a local tax case falls under the jurisdiction of the
CT A. Thus, the CA correctly dismissed the Petition for Certiorari before it for lack of jurisdiction.

WHEREFORE, the Petition is DENIED. The November 2, 2010 Decision and March 24, 2011
Resolution of the Court of Appeals in CA-G.R. SP No.108441 are AFFIRMED.

SO ORDERED.

19. FERRER JR. V. BAUTISTA

G.R. No. 210551 June 30, 2015

JOSE J. FERRER, JR., Petitioner,

vs.
CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF
QUEZON CITY, and CITY ASSESSOR OF QUEZON CITY, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for certiorari under Rule 65 of the Rules of Court with prayer for the
issuance of a temporary restraining order (TRO) seeking to declare unconstitutional and illegal
Ordinance Nos. SP-2095, S-2011 and SP-2235, S-2013 on the Socialized Housing Tax and Garbage
Fee, respectively, which are being imposed by the respondents.

The Case

On October 17, 2011,1 respondent Quezon City Council enacted Ordinance No. SP-2095, S-2011,2 or
the Socialized Housing Tax of Quezon City, Section 3 of which provides:

SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the

assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00) shall be collected
by the City Treasurer which shall accrue to the Socialized Housing Programs of the Quezon City
Government. The special assessment shall accrue to the General Fund under a special account to be
established for the purpose.
Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by the Quezon City
Government for the following projects: (a) land purchase/land banking; (b) improvement of
current/existing socialized housing facilities; (c) land development; (d) construction of core houses,
sanitary cores, medium-rise buildings and other similar structures; and (e) financing of public-private
partners hip agreement of the Quezon City Government and National Housing Authority ( NHA ) with
the private sector.3

Under certain conditions, a tax credit shall be enjoyed by taxpayers regularly paying the special
assessment:

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as imposed by this
ordinance shall enjoy a tax credit. The tax credit may be availed of only after five (5) years of
continue[d] payment. Further, the taxpayer availing this tax credit must be a taxpayer in good standing
as certified by the City Treasurer and City Assessor.

The tax credit to be granted shall be equivalent to the total amount of the special assessment paid by
the property owner, which shall be given as follows:

1. 6th year - 20%

2. 7th year - 20%

3. 8th year - 20%

4. 9th year - 20%

5. 10th year - 20%

Furthermore, only the registered owners may avail of the tax credit and may not be continued by the
subsequent property owners even if they are buyers in good faith, heirs or possessor of a right in
whatever legal capacity over the subject property.4

On the other hand, Ordinance No. SP-2235, S-20135 was enacted on December 16, 2013 and took
effect ten days after when it was approved by respondent City Mayor.6 The proceeds collected from
the garbage fees on residential properties shall be deposited solely and exclusively in an earmarked
special account under the general fund to be utilized for garbage collections.7 Section 1 of the
Ordinance se t forth the schedule and manner for the collection of garbage fees:

SECTION 1. The City Government of Quezon City in conformity with and in relation to Republic Act
No. 7160, otherwise known as the Local Government Code of 1991 HEREBY IMPOSES THE
FOLLOWING SCHEDULE AND MANNER FOR THE ANNUAL COLLECTION OF GARBAGE FEES,
AS FOLLOWS: On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

 Less than 200 sq. m. PHP 100.00

201 sq. m. – 500 sq. m. PHP 200.00

501 sq. m. – 1,000 sq. m. PHP 300.00

1,001 sq. m. – 1,500 sq. m. PHP 400.00

1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00

41 sq. m. – 60 sq. m. PHP 50.00

61 sq. m. – 100 sq. m. PHP 75.00

101 sq. m. – 150 sq. m. PHP 100.00

151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high- rise condominiums shall

pay the annual garbage fee on the total size of the entire condominium and socialized Housing
Unit and an additional garbage fee shall be collected based on area occupied for every unit
already so ld or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall pay the annual
garbage fee on the total lot size of the entire apartment and an additional garbage fee based
on the schedule prescribed herein for every unit occupied.

The collection of the garbage fee shall accrue on the first day of January and shall be paid
simultaneously with the payment of the real property tax, but not later than the first quarter
installment.8 In case a household owner refuses to pay, a penalty of 25% of the garbage fee due, plus
an interest of 2% per month or a fraction thereof, shall be charged.9
Petitioner alleges that he is a registered co-owner of a 371-square-meter residential property in
Quezon City which is covered by Transfer Certificate of Title (TCT ) No. 216288, and that, on January
7, 2014, he paid his realty tax which already included the garbage fee in the sum of

Php100.00.10

The instant petition was filed on January 17, 2014. We issued a TRO on February 5, 2014, which
enjoined the enforcement of Ordinance Nos. SP-2095 and SP-2235 and required respondents to
comment on the petition without necessarily giving due course thereto.11

Respondents filed their Comment12 with urgent motion to dissolve the TRO on February 17, 2014.
Thereafter, petitioner filed a Reply and a Memorandum on March 3, 2014 and September 8, 2014,
respectively.

Procedural Matters

A. Propriety of a Petition for Certiorari

Respondents are of the view that this petition for certiorari is improper since they are not tribunals,
boards or officers exercising judicial or quasi-judicial functions. Petitioner, however, counters that in
enacting Ordinance Nos. SP-2095 and SP-2235, the Quezon City Council exercised quasi-judicial
function because the ordinances ruled against the property owners who must pay the SHT and the
garbage fee, exacting from them funds for basic essential public services that they should not be held
liable. Even if a Rule 65 petition is improper, petitioner still asserts that this Court, in a number of cases
like in Rosario v. Court of Appeals,13 has taken cognizance of an improper remedy in the interest of
justice.

We agree that respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto
themselves any judicial or quasi-judicial prerogatives.

A respondent is said to be exercising judicial function where he has the power to determine what the
law is and what the legal rights of the parties are, and then undertakes to determine these questions
and adjudicate upon the rights of the parties.

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion, etc., of
public administrative officers or bodies … required to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise
discretion of a judicial nature."

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there
be a law that gives rise to some specific rights of person s or property under which adverse claims to
such rights are made, and the controversy en suing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law and adjudicate the respective rights of
the contending parties.14
For a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer
must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting to
lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy
in the ordinary course of law. The enactment by the Quezon City Council of the assailed ordinances
was done in the exercise of its legislative, not judicial or quasi-judicial, function. Under Republic Act
(R.A.) No.7160, or the Local Government Code of 1991 (LGC), local legislative power shall be
exercised by the Sangguniang Panlungsod for the city.15Said law likewise is specific in providing that
the power to impose a tax, fee, or charge , or to generate revenue shall be exercised by the sanggunian
of the local government unit concerned through an appropriate ordinance.16

Also, although the instant petition is styled as a petition for certiorari, it essentially seeks to declare the
unconstitutionality and illegality of the questioned ordinances. It, thus, partakes of the nature of a
petition for declaratory relief, over which this Court has only appellate, not original, jurisdiction.17

Despite these, a petition for declaratory relief may be treated as one for prohibition or mandamus, over
which we exercise original jurisdiction, in cases with far-reaching implications or one which raises
transcendental issues or questions that need to be resolved for the public good.18The judicial policy is
that this Court will entertain direct resort to it 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 Our primary jurisdiction.19

Section 2, Rule 65 of the Rules of Court lay down under what circumstances a petition for prohibition
may be filed:

SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation, board, officer or
person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and
there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered commanding the respondent to desist from further proceeding
in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice
may require.

In a petition for prohibition against any tribunal, corporation, board, or person – whether exercising
judicial, quasi-judicial, or ministerial functions – who has acted without or in excess of jurisdiction or
with grave abuse of discretion, the petitioner prays that judgment be rendered, commanding the
respondents to desist from further proceeding in the action or matter specified in the petition. In this
case, petitioner's primary intention is to prevent respondents from implementing Ordinance Nos. SP-
2095 and SP-2235. Obviously, the writ being sought is in the nature of a prohibition, commanding
desistance.

We consider that respondents City Mayor, City Treasurer, and City Assessor are performing ministerial
functions. A ministerial function is one that an officer or tribunal performs in the context of a given set
of facts, in a prescribed manner and without regard for the exercise of his or its own judgment, upon
the propriety or impropriety of the act done.20 Respondent Mayor, as chief executive of the city
government, exercises such powers and performs such duties and functions as provided for by the
LGC and other laws.21 Particularly, he has the duty to ensure that all taxes and other revenues of the
city are collected, and that city funds are applied to the payment of expenses and settlement of
obligations of the city, in accordance with law or ordinance.22 On the other hand, under the LGC, all
local taxes, fees, and charges shall be collected by the provincial, city, municipal, or barangay
treasurer, or their duly-authorized deputies, while the assessor shall take charge, among others, of
ensuring that all laws and policies governing the appraisal and assessment of real properties for
taxation purposes are properly executed.23 Anent the SHT, the Department of Finance (DOF) Local
Finance Circular No. 1-97, dated April 16, 1997, is more specific:

6.3 The Assessor’s office of the Identified LGU shall:

a. immediately undertake an inventory of lands within its jurisdiction which shall be

subject to the levy of the Social Housing Tax (SHT) by the local sanggunian concerned;

b. inform the affected registered owners of the effectivity of the SHT; a list of the lands
and registered owners shall also be posted in 3 conspicuous places in the
city/municipality;

c. furnish the Treasurer’s office and the local sanggunian concerned of the list of lands
affected;

6.4 The Treasurer’s office shall:

a. collect the Social Housing Tax on top of the Real Property Tax, SEF Tax and other
special assessments;

b. report to the DOF, thru the Bureau of Local Government Finance, and the Mayor’s
office the monthly collections on Social Housing Tax (SHT). An annual report should
likewise be submitted to the HUDCC on the total revenues raised during the year
pursuant to Sec. 43, R.A. 7279 and the manner in which the same was disbursed.

Petitioner has adduced special and important reasons as to why direct recourse to us should be
allowed. Aside from presenting a novel question of law, this case calls for immediate resolution since
the challenged ordinances adversely affect the property interests of all paying constituents of Quezon
City. As well, this petition serves as a test case for the guidance of other local government units
(LGUs).Indeed, the petition at bar is of transcendental importance warranting a relaxation of the
doctrine of hierarchy of courts. In Social Justice Society (SJS) Officers, et al. v. Lim , 24the Court cited
the case of Senator Jaworski v. Phil. Amusement & Gaming Corp.,25 where We ratiocinated:

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the
transcendental importance of the issues involved in this case warrants that we set aside the technical
defects and take primary jurisdiction over the petition at bar . x x x This is in accordance with the well
entrenched principle that rules of procedure are not inflexible tools designed to hinder or delay, but to
facilitate and promote the administration of justice. Their strict and rigid application, which would result
in technicalities that tend to frustrate, rather than promote substantial justice, must always be
eschewed.26

B. Locus Standi of Petitioner

Respondents challenge petitioner’s legal standing to file this case on the ground that, in relation to
Section 3 of Ordinance No. SP-2095, petitioner failed to allege his ownership of a property that has
an assessed value of more than Php100,000.00 and, with respect to Ordinance No. SP-2335, by what
standing or personality he filed the case to nullify the same. According to respondents, the petition is
not a class suit, and that, for not having specifically alleged that petitioner filed the case as a taxpayer,
it could only be surmised whether he is a party-in-interest who stands to be directly benefited or injured
by the judgment in this case.

It is a general rule that every action must be prosecuted or defended in the name of the real party-in-
interest, who stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By
real interest is meant a present substantial interest, as distinguished from a mere expectancy or a
future, contingent, subordinate, or consequential interest." "To qualify a person to be a real party-in-
interest in whose name an action must be prosecuted, he must appear to be the present real owner
of the right sought to be enforced."27

"Legal standing" or locus standi calls for more than just a generalized grievance.28 The concept has
been define d as a personal and substantial interest in the case such that the party has sustained or
will sustain direct injury as a result of the government al act that is being challenged.29 The gist of the
question of standing is whether a party alleges such personal stake in the outcome of the controversy
as to assure that concrete adverseness which sharpens the presentation of issues upon which the
court depends for illumination of difficult constitutional questions.30

A party challenging the constitutionality of a law, act, or statute must show "not only that the law is
invalid, but also that he has sustained or is in immediate, or imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way." It
must be shown that he has been, or is about to be, denied some right or privilege to which he is lawfully
entitled, or that he is about to be subjected to some burdens or penalties by reason of the statute
complained of.31

Tested by the foregoing, petitioner in this case clearly has legal standing to file the petition. He is a
real party-in-interest to assail the constitutionality and legality of Ordinance Nos. SP-2095 and SP-
2235 because respondents did not dispute that he is a registered co-owner of a residential property in
Quezon City an d that he paid property tax which already included the SHT and the garbage fee. He
has substantial right to seek a refund of the payments he made and to stop future imposition. While
he is a lone petitioner, his cause of action to declare the validity of the subject ordinances is substantial
and of paramount interest to similarly situated property owners in Quezon City.
C. Litis Pendentia

Respondents move for the dismissal of this petition on the ground of litis pendentia. They claim that,
as early as February 22, 2012, a case entitled Alliance of Quezon City Homeowners, Inc., et al., v.
Hon. Herbert Bautista, et al. , docketed as Civil Case No. Q-12- 7-820, has been pending in the
Quezon City Regional Trial Court, Branch 104, which assails the legality of Ordinance No. SP-2095.
Relying on City of Makati, et al. v. Municipality (now City) of Taguig, et al.,32 respondents assert that
there is substantial identity of parties between the two cases because petitioner herein and plaintiffs
in the civil case filed their respective cases as taxpayers of Quezon City.

For petitioner, however, respondents’ contention is untenable since he is not a party in Alliance and
does not even have the remotest identity or association with the plaintiffs in said civil case. Moreover,
respondents’ arguments would deprive this Court of its jurisdiction to determine the constitutionality of
laws under Section 5, Article VIII of the 1987 Constitution.33

Litis pendentia is a Latin term which literally means "a pending suit" and is variously referred to in
some decisions as lis pendens and auter action pendant.34 While it is normally connected with the
control which the court has on a property involved in a suit during the continuance proceedings, it is
more interposed as a ground for the dismissal of a civil action pending in court.35 In Film Development
Council of the Philippines v. SM Prime Holdings, Inc.,36 We elucidated:

Litis pendentia, as a ground for the dismissal of a civil action, refers to a situation where two actions
are pending between the same parties for the same cause of action, so that one of them becomes
unnecessary and vexatious. It is based on the policy against multiplicity of suit and authorizes a court
to dismiss a case motu proprio.

xxxx

The requisites in order that an action may be dismissed on the ground of litis pendentia are: (a) the
identity of parties, or at least such as representing the same interest in both actions; (b) the identity of
rights asserted and relief prayed for, the relief being founded on the same facts, and (c) the identity of
the two cases such that judgment in one, regardless of which party is successful, would amount to res
judicata in the other.

The underlying principle of litis pendentia is the theory that a party is not allowed to vex another more
than once regarding the same subject matter and for the same cause of action. This theory is founded
on the public policy that the same subject matter should not be the subject of controversy in courts
more than once, in order that possible conflicting judgments may be avoided for the sake of the stability
of the rights and status of persons, and also to avoid the costs and expenses incident to numerous
suits.

Among the several tests resorted to in ascertaining whether two suits relate to a single or common
cause of action are: (1) whether the same evidence would support and sustain both the first and
second causes of action; and (2) whether the defenses in one case may be used to substantiate the
complaint in the other.
The determination of whether there is an identity of causes of action for purposes of litis pendentia is
inextricably linked with that of res judicata , each constituting an element of the other. In either case,
both relate to the sound practice of including, in a single litigation, the disposition of all issues relating
to a cause of action that is before a court.37

There is substantial identity of the parties when there is a community of interest between a party in the
first case and a party in the second case albeit the latter was not impleaded in the first case.38Moreover,
the fact that the positions of the parties are reversed, i.e., the plaintiffs in the first case are the
defendants in the second case or vice-versa, does not negate the identity of parties for purposes of
determining whether the case is dismissible on the ground of litis pendentia .39

In this case, it is notable that respondents failed to attach any pleading connected with the alleged civil
case pending before the Quezon City trial court. Granting that there is substantial identity of parties
1âw phi 1

between said case and this petition, dismissal on the ground of litis pendentia still cannot be had in
view of the absence of the second and third requisites. There is no way for us to determine whether
both cases are based on the same set of facts that require the presentation of the same evidence.
Even if founded on the same set of facts, the rights asserted and reliefs prayed for could be different.
Moreover, there is no basis to rule that the two cases are intimately related and/or intertwined with one
another such that the judgment that may be rendered in one, regardless of which party would be
successful, would amount to res judicata in the other.

D. Failure to Exhaust Administrative Remedies

Respondents contend that petitioner failed to exhaust administrative remedies for his non-compliance
with Section 187 of the LGC, which mandates:

Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures;
Mandatory Public Hearings. – The procedure for approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall
be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on
the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within
thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within
sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not
have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax,
fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision
or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent jurisdiction.

The provision, the constitutionality of which was sustained in Drilon v. Lim ,40 has been construed as
mandatory41 considering that –

A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the
most effective instrument to raise needed revenues to finance and support the myriad activities of local
government units for the delivery of basic services essential to the promotion of the general welfare
and enhancement of peace, progress, and prosperity of the people. Consequently, any delay in
implementing tax measures would be to the detriment of the public. It is for this reason that protests
over tax ordinances are required to be done within certain time frames. x x x.42

The obligatory nature of Section 187 was underscored in Hagonoy Market Vendor Asso. v. Municipality
of Hagonoy:43

x x x [T]he timeframe fixed by law fo r parties to avail of their legal remedies before competent courts
is not a "mere technicality" that can be easily brushed aside. The periods stated in Section 187 of the
Local Government Code are mandatory. x x x Being its lifeblood, collection of revenues by the
government is of paramount importance. The funds for the operation of its agencies and provision of
basic services to its inhabitants are largely derived from its revenues and collections. Thus, it is
essential that the validity of revenue measures is not left uncertain for a considerable length of time.
Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue measures
and tax ordinances."44

Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones,45held that there was no need for
petitioners therein to exhaust administrative remedies before resorting to the courts, considering that
there was only a pure question of law, the parties did not dispute any factual matter on which they had
to present evidence. Likewise, in Cagayan Electric Power and Light Co., Inc. v. City of Cagayan de
Oro,46 We relaxed the application of the rules in view of the more substantive matters. For the same
reasons, this petition is an exception to the general rule.

Substantive Issues

Petitioner asserts that the protection of real properties from informal settlers and the collection of
garbage are basic and essential duties and functions of the Quezon City Government. By imposing
the SHT and the garbage fee, the latter has shown a penchant and pattern to collect taxes to pay for
public services that could be covered by its revenues from taxes imposed on property, idle land,
business, transfer, amusement, etc., as well as the Internal Revenue Allotment (IRA ) from the National
Government. For petitioner, it is noteworthy that respondents did not raise the issue that the Quezon
City Government is in dire financial state and desperately needs money to fund housing for informal
settlers and to pay for garbage collection. In fact, it has not denied that its revenue collection in 2012
is in the sum of ₱13.69 billion.

Moreover, the imposition of the SHT and the garbage fee cannot be justified by the Quezon City
Government as an exercise of its power to create sources of income under Section 5, Article X of the
1987 Constitution.47 According to petitioner, the constitutional provision is not a carte blanche for the
LGU to tax everything under its territorial and political jurisdiction as the provision itself admits of
guidelines and limitations.

Petitioner further claims that the annual property tax is an ad valorem tax, a percentage of the
assessed value of the property, which is subject to revision every three (3) years in order to reflect an
increase in the market value of the property. The SHT and the garbage fee are actually increases in
the property tax which are not based on the assessed value of the property or its reassessment every
three years; hence, in violation of Sections 232 and 233 of the LGC.48
For their part, respondents relied on the presumption in favor of the constitutionality of Ordinance Nos.
SP-2095 and SP-2235, invoking Victorias Milling Co., Inc. v. Municipality of Victorias, etc.,49 People v.
Siton, et al.,50 and Hon. Ermita v. Hon. Aldecoa-Delorino .51 They argue that the burden of establishing
the invalidity of an ordinance rests heavily upon the party challenging its constitutionality. They insist
that the questioned ordinances are proper exercises of police power similar to Telecom. & Broadcast
Attys. of the Phils., Inc. v. COMELEC52 and Social Justice Society (SJS), et al. v. Hon. Atienza,
Jr.53 and that their enactment finds basis in the social justice principle enshrined in Section 9,54 Article
II of the 1987 Constitution.

As to the issue of publication, respondents argue that where the law provides for its own effectivity,
publication in the Official Gazette is not necessary so long as it is not punitive in character, citing
Balbuna, et al. v. Hon. Secretary of Education, et al.55 and Askay v. Cosalan .[56]] Thus, Ordinance
No. SP-2095 took effect after its publication, while Ordinance No. SP-2235 became effective after its
approval on December 26, 2013.

Additionally, the parties articulate the following positions:

On the Socialized Housing Tax

Respondents emphasize that the SHT is pursuant to the social justice principle found in Sections 1
and 2, Article XIII57 of the 1987 Constitution and Sections 2 (a)58 and 4359 of R.A. No. 7279, or the
"Urban Development and Housing Act of 1992 ( UDHA ).

Relying on Manila Race Horse Trainers Assn., Inc. v. De La Fuente,60and Victorias Milling Co., Inc. v.
Municipality of Victorias, etc.,61respondents assert that Ordinance No. SP-2095 applies equally to all
real property owners without discrimination. There is no way that the ordinance could violate the equal
protection clause because real property owners and informal settlers do not belong to the same class.

Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent with the
UDHA. While the law authorizes LGUs to collect SHT on properties with an assessed value of more
than ₱50,000.00, the questioned ordinance only covers properties with an assessed value exceeding
₱100,000.00. As well, the ordinance provides for a tax credit equivalent to the total amount of the
special assessment paid by the property owner beginning in the sixth (6th) year of the effectivity of the
ordinance.

On the contrary, petitioner claims that the collection of the SHT is tantamount to a penalty imposed on
real property owners due to the failure of respondent Quezon City Mayor and Council to perform their
duty to secure and protect real property owners from informal settlers, thereby burdening them with
the expenses to provide funds for housing. For petitioner, the SHT cannot be viewed as a "charity"
from real property owners since it is forced, not voluntary.

Also, petitioner argues that the collection of the SHT is a kind of class legislation that violates the right
of property owners to equal protection of the laws since it favors informal settlers who occupy property
not their own and pay no taxes over law-abiding real property owners w ho pay income and realty
taxes.
Petitioner further contends that respondents’ characterization of the SHT as "nothing more than an
advance payment on the real property tax" has no statutory basis. Allegedly, property tax cannot be
collected before it is due because, under the LGC, chartered cities are authorized to impose property
tax based on the assessed value and the general revision of assessment that is made every three (3)
years.

As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on Section 43
of the UDHA, petitioner asserts that there is no specific provision in the 1987 Constitution stating that
the ownership and enjoyment of property bear a social function. And even if there is, it is seriously
doubtful and far-fetched that the principle means that property owners should provide funds for the
housing of informal settlers and for home site development. Social justice and police power, petitioner
believes, does not mean imposing a tax on one, or that one has to give up something, for the benefit
of another. At best, the principle that property ownership and enjoyment bear a social function is but
a reiteration of the Civil Law principle that property should not be enjoyed and abused to the injury of
other properties and the community, and that the use of the property may be restricted by police power,
the exercise of which is not involved in this case.

Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the SHT collected. Bistek is the
monicker of respondent City Mayor. The Bistekvilles makes it clear, therefore, that politicians will take
the credit for the tax imposed on real property owners.

On the Garbage Fee

Respondents claim that Ordinance No. S-2235, which is an exercise of police power, collects on the
average from every household a garbage fee in the meager amount of thirty-three (33) centavos per
day compared with the sum of ₱1,659.83 that the Quezon City Government annually spends for every
household for garbage collection and waste management.62

In addition, there is no double taxation because the ordinance involves a fee. Even assuming that the
garbage fee is a tax, the same cannot be a direct duplicate tax as it is imposed on a different subject
matter and is of a different kind or character. Based on Villanueva, et al. v. City of Iloilo63 and Victorias
Milling Co., Inc. v. Municipality of Victorias, etc.,64 there is no "taxing twice" because the real property
tax is imposed on ownership based on its assessed value, while the garbage fee is required on the
domestic household. The only reference to the property is the determination of the applicable rate and
the facility of collection.

Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of police
power. The cases of Calalang v. Williams,65 Patalinghug v. Court of Appeals,66 and Social Justice
Society (SJS), et al. v. Hon. Atienza, Jr.,67 which were cited by respondents, are inapplicable since the
assailed ordinance is a revenue measure and does not regulate the disposal or other aspect of
garbage.

The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from domestic
households and not from restaurants, food courts, fast food chains, and other commercial dining
places that spew garbage much more than residential property owners.
Petitioner likewise contends that the imposition of garbage fee is tantamount to double taxation
because garbage collection is a basic and essential public service that should be paid out from
property tax, business tax, transfer tax, amusement tax, community tax certificate, other taxes, and
the IRA of the Quezon City Government. To bolster the claim, he states that the revenue collection of
the Quezon City Government reached Php13.69 billion in 2012. A small portion of said amount could
be spent for garbage collection and other essential services.

It is further noted that the Quezon City Government already collects garbage fee under Section 4768 of
R.A. No. 9003, or the Ecological Solid Waste Management Act of 2000, which authorizes LGUs to
impose fees in amounts sufficient to pay the costs of preparing, adopting, and implementing a solid
waste management plan, and that LGUs have access to the Solid Waste Management (SWM) Fund
created under Section 4669 of the same law. Also, according to petitioner, it is evident that Ordinance
No. S2235 is inconsistent with R.A. No. 9003 for whil e the law encourages segregation, composting,
and recycling of waste, the ordinance only emphasizes the collection and payment of garbage fee;
while the law calls for an active involvement of the barangay in the collection, segregation, and
recycling of garbage, the ordinance skips such mandate. Lastly, in challenging the ordinance,
petitioner avers that the garbage fee was collected even if the required publication of its approval had
not yet elapsed. He notes that on January 7, 2014, he paid his realty tax which already included the
garbage fee.

The Court's Ruling

Respondents correctly argued that an ordinance, as in every law, is presumed valid.

An ordinance carries with it the presumption of validity. The question of reasonableness though is
open to judicial inquiry. Much should be left thus to the discretion of municipal authorities. Courts will
go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be
prohibitive, arbitrary, unreasonable, oppressive, or confiscatory. A rule which has gained acceptance
is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the
business made subject to imposition.70

For an ordinance to be valid though, it must not only be within the corporate powers of the LGU to
enact and must be passed according to the procedure prescribed by law, it should also conform to the
following requirements: (1) not contrary to the Constitution or any statute; (2) not unfair or oppressive;
(3) not partial or discriminatory; (4) not prohibit but may regulate trade; (5) general and consistent with
public policy; and (6) not unreasonable.71 As jurisprudence indicates, the tests are divided into the
formal (i.e., whether the ordinance was enacted within the corporate powers of the LGU and whether
it was passed in accordance with the procedure prescribed by law), and the substantive ( i.e., involving
inherent merit, like the conformity of the ordinance with the limitations under the Constitution and the
statutes, as well as with the requirements of fairness and reason, and its consistency with public
policy).72

An ordinance must pass muster under the test of constitutionality and the test of consistency with the
prevailing laws.73 If not, it is void.74
Ordinance should uphold the principle of the supremacy of the Constitution.75 As to conformity with
existing statutes,

Batangas CATV, Inc. v. Court of Appeals76 has this to say:

It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the laws
of the state. An ordinance in conflict with a state law of general character and statewide application is
universally held to be invalid. The principle is frequently expressed in the declaration that municipal
authorities, under a general grant of power, cannot adopt ordinances which infringe the spirit of a state
law or repugnant to the general policy of the state. In every power to pass ordinances given to a
municipality, there is an implied restriction that the ordinances shall be consistent with the general law.
In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp., Inc.,
ruled that:

The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they
have derived their power in the first place, and negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it
may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional
limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so
great a folly and so great a wrong, sweep from existence all of the municipal corporations in the State,
and the corporation could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are so to phrase it, the mere tenants at will of the
legislature.

This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress retains control of the local
government units although in significantly reduced degree now than under our previous Constitutions.
The power to create still includes the power to destroy. The power to grant still includes the power to
withhold or recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, which cannot now be withdrawn by mere
statute. By and large, however, the national legislature is still the principal of the local government
units, which cannot defy its will or modify or violate it.77

LGUs must be reminded that they merely form part of the whole; that the policy of ensuring the
autonomy of local governments was never intended by the drafters of the 1987 Constitution to create
an imperium in imperio and install an intra-sovereign political subdivision independent of a single
sovereign state.78
"[M]unicipal corporations are bodies politic and corporate, created not only as local units of local self-
government, but as governmental agencies of the state. The legislature, by establishing a municipal
corporation, does not divest the State of any of its sovereignty; absolve itself from its right and duty to
administer the public affairs of the entire state; or divest itself of any power over the inhabitants of the
district which it possesses before the charter was granted."79

LGUs are able to legislate only by virtue of a valid delegation of legislative power from the national
legislature; they are mere agents vested with what is called the power of subordinate
legislation.80 "Congress enacted the LGC as the implementing law for the delegation to the various
LGUs of the State’s great powers, namely: the police power, the power of eminent domain, and the
power of taxation. The LGC was fashioned to delineate the specific parameters and limitations to be
complied with by each LGU in the exercise of these delegated powers with the view of making each
LGU a fully functioning subdivision of the State subject to the constitutional and statutory limitations."81

Specifically, with regard to the power of taxation, it is indubitably the most effective instrument to raise
needed revenues in financing and supporting myriad activities of the LGUs for the delivery of basic
services essential to the promotion of the general welfare and the enhancement of peace, progress,
and prosperity of the people.82 As this Court opined in National Power Corp. v. City of Cabanatuan:83

In recent years, the increasing social challenges of the times expanded the scope of state activity, and
taxation has become a tool to realize social justice and the equitable distribution of wealth, economic
progress and the protection of local industries as well as public welfare and similar objectives. Taxation
assume s even greater significance with the ratification of the 1987 Constitution. Thenceforth, the
power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct
authority to levy taxes, fees and other charges pursuant to Article X, Section 5 of the 1987 Constitution,
viz: "Section 5. Each Local Government unit shall have the power to create its own sources of revenue,
to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local governments."

This paradigm shift results from the realization that genuine development can be achieved only by
strengthening local autonomy and promoting decentralization of governance. For a long time, the
country’s highly centralized government structure has bred a culture of dependence among local
government leaders upon the national leadership. It has also "dampened the spirit of initiative,
innovation and imaginative resilience in matters of local development on the part of local government
leaders." The only way to shatter this culture of dependence is to give the LGUs a wider role in the
delivery of basic services, and confer them sufficient powers to generate their own sources for the
purpose. To achieve this goal, Section 3 of Article X of the 1987 Constitution mandates Congress to
enact a local government code that will, consistent with the basic policy of local autonomy , set the
guidelines and limitations to this grant of taxing powers x x x84

Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of Benguet85 that:

The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized
in Icard v. City Council of Baguio :
It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of
taxation. The charter or statute must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in strictissimi juris . Any doubt or
ambiguity arising out of the term used in granting that power must be resolved against the municipality.
Inferences, implications, deductions – all these – have no place in the interpretation of the taxing power
of a municipal corporation. [Underscoring supplied]

xxxx

Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges."
Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may
provide."

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No.
7160, otherwise known as the Local Government Code of 1991. Book II of the LGC governs local
taxation and fiscal matters.86

Indeed, LGUs have no inherent power to tax except to the extent that such power might be delegated
to them either by the basic law or by the statute.87 "Under the now prevailing Constitution , where there
is neither a grant nor a prohibition by statute , the tax power must be deemed to exist although
Congress may provide statutory limitations and guidelines. The basic rationale for the current rule is
to safeguard the viability and self-sufficiency of local government units by directly granting them
general and broad tax powers. Nevertheless, the fundamental law did not intend the delegation to be
absolute and unconditional; the constitutional objective obviously is to ensure that, while the local
government units are being strengthened and made more autonomous , the legislature must still see
to it that (a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable
impositions; (b) each local government unit will have its fair share of available resources; (c) the
resources of the national government will not be unduly disturbed; and (d) local taxation will be fair,
uniform, and just."88

Subject to the provisions of the LGC and consistent with the basic policy of local autonomy, every LGU
is now empowered and authorized to create its own sources of revenue and to levy taxes, fees, and
charges which shall accrue exclusively to the local government unit as well as to apply its resources
and assets for productive, developmental, or welfare purposes, in the exercise or furtherance of their
governmental or proprietary powers and functions.89 The relevant provisions of the LGC which
establish the parameters of the taxing power of the LGUs are as follows:

SECTION 130. Fundamental Principles. – The following fundamental principles shall govern th e
exercise of the taxing and other revenue-raising powers of local government units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

(1) be equitable and based as far as practicable on the taxpayer’s ability to pay;
 (2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in restraint of
trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be left to
any private person;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the
benefit of, and be subject to the disposition by, the local government unit levying the tax, fee,
charge or other imposition unless otherwise specifically provided herein; and,

(e) Each local government unit shall, as far as practicable, evolve a progressive system of
taxation.

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except
as otherwise provided herein;

(d) Customs duties, registration fees of vessel and wharage on wharves, tonnage dues, and
all other kinds of customs fees, charges and dues except wharfage on wharves constructed
and maintained by the local government unit concerned;

(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of local government units in the guise of charges
for wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form
whatsoever upon such goods or merchandise;

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers
or fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-
pioneer for a period of six (6) and four (4) years, respectively from the date of registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as
amended, and taxes, fees or charges on petroleum products;
 (i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions
on goods or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code;

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds
of licenses or permits for the driving thereof, except tricycles;

(m) Taxes, fees, or other charges on Philippine products actually exported, except as
otherwise provided herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine
hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the
Philippines" respectively; and

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.

SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the city, may
levy the taxes, fees, and charges which the province or municipality may impose: Provided, however,
That the taxes, fees and charges levied and collected by highly urbanized and independent component
cities shall accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement
taxes.

SECTION 186. Power to Levy Other Taxes, Fees or Charges. – Local government units may exercise
the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated
herein or taxed under the provisions of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such
taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose.

On the Socialized Housing Tax

Contrary to petitioner’s submission, the 1987 Constitution explicitly espouses the view that the use of
property bears a social function and that all economic agents shall contribute to the common
good.90 The Court already recognized this in Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.:91
Property has not only an individual function, insofar as it has to provide for the needs of the owner, but
also a social function insofar as it has to provide for the needs of the other members of society. The
principle is this:

Police power proceeds from the principle that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to
the equal enjoyment of others having an equal right to the enjoyment of their property, no r injurious
to the right of the community. Rights of property, like all other social and conventional rights, are
subject to reasonable limitations in their enjoyment as shall prevent them from being injurious, and to
such reasonable restraints and regulations established by law as the legislature, under the governing
an d controlling power vested in them by the constitution, may think necessary and expedient.92

Police power, which flows from the recognition that salus populi est suprema lex (the welfare of the
people is the supreme law), is the plenary power vested in the legislature to make statutes and
ordinances to promote the health, morals, peace, education, good order or safety and general welfare
of the people.93 Property rights of individuals may be subjected to restraints and burdens in order to
fulfill the objectives of the government in the exercise of police power. 94 In this jurisdiction, it is well-
entrenched that taxation may be made the implement of the state’s police power.95

Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the assessed value
of land in excess of Php100,000.00. This special assessment is the same tax referred to in R.A. No.
7279 or the UDHA.96 The SHT is one of the sources of funds for urban development and housing
program.97 Section 43 of the law provides:

Sec. 43. Socialized Housing Tax . – Consistent with the constitutional principle that the ownership and
enjoyment of property bear a social function and to raise funds for the Program, all local government
units are hereby authorized to impose an additional one-half percent (0.5%) tax on the assessed value
of all lands in urban areas in excess of Fifty thousand pesos (₱50,000.00).

The rationale of the SHT is found in the preambular clauses of the subject ordinance, to wit:

WHEREAS, the imposition of additional tax is intended to provide the City Government with sufficient
funds to initiate, implement and undertake Socialized Housing Projects and other related preliminary
activities;

WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and Projects of
the City Government, specifically the marginalized sector through the acquisition of properties for
human settlements;

WHEREAS, the removal of the urban blight will definitely increase fair market value of properties in
the city[.]

The above-quoted are consistent with the UDHA, which the LGUs are charged to implement in their
respective localities in coordination with the Housing and Urban Development Coordinating Council,
the national housing agencies, the Presidential Commission for the Urban Poor, the private sector,
and other non-government organizations.98 It is the declared policy of the State to undertake a
comprehensive and continuing urban development and housing program that shall, among others,
uplift the conditions of the underprivileged and homeless citizens in urban areas and in resettlement
areas, and provide for the rational use and development of urban land in order to bring a bout, among
others, reduction in urban dysfunctions, particularly those that adversely affect public health, safety
and ecology, and access to land and housing by the underprivileged and homeless citizens.99 Urban
renewal and resettlement shall include the rehabilitation and development of blighted and slum
areas100 and the resettlement of program beneficiaries in accordance with the provisions of the
UDHA.101 Under the UDHA, socialized housing102 shall be the primary strategy in providing shelter for
the underprivileged and homeless.103 The LGU or the NHA, in cooperation with the private developers
and concerned agencies, shall provide socialized housing or re settlement areas with basic services
and facilities such as potable water, power and electricity, and an adequate power distribution system,
sewerage facilities, and an efficient and adequate solid waste disposal system; and access to primary
roads and transportation facilities.104 The provisions for health, education, communications, security,
recreation, relief and welfare shall also be planned and be given priority for implementation by the
LGU and concerned agencies in cooperation with the private sector and the beneficiaries
themselves.105

Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination with the NHA,
are directed to implement the relocation and resettlement of persons living in danger areas such as
esteros , railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places
like sidewalks, roads, parks, and playgrounds.106 In coordination with the NHA, the LG Us shall provide
relocation or resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected families.107

Clearly, the SHT charged by the Quezon City Government is a tax which is within its power to impose.
Aside from the specific authority vested by Section 43 of the UDHA, cities are allowed to exercise such
other powers and discharge such other functions and responsibilities as are necessary, appropriate,
or incidental to efficient and effective provision of the basic services and facilities which include, among
others, programs and projects for low-cost housing and other mass dwellings.108 The collections made
accrue to its socialized housing programs and projects.

The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory
purpose. The levy is primarily in the exercise of the police power for the general welfare of the entire
city. It is greatly imbued with public interest. Removing slum areas in Quezon City is not only beneficial
to the underprivileged and homeless constituents but advantageous to the real property owners as
well. The situation will improve the value of the their property investments, fully enjoying the same in
view of an orderly, secure, and safe community, and will enhance the quality of life of the poor, making
them law-abiding constituents and better consumers of business products.

Though broad and far-reaching, police power is subordinate to constitutional limitations and is subject
to the requirement that its exercise must be reasonable and for the public good.109 In the words of City
of Manila v. Hon. Laguio, Jr.:110

The police power granted to local government units must always be exercised with utmost observance
of the rights of the people to due process and equal protection of the law. Such power cannot be
exercised whimsically, arbitrarily or despotically as its exercise is subject to a qualification, limitation
or restriction demanded by the respect and regard due to the prescription of the fundamental law,
particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be
adversely affected only to the extent that may fairly be required by the legitimate demands of public
interest or public welfare. Due process requires the intrinsic validity of the law in interfering with the
rights of the person to his life, liberty and property.

xxxx

To successfully invoke the exercise of police power as the rationale for the enactment of the
Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that the
interests of the public generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. It must be evident that
no other alternative for the accomplishment of the purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes of the police measure and the means employed
for its accomplishment, for even under the guise of protecting the public interest, personal rights and
those pertaining to private property will not be permitted to be arbitrarily invaded.

Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights – a violation of the due process clause.111

As with the State, LGUs may be considered as having properly exercised their police power only if
there is a lawful subject and a lawful method or, to be precise, if the following requisites are met: (1)
the interests of the public generally, as distinguished from those of a particular class, require its
exercise and (2) the mean s employed are reasonably necessary for the accomplishment of the
purpose and not unduly oppressive upon individuals.112

In this case, petitioner argues that the SHT is a penalty imposed on real property owners because it
burdens them with expenses to provide funds for the housing of informal settlers, and that it is a class
legislation since it favors the latter who occupy properties which is not their own and pay no taxes.

We disagree.

Equal protection requires that all persons or things similarly situated should be treated alike, both as
to rights conferred and responsibilities imposed.113 The guarantee means that no person or class of
persons shall be denied the same protection of laws which is enjoyed by other persons or other classes
in like circumstances.114 Similar subjects should not be treated differently so as to give undue favor to
some and unjustly discriminate against others.115 The law may, therefore, treat and regulate one class
differently from another class provided there are real and substantial differences to distinguish one
class from another.116

An ordinance based on reasonable classification does not violate the constitutional guaranty of the
equal protection of the law. The requirements for a valid and reasonable classification are: (1) it must
rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be
limited to existing conditions only; and (4) it must apply equally to all members of the same class.117For
the purpose of undertaking a comprehensive and continuing urban development and housing
program, the disparities between a real property owner and an informal settler as two distinct classes
are too obvious and need not be discussed at length. The differentiation conforms to the practical
dictates of justice and equity and is not discriminatory within the meaning of the Constitution. Notably,
the public purpose of a tax may legally exist even if the motive which impelled the legislature to impose
the tax was to favor one over another.118 It is inherent in the power to tax that a State is free to select
the subjects of taxation.119Inequities which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation.120

Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or
oppressive since the tax being imposed therein is below what the UDHA actually allows. As pointed
out by respondents, while the law authorizes LGUs to collect SHT on lands with an assessed value of
more than ₱50,000.00, the questioned ordinance only covers lands with an assessed value exceeding
₱100,000.00. Even better, on certain conditions, the ordinance grants a tax credit equivalent to the
total amount of the special assessment paid beginning in the sixth (6th) year of its effectivity. Far from
being obnoxious, the provisions of the subject ordinance are fair and just.

On the Garbage Fee

In the United States of America, it has been held that the authority of a municipality to regulate garbage
falls within its police power to protect public health, safety, and welfare.121 As opined, the purposes and
policy underpinnings of the police power to regulate the collection and disposal of solid waste are: (1)
to preserve and protect the public health and welfare as well as the environment by minimizing or
eliminating a source of disease and preventing and abating nuisances; and (2) to defray costs and
ensure financial stability of the system for the benefit of the entire community, with the sum of all
charges marshalled and designed to pay for the expense of a systemic refuse disposal scheme.122

Ordinances regulating waste removal carry a strong presumption of

validity.123 Not surprisingly, the overwhelming majority of U.S. cases addressing a city's authority to
impose mandatory garbage service and fees have upheld the ordinances against constitutional and
statutory challenges.124

A municipality has an affirmative duty to supervise and control the collection of garbage within its
corporate limits.125The LGC specifically assigns the responsibility of regulation and oversight of solid
waste to local governing bodies because the Legislature determined that such bodies were in the best
position to develop efficient waste management programs.126 To impose on local governments the
responsibility to regulate solid waste but not grant them the authority necessary to fulfill the same
would lead to an absurd result."127 As held in one U.S. case:

x x x When a municipality has general authority to regulate a particular subject matter, the manner and
means of exercising those powers, where not specifically prescribed by the legislature, are left to the
discretion of the municipal authorities. x x x Leaving the manner of exercising municipal powers to the
discretion of municipal authorities "implies a range of reasonableness within which a municipality's
exercise of discretion will not be interfered with or upset by the judiciary."128
In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its corporate powers
under Section 22 of the same, the Sangguniang Panlungsod of Quezon City, like other local legislative
bodies, is empowered to enact ordinances, approve resolutions, and appropriate funds for the genera
l welfare of the city and its inhabitants.129Section 16 of the LGC provides:

SECTION 16. General Welfare . – Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and support,
among other things, the preservation and enrichment of culture, promote health and safety, enhance
the right of the people to a balanced ecology, encourage and support the development of appropriate
and self-reliant scientific and technological capabilities, improve public morals, enhance economic
prosperity and social justice, promote full employment among their residents, maintain peace and
order, and preserve the comfort and convenience of their inhabitants.

The general welfare clause is the delegation in statutory form of the police power of the State to
LGUs.130 The provisions related thereto are liberally interpreted to give more powers to LGUs in
accelerating economic development and upgrading the quality of life for the people in the
community.131 Wide discretion is vested on the legislative authority to determine not only what the
interests of the public require but also what measures are necessary for the protection of such interests
since the Sanggunian is in the best position to determine the needs of its constituents.132

One of the operative principles of decentralization is that, subject to the provisions of the LGC and
national policies, the LGUs shall share with the national government the responsibility in the
management and maintenance of ecological balance within their territorial jurisdiction.133 In this regard,
cities are allowed to exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the
basic services and facilities which include, among others, solid waste disposal system or
environmental management system and services or facilities related to general hygiene and
sanitation.134R.A. No. 9003, or the Ecological Solid Waste Management Act of 2000,135 affirms this
authority as it expresses that the LGUs shall be primarily responsible for the implementation and
enforcement of its provisions within their respective jurisdictions while establishing a cooperative effort
among the national government, other local government units, non-government organizations, and the
private sector.136

Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and charges
for services rendered.137 "Charges" refer to pecuniary liability, as rents or fees against persons or
property, while "Fee" means a charge fixed by law or ordinance for the regulation or inspection of a
business or activity.138

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for the
regulation of an activity. The basis for this could be discerned from the foreword of said Ordinance, to
wit:

WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of population
and urban geographical areas, apart from being competent and efficient in the delivery of public
service, apparently requires a big budgetary allocation in order to address the problems relative and
connected to the prompt and efficient delivery of basic services such as the effective system of waste
management, public information programs on proper garb age and proper waste disposal, including
the imposition of waste regulatory measures;

WHEREAS, to help augment the funds to be spent for the city’s waste management system, the City
Government through the Sangguniang Panlungsod deems it necessary to impose a schedule of
reasonable fees or charges for the garbage collection services for residential (domestic household)
that it renders to the public.

Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax. In Smart Communications,
Inc. v. Municipality of Malvar, Batangas ,139the Court had the occasion to distinguish these two
concepts:

In Progressive Development Corporation v. Quezon City, the Court declared that "if the generating of
revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make
the imposition a tax."

In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the purpose and effect
of the imposition determine whether it is a tax or a fee, and that the lack of any standards for such
imposition gives the presumption that the same is a tax.

We accordingly say that the designation given by the municipal authorities does not decide whether
the imposition is properly a license tax or a license fee. The determining factors are the purpose and
1aw p++i1

effect of the imposition as may be apparent from the provisions of the ordinance. Thus, "[w]hen no
police inspection, supervision, or regulation is provided, nor any standard set for the applicant to
establish, or that he agrees to attain or maintain, but any and all persons engaged in the business
designated, without qualification or hindrance, may come, and a license on payment of the stipulated
sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye,
but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is
strong that the power of taxation, and not the police power, is being exercised."

In Georgia, U.S.A., assessments for garbage collection services have been consistently treated as a
fee and not a tax.140

In another U.S. case,141 the garbage fee was considered as a "service charge" rather than a tax as it
was actually a fee for a service given by the city which had previously been provided at no cost to its
citizens.

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the
rule on double taxation142 must necessarily fail.

Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal

corporation, it must be reasonably commensurate to the cost of providing the garbage service.143 To
pass judicial scrutiny, a regulatory fee must not produce revenue in excess of the cost of the regulation
because such fee will be construed as an illegal tax when the revenue generated by the regulation
exceeds the cost of the regulation.144

Petitioner argues that the Quezon City Government already collects garbage fee under Section 47 of
R.A. No. 9003, which authorizes LGUs to impose fees in amounts sufficient to pay the costs of
preparing, adopting, and implementing a solid waste management plan, and that it has access to the
SWM Fund under Section 46 of the same law. Moreover, Ordinance No. S-2235 is inconsistent with
R.A. No. 9003, because the ordinance emphasizes the collection and payment of garbage fee with no
concern for segregation, composting and recycling of wastes. It also skips the mandate of the law
calling for the active involvement of the barangay in the collection, segregation, and recycling of
garbage.

We now turn to the pertinent provisions of R.A. No. 9003.

Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic, comprehensive and
ecological solid waste management program which shall, among others, ensure the proper
segregation, collection, transport, storage, treatment and disposal of solid waste through the
formulation and adoption of the best environmental practices in ecological waste management.145 The
law provides that segregation and collection of solid waste shall be conducted at the barangay level,
specifically for biodegradable, compostable and reusable wastes, while the collection of non-
recyclable materials and special wastes shall be the responsibility of the municipality or
city.146Mandatory segregation of solid wastes shall primarily be conducted at the source, to include
household, institutional, industrial, commercial and agricultural sources.147 Segregation at source refers
to a solid waste management practice of separating, at the point of origin, different materials found in
soli d waste in order to promote recycling and re-use of resources and to reduce the volume of waste
for collection and disposal.148 Based on Rule XVII of the Department of Environment and Natural
Resources (DENR) Administrative Order No. 2001-34, Series of 2001,149which is the Implementing
Rules and Regulations ( IRR ) of R.A. No. 9003, barangays shall be responsible for the collection,
segregation, and recycling of biodegradable, recyclable , compostable and reusable wastes.150

For the purpose, a Materials Recovery Facility (MRF), which shall receive biodegradable wastes for
composting and mixed non-biodegradable wastes for final segregation, re-use and recycling, is to be
established in every barangay or cluster of barangays.151

According to R.A. 9003, an LGU, through its local solid waste management board, is mandated by law
to prepare a 10-year solid waste management plan consistent with the National Solid Waste
Management Framework.152 The plan shall be for the re-use, recycling and composting of wastes
generated in its jurisdiction; ensure the efficient management of solid waste generated within its
jurisdiction; and place primary emphasis on implementation of all feasible re-use, recycling, and
composting programs while identifying the amount of landfill and transformation capacity that will be
needed for solid waste which cannot be re-used, recycled, or composted.153 One of the components of
the so lid waste management plan is source reduction:

(e) Source reduction – The source reduction component shall include a program and implementation
schedule which shows the methods by which the LGU will, in combination with the recycling and
composting components, reduce a sufficient amount of solid waste disposed of in accordance with the
diversion requirements of Section 20.

The source reduction component shall describe the following:

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry out such
activities;

(3) other appropriate waste reduction technologies that may also be considered, provide d that
such technologies conform with the standards set pursuant to this Act;

(4) the types of wastes to be reduced pursuant to Section 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to be diverted
from disposal at a disposal facility through re-use , recycling and composting; and

(6) new facilities and of expansion of existing facilities which will be needed to implement re-
use, recycling and composting.

The LGU source reduction component shall include the evaluation and identification of rate structures
and fees for the purpose of reducing the amount of waste generated, and other source reduction
strategies, including but not limited to, program s and economic incentives provided under Sec. 45 of
this Act to reduce the use of non-recyclable materials, replace disposable materials and products with
reusable materials and products, reduce packaging, and increase the efficiency of the use of paper,
cardboard, glass, metal, and other materials. The waste reduction activities of the community shall al
so take into account, among others, local capability, economic viability, technical requirements, social
concerns, disposition of residual waste and environmental impact: Provided , That, projection of future
facilities needed and estimated cost shall be incorporated in the plan. x x x154

The solid waste management pl an shall also include an implementation schedule for solid waste
diversion:

SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan shall include an
implementation schedule which shows that within five (5) years after the effectivity of this Act, the LGU
shall divert at least 25% of all solid waste from waste disposal facilities through re-use, recycling, and
composting activities and other resource recovery activities: Provided , That the waste diversion goals
shall be increased every three (3) years thereafter: Provided , further, That nothing in this Section
prohibits a local government unit from implementing re-use, recycling, and composting activities
designed to exceed the goal.

The baseline for the twenty-five percent (25%) shall be derived from the waste characterization
result155 that each LGU is mandated to undertake.156In accordance with Section 46 of R.A. No. 9003,
the LGUs are entitled to avail of the SWM Fund on the basis of their approved solid waste management
plan. Aside from this, they may also impose SWM Fees under Section 47 of the law, which states:
SEC. 47. Authority to Collect Solid Waste Management Fees – The local government unit shall impose
fees in amounts sufficient to pay the costs of preparing, adopting, and implementing a solid waste
management plan prepared pursuant to this Act. The fees shall be based on the following minimum
factors:

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In
determining the amounts of the fees, an LGU shall include only those costs directly related to the
adoption and implementation of the plan and the setting and collection of the local fees.

Rule XVII of the IRR of R.A. No. 9003 sets forth the details:

Section 1. Power to Collect Solid Waste Management Fees . – The Local SWM Board/Local SWM
Cluster Board shall impose fees on the SWM services provided for by the LGU and/or any authorized
organization or unit. In determining the amounts of the fees, a Local SWM Board/Local SWM Cluster
Board shall include only those costs directly related to the adoption and implementation of the SWM
Plan and the setting and collection of the local fees. This power to impose fees may be ceded to the
private sector and civil society groups which have been duly accredited by the Local SWM Boar
d/Local SWM Cluster Board; provided, the SWM fees shall be covered by a Contract or Memorandum
of Agreement between the respective boa rd and the private sector or civil society group.

The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan prepared
pursuant to the Act. Further, the fees shall also be used to pay the actual costs incurred in collecting
the local fees and for project sustainability.

Section 2. Basis of SWM Service Fees

Reasonable SWM service fees shall be computed based on but not limited to the following minimum
factors:

a) Types of solid waste to include special waste

b) amount/volume of waste

c) distance of the transfer station to the waste management facility

d) capacity or type of LGU constituency

e) cost of construction

f) cost of management
 g) type of technology

Section 3. Collection of Fees. – Fees may be collected corresponding to the following levels:

a) Barangay – The Barangay may impose fees for collection and segregation of biodegradable,
compostable and reusable wastes from households, commerce, other sources of domestic
wastes, and for the use of Barangay MRFs. The computation of the fees shall be established
by the respective SWM boards. The manner of collection of the fees shall be dependent on
the style of administration of respective Barangay Councils. However, all transactions shall
follow the Commission on Audit rules on collection of fees.

b) Municipality – The municipal and city councils may impose fees on the barangay MRFs for
the collection and transport of non-recyclable and special wastes and for the disposal of these
into the sanitary landfill. The level and procedure for exacting fees shall be defined by the
Local SWM Board/Local SWM Cluster Board and supported by LGU ordinances; however,
payments shall be consistent with the accounting system of government.

c) Private Sector/Civil Society Group – On the basis of the stipulations of contract or

Memorandum of Agreement, the private sector or civil society group shall impose fees for
collection, transport and tipping in their SLFs. Receipts and invoices shall be issued to the
paying public or to the government.

From the afore-quoted provisions, it is clear that the authority of a municipality or city to impose fees
is limited to the collection and transport of non-recyclable and special wastes and for the disposal of
these into the sanitary landfill. Barangays, on the other hand, have the authority to impose fees for the
collection and segregation of biodegradable, compostable and reusable wastes from households,
commerce, other sources of domestic wastes, and for the use of barangay MRFs. This is but
consistent with

Section 10 of R.A. No. 9003 directing that segregation and collection of biodegradable, compostable
and reusable wastes shall be conducted at the barangay level, while the collection of non-recyclable
materials and special wastes shall be the responsibility of the municipality or city.

In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the volume of
waste currently generated by each person in Quezon City, which purportedly stands at 0.66 kilogram
per day, and the increasing trend of waste generation for the past three years.157 Respondents

did not elaborate any further. The figure presented does not reflect the specific types of wastes
generated – whether residential, market, commercial, industrial, construction/demolition, street waste,
agricultural, agro-industrial, institutional, etc. It is reasonable, therefore, for the Court to presume that
such amount pertains to the totality of wastes, without any distinction, generated by Quezon City
constituents. To reiterate, however, the authority of a municipality or city to impose fees extends only
to those related to the collection and transport of non-recyclable and special wastes.

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers only to non-
recyclable and special wastes, still, We cannot sustain the validity of Ordinance No. S-2235. It violates
the equal protection clause of the Constitution and the provisions of the LGC that an ordinance must
be equitable and based as far as practicable on the taxpayer’s ability to pay, and not unjust, excessive,
oppressive, confiscatory.158

In the subject ordinance, the rates of the imposable fee depend on land or floor area and whether the
payee is an occupant of a lot, condominium, social housing project or apartment. For easy reference,
the relevant provision is again quoted below:

On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00

201 sq. m. – 500 sq. m. PHP 200.00

501 sq. m. – 1,000 sq. m. PHP 300.00

1,001 sq. m. – 1,500 sq. m. PHP 400.00

1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00

41 sq. m. – 60 sq. m. PHP 50.00

61 sq. m. – 100 sq. m. PHP 75.00

101 sq. m. – 150 sq. m. PH₱100.00

151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high rise condominiums shall

pay the annual garbage fee on the total size of the entire condominium and socialized Housing
Unit and an additional garbage fee shall be collected based on area occupied for every unit
already so ld or being amortized.
 b) High-rise apartment units – Owners of high-rise apartment units shall pay the annual
garbage fee on the total lot size of the entire apartment and an additional garbage fee based
on the schedule prescribed herein for every unit occupied.

For the purpose of garbage collection, there is, in fact, no substantial distinction between an occupant
of a lot, on one hand, and an occupant of a unit in a condominium, socialized housing project or
apartment, on the other hand. Most likely, garbage output produced by these types of occupants is
uniform and does not vary to a large degree; thus, a similar schedule of fee is both just and equitable.159

The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq. m. unit
in a condominium or socialized housing project has to pay twice the amount than a resident of a lot
similar in size; unlike unit occupants, all occupants of a lot with an area of 200 sq. m. and less have to
pay a fixed rate of Php100.00; and the same amount of garbage fee is imposed regardless of whether
the resident is from a condominium or from a socialized housing project.

Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared purpose of
"promoting shared responsibility with the residents to attack their common mindless attitude in over-
consuming the present resources and in generating waste."160 Instead of simplistically categorizing the
payee into land or floor occupant of a lot or unit of a condominium, socialized housing project or
apartment, respondent City Council should have considered factors that could truly measure the
amount of wastes generated and the appropriate fee for its collection. Factors include, among others,
household age and size, accessibility to waste collection, population density of the barangay or district,
capacity to pay, and actual occupancy of the property. R.A. No. 9003 may also be looked into for
guidance. Under said law, WM service fees may be computed based on minimum factors such as type
s of solid waste to include special waste, amount/volume of waste, distance of the transfer station to
the waste management facility, capacity or type of LGU constituency, cost of construction, cost of
management, and type of technology. With respect to utility rates set by municipalities, a municipality
has the right to classify consumers under reasonable classifications based upon factors such as the
cost of service, the purpose for which the service or the product is received, the quantity or the amount
received, the different character of the service furnished, the time of its use or any other matter which
presents a substantial difference as a ground of distinction.161[A] lack of uniformity in the rate charged
is not necessarily unlawful discrimination. The establishment of classifications and the charging of
different rates for the several classes is not unreasonable and does not violate the requirements of
equality and uniformity. Discrimination to be unlawful must draw an unfair line or strike an unfair
balance between those in like circumstances having equal rights and privileges. Discrimination with
respect to rates charged does not vitiate unless it is arbitrary and without a reasonable fact basis or
justification.162

On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235, which states:

SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus an interest of 2% per
month or a fraction thereof (interest) shall be charged against a household owner who refuses to pay
the garbage fee herein imposed. lacks the limitation required by Section 168 of the LGC, which
provides:
SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. – The sanggunian may
impose a surcharge not exceeding twenty-five (25%) of the amount of taxes, fees or charges not paid
on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid taxes, fees
or charges including surcharges, until such amount is fully paid but in no case shall the total interest
on the unpaid amount or portion thereof exceed thirty-six (36) months. (Emphasis supplied)

Finally, on the issue of publication of the two challenged ordinances.

Petitioner argues that the garbage fee was collected even if the required publication of its approval
had not yet elapsed. He notes that he paid his realty tax on January 7, 2014 which already included
the garbage fee. Respondents counter that if the law provides for its own effectivity, publication in the
Official Gazette is not necessary so long as it is not penal in nature. Allegedly, Ordinance No. SP-2095
took effect after its publication while Ordinance No. SP-2235 became effective after its approval on
December 26, 2013.

The pertinent provisions of the LGC state:

SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless otherwise stated in the ordinance
or the resolution approving the local development plan and public investment program, the same shall
take effect after ten (10) days from the date a copy thereof is posted in a bulletin board at the entrance
of the provincial capital or city, municipal, or barangay hall, as the case may be, and in at least two (2)
other conspicuous places in the local government unit concerned.

(b) The secretary to the sanggunian concerned shall cause the posting of an ordinance or
resolution in the bulletin board at the entrance of the provincial capital and the city, municipal,
or barangay hall in at least two

(2) conspicuous places in the local government unit concerned not later than five (5) days after
approval thereof.

The text of the ordinance or resolution shall be disseminated and posted in Filipino or English
and in the language or dialect understood by the majority of the people in the local government
unit concerned, and the secretary to the sanggunian shall record such fact in a book kept for
the purpose, stating the dates of approval and posting.

(c) The gist of all ordinances with penal sanctions shall be published in a newspaper of general
circulation within the province where the local legislative body concerned belongs. In the
absence of any newspaper of general circulation within the province, posting of such
ordinances shall be made in all municipalities and cities of the province where the sanggunian
of origin is situated.

(d) In the case of highly urbanized and independent component cities, the main features of the
ordinance or resolution duly enacted or adopted shall, in addition to being posted, be published
once in a local newspaper of general circulation within the city: Provided, That in the absence
thereof the ordinance or resolution shall be published in any newspaper of general circulation.
SECTION 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10) days after
their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue
measures shall be published in full for three (3) consecutive days in a newspaper of local circulation:
Provided, however, That in provinces, cities and municipalities where there are no newspapers of local
circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places.
(Emphasis supplied)

On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095, which
provides that it would take effect after its publication in a newspaper of general circulation.163 On the
other hand, Ordinance No. SP-2235, which was passed by the City Council on December 16, 2013,
provides that it would be effective upon its approval.164

Ten (10) days after its enactment, or on December 26, 2013, respondent City Mayor approved the
same.165

The case records are bereft of any evidence to prove petitioner’s negative allegation that respondents
did not comply with the posting and publication requirements of the law. Thus, We are constrained not
to give credit to his unsupported claim.

WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of Ordinance
No. SP-2095, S-2011, or the "Socialized Housing Tax of Quezon City," is· SUSTAINED for being
consistent ·with Section·43 of Republic Act No. ·7279. On the other hand, Ordinance No. SP-2235, S-
2013, which collects an annual garbage fee on all domestic households in Quezon City, is hereby
declared as UNCONSTITUTIONAL AND ILLEGAL. Respondents are DIRECTED to REFUND with
reasonable dispatch the sums of money collected relative to its enforcement. The temporary
restraining order issued by the Court on February 5, 2014 is LIFTED with respect to Ordinance No.
SP-2095. In contrast, respondents are PERMANENTLY ENJOINED from taking any further action to
enforce Ordinance No. SP. 2235.

SO ORDERED.

20. LOMONDOT V. BALINDONG

G.R. No. 192463 July 13, 2015

OMAIRA LOMONDOT and SARIPA LOMONDOT, Petitioners,

vs.
HON. RASAD G BALINDONG, Presiding Judge, Shari'a District Court, 4th Shari'a Judicial
District, Marawi City, Lanao del Sur and AMBOG PANGANDAMUAN and SIMBANATAO
DIACA, Respondents.

DECISION

PERALTA, J.:
Before us is a petition for certiorari with prayer for the issuance of a writ of demolition seeking to annul
the Order1dated November 9, 2009 of the Shari'a District Court (SDC), Fourth Shari'a Judicial District,
Marawi City, issued in Civil Case No. 055-91, denying petitioners' motion for the issuance of a writ of
demolition, and the Orders2 dated January 5, 2010 and February 10, 2010 denying petitioners' first
and second motions for reconsideration, respectively.

The antecedent facts are as follows:

On August 16, 1991, petitioners Omaira and Saripa Lomondot filed with the SDC, Marawi City, a
complaint for recovery of possession and damages with prayer for mandatory injunction and temporary
restraining order against respondents Ambog Pangandamun (Pangandamun) and Simbanatao Diaca
(Diaca). Petitioners claimed that they are the owners by succession of a parcel of land located at
Bangon, Marawi City, consisting an area of about 800 sq. meters; that respondent Pangandamun
illegally entered and encroached 100 sq. meter of their land, while respondent Diaca occupied 200 sq.
meters, as indicated in Exhibits "A" and "K" submitted as evidence. Respondents filed their Answer
arguing that they are the owners of the land alleged to be illegally occupied. Trial thereafter ensued.

On January 31, 2005, the SDC rendered a Decision,3 the dispositive portion of which reads:
WHEREFORE, judgment is rendered as follows:

1. DECLARING plaintiffs owners of the 800 square meter land borrowed and turned over by
BPI and described in the complaint and Exhibits "A" and "K";

2. ORDERING defendants to VACATE the portions or areas they illegally encroached as

indicated in Exhibits "A" and "K" and to REMOVE whatever improvements thereat introduced;

3. ORDERING defendants to jointly and severally pay plaintiffs (a) ₱50,000.00 as moral
damages; (b) ₱30,000.00 as exemplary damages; (C) ₱50,000.00 as attorney's fees and the
costs of the suit.

SO ORDERED4

Respondents filed an appeal5 with us and petitioners were required to file their Comment thereto. In a
Resolution6dated March 28, 2007, we dismissed the petition for failure of respondents to sufficiently
show that a grave abuse of discretion was committed by the SDC as the decision was in accord with
the facts and the applicable law and jurisprudence. Respondents' motion for reconsideration was
denied with finality on September 17, 2007.7 The SDC Decision dated January 31, 2005 became final
and executory on October 31, 2007 and an entry of judgment8 was subsequently made.

Petitioners filed a motion9 for issuance of a writ of execution with prayer for a writ of demolition.

On February 7, 2008, the SDC granted the motion10 for a writ of execution and the writ was issued with
the following fallo:

NOW THEREFORE, you are hereby commanded to cause the execution of the aforesaid judgment. If
defendants do not vacate the premises and remove the improvements, you must secure a special
order of the court to destroy, demolish or remove the improvements on the property. The total amount
awarded to and demanded by the prevailing party is ₱150,000.00 (damages, attorney's fees and the
cost) which defendants must satisfy, pursuant to Section 8 (d) and (e), Rule 39, Rules of Court.11

The Sheriff then sent a demand letter12 to respondents for their compliance.

On February 3, 2009, petitioners filed a Motion13 for the Issuance of a Writ of Demolition to implement
the SDC Decision dated January 31, 2005. The motion was set for hearing.

On March 4, 2009, the SDC issued an Order14 reading as follows:

The plaintiffs, the prevailing party, filed a Motion for Writ of Demolition and the motion was set for
hearing on February 16, 2009. On this date, the plaintiffs, without counsel, appeared. The defendants
failed to appear. Thus, the court issued an order submitting the motion for resolution. Resolution of
the motion for issuance of a Writ of Demolition should be held in abeyance. First, defendant Ambog
Pangandamun has filed on February 6, 2009 an Urgent Manifestation praying deferment of the hearing
on the motion for writ of execution. Second, Atty. Dimnatang T. Saro filed on February 13, 2009 a
Notice of Appearance with Motion to Postpone the hearing set on February 16, 2009 to study the
records of the case as the records are not yet in his possession. Third, the recent periodic report dated
January 26, 2009 of the Sheriff shows Sultan Alioden of Kabasaran is negotiating the parties whereby
the defendant Ambog Pangandamun will be made to pay the five (5)-meter land of the plaintiffs
encroached by him and that what remains to be ironed out is the fixing of the amount.

WHEREFORE, the resolution on the Motion for Writ of Demolition is HELD IN ABEYANCE. The Sheriff
is DIRECTED to exert efforts to bring the parties back to the negotiating table seeing to it that Sultan
Alioden of Kabasaran is involved in the negotiation. Atty. Saro is REQUIRED to file his comment on
the motion for writ of execution within fifteen (15) days from notice to guide the court in resolving the
incident in the event the negotiation fails.

SO ORDERED.15

On May 5, 2009, the SDC issued another Order16 which held in abeyance the resolution of the motion
for issuance of a writ of demolition and granted an ocular inspection or actual measurement of
petitioners' 800-sq.-meter land.

The SDC issued another Order17 dated May 14, 2009, which stated, among others, that: While the
decision has become final and executory and a Writ of Execution has been issued, there are instances
when a Writ of Execution cannot be enforced as when there is a supervening event that prevents the
Sheriff to execute a Writ of Execution.

The defendants claimed they have not encroached as they have already complied with the Writ of
Execution and their buildings are not within the area claimed by the plaintiffs. This to the Court is the
supervening event, thus the order granting the request of Atty. Jimmy Saro, counsel for the
defendants, to conduct a survey to determine whether there is encroachment or not. Thus, the Order
dated May 5, 2009.
WHEREFORE, Engr. Hakim Laut Balt is hereby commissioned to conduct a survey of the 800 square
meters claimed by the plaintiffs. Said Eng. Balt is given a period of one (1) month from notice within
which to conduct the survey in the presence of the parties.18

On November 9, 2009, the SDC issued the assailed Order19 denying petitioners' motion for demolition.
The Order reads in full:

It was on February 3, 2009 that the plaintiffs filed a Motion for Issuance of a Writ of Demolition. The
defendants filed their comment thereto on March 24, 2009. They prayed that an ocular inspection
and/or actual measurement of the 800 square meter land of the plaintiffs be made which the court
granted, in the greater interest of justice, considering that defendants claimed to have complied with
the writ of execution, hence there is no more encroachment of plaintiffs’ land.

The intercession of concerned leaders to effect amicable settlement and the order to conduct a survey
justified the holding in abeyance of the resolution of the pending incident, motion for writ of demolition.

After attempts for settlement failed and after the commissioned Geodetic Engineer to conduct the
needed survey asked for relief, plaintiffs asked anew for a writ of demolition. Defendants opposed the
grant of the motion, alleging compliance with the writ of execution, and prayed for appointment of
another Geodetic Engineer to conduct a survey and actual measurement of plaintiffs' 800 square
meter land.

At this point in time, the court cannot issue a special order to destroy, demolish or remove defendants'
houses, considering their claim that they no longer encroach any portion of plaintiffs’ land.

Gleaned from Engineer Hakim Laut Balt's Narrative Report, he could have conducted the required
survey had not the plaintiffs dictated him where to start the survey.

WHERFORE, the motion for issuance of a writ of demolition is DENIED. A survey is still the best way
to find out if indeed defendants' houses are within plaintiffs' 800 square meter land. Parties are,
therefore, directed to choose and submit to the court their preferred Geodetic Engineer to conduct the
survey within ten (10) days from notice.20

Petitioners filed their motion for reconsideration which the SDC denied in an Order21 dated January 5,
2010 saying that the motion failed to state the timeliness of the filing of said motion and failed to comply
with the requirements of notice of hearing. Petitioners' second motion for reconsideration was also
denied in an Order22 dated February10, 2010. The SDC directed the parties to choose and submit their
preferred Geodetic Engineer to conduct the survey within 15 days from notice.

Undaunted, petitioners filed with the CA-Cagayan de Oro City a petition for certiorari assailing the
Orders issued by the SDC on November 9, 2009, January 5, 2010 and February 10, 2010. In a
Resolution23 dated April 27, 2010, the CA dismissed the petition for lack of jurisdiction, saying, among
others, that:

xxxx
In pursuing the creation of Shari'a Appellate Court, the Supreme Court En Banc even approved A.M.
No. 99-4-06, otherwise known as Resolution Authorizing the Organization of the Shari'a Appellate
Court.

However, the Shari'a Appellate Court has not yet been organized until the present. We, on our part,
therefore, cannot take cognizance of the instant case because it emanates from the Shari'a Courts,
which is not among those courts, bodies or tribunals enumerated under Chapter 1, Section 9 of [Batas]
Pambansa Bilang 129, as amended over which We can exercise appellate jurisdiction. Thus, the
instant Petition should be filed directly with the Supreme Court.24 Petitioners filed the instant petition
for certiorari assailing the SDC Orders, invoking the following grounds:

RESPONDENT JUDGE, HONORABLE RASAD G. BALINDONG, COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION IN
DENYING THE MOTION FOR ISSUANCE OF THE WRIT OF DEMOLITION AFTERTHE WRIT OF
EXECUTION ISSUED BY THE COURT COULD NOT BE IMPLEMENTED AND INSTEAD DIRECT
THE CONDUCT OF THE SURVEY.

RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING IT

APPEAR THAT HE WAS IN COURT AT HIS SALA IN MARAWI CITY LAST JANUARY 28, 2010
WHEN THE PARTIES WERE PRESENT AND HE WAS NOT THERE.25

Preliminarily, we would deal with a procedural matter. Petitioners, after receipt of the SDC Order
denying their second motion for reconsideration of the Order denying their motion for the issuance of
a writ of demolition, filed a petition for certiorari with the CA. The CA dismissed the petition for lack of
jurisdiction in a Resolution dated April 27, 2010 saying that, under RA 9054, it is the Shari’a Appellate
Court (SAC) which shall exercise jurisdiction over petition for certiorari; that, however, since SAC has
not yet been organized, it cannot take cognizance of the case as it emanates from the Shari’a Courts,
which is not among those courts, bodies or tribunals enumerated under Chapter 1, Section 9 of Batas
Pambansa Bilang 129, as amended, over which it can exercise appellate jurisdiction.

Under Republic Act No. 9054, An Act to Strengthen and Expand the Organic Act for the Autonomous
Region in Muslim Mindanao, amending for the purpose Republic Act No. 6734, entitled, "An Act
Providing for the Autonomous Region in Muslim Mindanao, as amended", the Shari'a Appellate Court
shall exercise appellate jurisdiction over petitions for certiorari of decisions of the Shari'a District
Courts. In Villagracia v. Fifth (5th) Shari’a District Court,26 we said:

x x x We call for the organization of the court system created under Republic Act No. 9054 to effectively
enforce the Muslim legal system in our country. After all, the Muslim legal system – a legal system
complete with its own civil, criminal, commercial, political, international, and religious laws is part of
the law of the land, and Shari’a courts are part of the Philippine judicial system.

The Shari’a Appellate Court created under Republic Act No. 9054 shall exercise appellate jurisdiction
over all cases tried in the Shari’a District Courts. It shall also exercise original jurisdiction over
1avv phi1

petitions for certiorari, prohibition, mandamus, habeas corpus, and other auxiliary writs and processes
in aid of its appellate jurisdiction. The decisions of the Shari’a Appellate Court shall be final and
executory, without prejudice to the original and appellate jurisdiction of this court.27
and

In Tomawis v. Hon. Balindong,28 we stated that:

x x x [t]he Shari’a Appellate Court has yet to be organized with the appointment of a Presiding Justice
and two Associate Justices. Until such time that the Shari’a Appellate Court shall have been organized,
however, appeals or petitions from final orders or decisions of the SDC filed with the CA shall be
referred to a Special Division to be organized in any of the CA stations preferably composed of Muslim
CA Justices.29

Notably, Tomawis case was decided on March 5, 2010, while the CA decision was rendered on April
27, 2010. The CA's reason for dismissing the petition, i.e., the decision came from SDC which the CA
has no appellate jurisdiction is erroneous for failure to follow the Tomawis ruling. However, we need
not remand the case, as we have, on several occasions,30 passed upon and resolved petitions and
cases emanating from Shari’a courts.

Petitioners contend that their land was specific and shown by the areas drawn in Exhibits "A" and "K"
and by oral and documentary evidence on record showing that respondents have occupied portions
of their land, i.e., respondent Pangandamun's house encroached a 100 sq. meter portion, while
respondent Diaca occupied 200 sq. meters; and that the SDC had rendered a decision ordering
respondents to vacate the portions or areas they had illegally encroached as indicated in Exhibits "A"
and "K" and to remove whatever improvements thereat introduced. Such decision had already attained
finality and a corresponding entry of judgment had been made and a writ of execution was issued.
Petitioners' claim that the SDC's order for a conduct of a survey to determine whether respondents'
land are within petitioners' 800-sq.-meter land would, in effect, be amending a final and executory
decision.

Only respondent Pangandamun filed his Comment, arguing that petitioners' motion for the issuance
of a writ of demolition has no factual and legal basis because his houses are clearly outside the 800-
sq.-meter land of petitioners; that his house had been constructed in 1964 within full view of the
petitioners but none of them ever questioned the same.

We find for the petitioners.

The SDC Decision dated January31, 2005 ordered respondents to vacate the portions or areas they
had illegally encroached as indicated in Exhibits "A" and "K" and to remove whatever improvements
thereat introduced. Thus, petitioners had established that they are recovering possession of 100 sq.
meters of their land which was occupied by respondent Pangandamun's house as indicated in Exhibit
"K-1", and 200 sq. meter portion being occupied by Diaca as indicated in Exhibit "K-2". Such decision
had become final and executory after we affirmed the same and an entry of judgment was made. Such
decision can no longer be modified or amended. In Dacanay v. Yrastorza, Sr.,31 we explained the
concept of a final and executory judgment, thus:

Once a judgment attains finality, it becomes immutable and unalterable. A final and executory
judgment may no longer be modified in any respect, even if the modification is meant to correct what
is perceived to be an erroneous conclusion of factor law and regardless of whether the modification is
attempted to be made by the court rendering it or by the highest court of the land. This is the doctrine
of finality of judgment. It is grounded on fundamental considerations of public policy and sound practice
that, at the risk of occasional errors, the judgments or orders of courts must become final at some
definite time fixed by law. Otherwise, there will be no end to litigations, thus negating the main role of
courts of justice to assist in the enforcement of the rule of law and the maintenance of peace and order
by settling justiciable controversies with finality.32

However, the SDC later found that while the decision has become final and executory and a writ of
execution has been issued, there are instances when a writ of execution cannot be enforced as when
there is a supervening event that prevents the sheriff to execute the writ of execution. It found that
respondents' claim that their buildings are not within the area claimed by petitioners is a supervening
event and ordered a survey of the land, hence, denied the motion for a writ of demolition.

We do not agree.

It is settled that there are recognized exceptions to the execution as a matter of right of a final and
immutable judgment, and one of which is a supervening event.

In Abrigo v. Flores,33 we said:

We deem it highly relevant to point out that a supervening event is an exception to the execution as a
matter of right of a final and immutable judgment rule, only if it directly affects the matter already
litigated and settled, or substantially changes the rights or relations of the parties therein as to render
the execution unjust, impossible or inequitable. A supervening event consists of facts that transpire
after the judgment became final and executory, or of new circumstances that develop after the
judgment attained finality, including matters that the parties were not aware of prior to or during the
trial because such matters were not yet in existence at that time. In that event, the interested party
may properly seek the stay of execution or the quashal of the writ of execution, or he may move the
court to modify or alter the judgment in order to harmonize it with justice and the supervening event.
The party who alleges a supervening event to stay the execution should necessarily establish the facts
by competent evidence; otherwise, it would become all too easy to frustrate the conclusive effects of
a final and immutable judgment.34 In this case, the matter of whether respondents' houses intruded
petitioners' land is the issue in the recovery of possession complaint filed by petitioners in the SDC
which was already ruled upon, thus cannot be considered a supervening event that would stay the
execution of a final and immutable judgment. To allow a survey as ordered by the SDC to determine
whether respondents' houses are within petitioners' land is tantamount to modifying a decision which
had already attained finality.

We find that the SDC committed grave abuse of discretion when it denied petitioners' motion for the
issuance a writ of demolition. The issuance of a special order of demolition would certainly be the
necessary and logical consequence of the execution of the final and immutable decision.35 Section
10(d) of Rule 39, Rules of Court provides:

Section 10. Execution of judgments for specific act. —

xxxx
(d) Removal of improvements on property subject of execution. - when the property subject of the
execution contains improvements constructed or planted by the judgment obligor or his agent, the
officer shall not destroy, demolish or remove said improvements except upon special order of the
court, issued upon motion of the judgment obligee after due hearing and after the former has failed to
remove the same within a reasonable time fixed by the court.

Notably, this case was decided in 2005 and its execution has already been delayed for years now. It
is almost trite to say that execution is the fruit and end of the suit and is the life of law.36 A judgment, if
left unexecuted, would be nothing but an empty victory for the prevailing party.37

WHEREFORE, the petition is GRANTED. The Orders dated November 9, 2009, January 5, 2010 and
February 10, 2010, of the Shari'a District Court, Fourth Shari'a Judicial District, Marawi City are hereby
CANCELLED and SET ASIDE. The Shari'a District Court is hereby ORDERED to ISSUE a writ of
demolition to enforce its Decision dated January 31, 2005 in Civil Case No. 055-91.

Let a copy of this Decision be furnished the Presiding Justice of the Court of Appeals for whatever
action he may undertake in light of our pronouncement in the Tomawis v. Hon. Balindong case quoted
earlier on the creation of a Special Division to handle appeals or petitions from trial orders or decisions
of the Shari' a District Court.

SO ORDERED.

21. PCGG V. DUMAYAS

EN BANC

G.R. No. 209447, August 11, 2015

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), Petitioner, v. HON. WINLOVE

M. DUMAYAS, PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 59, MAKATI CITY AND
UNITED COCONUT PLANTERS BANK (UCPB), Respondents.

[G.R. NO. 210901]

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), Petitioner, v. HON. WINLOVE

M. DUMAYAS, PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 59, MAKATI CITY AND
UNITED COCONUT PLANTERS LIFE ASSURANCE CORPORATION (COCOLIFE), Respondents.

DECISION

VILLARAMA, JR., J.:

It is an important fundamental principle in our judicial system that every litigation must come to an
end. Litigation must end and terminate sometime and somewhere, and it is essential to an effective
and efficient administration of justice that, once a judgment has become final, the winning party be,
not through a mere subterfuge, deprived of the fruits of the verdict.1 Adherence to the principle impacts
upon the lives of about three million poor farmers who have long waited to benefit from the outcome
of the 27-year battle for the judicial recovery of assets acquired through illegal conversion of the
coconut levies collected during the Marcos regime into private funds.

The Case

Before us are the consolidated petitions seeking the reversal of the following Orders 2 issued by
respondent Presiding Judge of the Regional Trial Court (RTC) of Makati City, Branch 59: (a) Order
dated April 29, 2013 denying petitioner’s motion to dismiss the complaint in Civil Case No. 12-
1251; (b) Order dated June 28, 2013 denying the motion for reconsideration filed by petitioner; (c)
Omnibus Order dated May 15, 2013 denying petitioner’s motion to dismiss the complaint in Civil Case
No. 12-1252; and (d) Order dated December 4, 2013 denying the motion for reconsideration filed by
petitioner.

The Antecedents

The factual background of this case is gathered from the records and the decisions of this Court
involving the coconut levy funds. We reproduce the pertinent portions of the January 24, 2012
Decision in COCOFED v. Republic3:LawlibraryofCRAlaw

In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment Company (CIC)
to administer the Coconut Investment Fund (CIF), which, under Section 8 thereof, was to be sourced
from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55 levy of which the copra
seller was, or ought to be, issued COCOFUND receipts, PhP 0.02 was placed at the disposition of
COCOFED, the national association of coconut producers declared by the Philippine Coconut
Administration (PHILCOA, now PCA) as having the largest membership.

The declaration of martial law in September 1972 saw the issuance of several presidential decrees
(“P.Ds.”) purportedly designed to improve the coconut industry through the collection and use of the
coconut levy fund. While coming generally from impositions on the first sale of copra, the coconut levy
fund came under various names x x x. Charged with the duty of collecting and administering the Fund
was PCA. Like COCOFED with which it had a legal linkage, the PCA, by statutory provisions scattered
in different coco levy decrees, had its share of the coco levy.

The following were some of the issuances on the coco levy, its collection and utilization, how the
proceeds of the levy will be managed and by whom, and the purpose it was supposed to
serve:LawlibraryofCRAlaw

1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and declared the
proceeds of the CCSF levy as trust fund, to be utilized to subsidize the sale of coconut-based products,
thus stabilizing the price of edible oil.

2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the operation of a
hybrid coconut seed farm.

3. Then came P.D. No. 755 providing under its Section 1 the following:LawlibraryofCRAlaw
It is hereby declared that the policy of the State is to provide readily available credit facilities to the
coconut farmers at a preferential rates; that this policy can be expeditiously and efficiently realized by
the implementation of the “Agreement for the Acquisition of a Commercial Bank for the benefit of
Coconut Farmers” executed by the [PCA] x x x; and that the [PCA] is hereby authorized to distribute,
for free, the shares of stock of the bank it acquired to the coconut farmers x x x.Towards achieving the
policy thus declared, P.D. No. 755, under its Section 2, authorized PCA to utilize the CCSF and the
CIDF collections to acquire a commercial bank and deposit the CCSF levy collections in said bank,
interest free, the deposit withdrawable only when the bank has attained a certain level of sufficiency
in its equity capital. The same section also decreed that all levies PCA is authorized to collect shall
not be considered as special and/or fiduciary funds or form part of the general funds of the government
within the contemplation of P.D. No. 711.

4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil industries.

5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised Coconut
Industry Code), read:LawlibraryofCRAlaw

ARTICLE III
Levies

Section 1. Coconut Consumers Stabilization Fund Levy. – The [PCA] is hereby empowered to impose
and collect x x x the Coconut Consumers Stabilization Fund Levy x x x.

x x x x

Section 5. Exemption. — The [CCSF] and the [CIDF] as well as all disbursements as herein
authorized, shall not be construed x x x as special and/or fiduciary funds, or as part of the general
funds of the national government within the contemplation of PD 711; x x x the intention being that
said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers
shall be owned by them in their private capacities: x x x. (Emphasis supplied.)
6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation, out of other
coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468 and entrusted a
portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in oil mills and
other private corporations, with the following equity ownership structure:

Section 2. Organization of the Cooperative Endeavor. – The [UCPB], in its capacity as the investment
arm of the coconut farmers thru the [CIIF] x x x is hereby directed to invest, on behalf of the coconut
farmers, such portion of the CIIF x x x in private corporations x x x under the following
guidelines:LawlibraryofCRAlaw

a) The coconut farmers shall own or control at least x x x (50%) of the outstanding voting capital
stock of the private corporation [acquired] thru the CIIF and/or corporation owned or controlled by
the farmers thru the CIIF x x x. (Words in bracket added.)
Through the years, a part of the coconut levy funds went directly or indirectly to [finance] various
projects and/or was converted into different assets or investments. Of particular relevance to this case
was their use to acquire the First United Bank (FUB), later renamed UCPB, and the acquisition by
UCPB, through the CIIF companies, of a large block of SMC shares.

x x x x

Shortly after the execution of the PCA-Cojuangco, Jr. Agreement, President Marcos issued, on July
29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and CIDF to acquire a
commercial bank to provide coco farmers with “readily available credit facilities at preferential rate,”
and PCA “to distribute, for free,” the bank shares to coconut farmers.

Then came the 1986 EDSA event. One of the priorities of then President Corazon C. Aquino’s
revolutionary government was the recovery of ill-gotten wealth reportedly amassed by the Marcos
family and close relatives, their nominees and associates. Apropos thereto, she issued Executive
Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O. 1 created the
PCGG and provided it with the tools and processes it may avail of in the recovery efforts; E.O. No. 2
asserted that the ill-gotten assets and properties come in the form of shares of stocks, etc.; while E.O.
No. 14 conferred on the Sandiganbayan exclusive and original jurisdiction over ill-gotten wealth cases,
with the proviso that “technical rules of procedure and evidence shall not be applied strictly” to the civil
cases filed under the E.O. Pursuant to these issuances, the PCGG issued numerous orders of
sequestration, among which were those handed out, as earlier mentioned, against shares of
stock in UCPB purportedly owned by or registered in the names of (a) more than a million coconut
farmers and (b) the CIIF companies, including the SMC shares held by the CIIF companies. On
July 31, 1987, the PCGG instituted before the Sandiganbayan a recovery suit docketed thereat as CC
No. 0033.

After the filing and subsequent amendments of the complaint in CC 0033, Lobregat, COCOFED, et
al., and Ballares, et al., purportedly representing over a million coconut farmers, sought and were
allowed to intervene. Meanwhile, the following incidents/events transpired:LawlibraryofCRAlaw

1. On the postulate, inter alia, that its coco-farmer members own at least 51% of the outstanding
capital stock of UCPB, the CIIF companies, etc., COCOFED, et al., on November 29, 1989, filed Class
Action Omnibus Motion praying for the lifting of the orders of sequestration referred to above and for
a chance to present evidence to prove the coconut farmers’ ownership of the UCPB and CIIF shares.
The plea to present evidence was denied;

2. Later, the Republic moved for and secured approval of a motion for separate trial which paved the
way for the subdivision of the causes of action in CC 0033, each detailing how the assets subject
thereof were acquired and the key roles the principal played;

3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be subdivided into eight
complaints, docketed as CC 0033-A to CC 0033-H.

x x x x

4. On February 23, 2001, Lobregat, COCOFED, Ballares, et al., filed a Class Action Omnibus
Motion to enjoin the PCGG from voting the sequestered UCPB shares and the SMC shares registered
in the names of the CIIF companies. The Sandiganbayan, by Order of February 28, 2001, granted the
motion, sending the Republic to come to this Court on certiorari, docketed as G.R. Nos. 147062-
64, to annul said order; and

5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v. COCOFED), the Court
declared the coco levy funds as prima facie public funds. And purchased as the sequestered
UCPB shares were by such funds, beneficial ownership thereon and the corollary voting rights
prima facie pertain, according to the Court, to the government.4 (Additional emphasis, italics and
underscoring supplied)
As mentioned in the above-cited case, the amended complaint in Civil Case No. 0033 revolved around
the provisional take-over by the PCGG of COCOFED, Cocomark, and Coconut Investment Company
and their assets and the sequestration of shares of stock in UCPB CIIF corporations (CIIF oil mills and
the 14 CIIF holding companies), or CIIF companies, so-called for having been either organized,
acquired and/or funded as UCPB subsidiaries with the use of the CIIF levy. The basic complaint also
contained allegations about the alleged misuse of the coconut levy funds to buy out the majority of the
outstanding shares of stock of San Miguel Corporation (SMC).5redarclaw

The proceedings relevant to this case pertain to Civil Case No. 0033-A entitled, Republic of the
Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., Defendants, COCOFED, et al., BALLARES,
et al., Class Action Movants (Re: Anomalous Purchase and Use of [FUB] now [UCPB]), and Civil Case
No. 0033-F entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,
Defendants (Re: Acquisition of San Miguel Corporation Shares of Stock).

The Sandiganbayan rendered partial summary judgments in Civil Case No. 0033-A and 0033-F on
July 11, 2003 and May 7, 2004, respectively. In our Decision dated January 24, 2012 in COCOFED
v. Republic,6 we affirmed with modification the said partial summary judgments and also upheld the
Sandiganbayan’s ruling that the coconut levy funds are special public funds of the
Government. Citing Republic v. COCOFED7 which resolved the issue of whether the PCGG has the
right to vote the sequestered shares, we declared that the coconut levy funds are not only affected
with public interest but are, in fact, prima facie public funds. We also upheld the Sandiganbayan’s
ruling that Sections 1 and 2 of P.D. 755, Section 3, Article III of P.D. 961, and the implementing
regulations of the PCA, are unconstitutional “for allowing the use and/or the distribution of properties
acquired through the coconut levy funds to private individuals for their own direct benefit and absolute
ownership.” As to the ownership of the six CIIF companies, the 14 holding companies, and the CIIF
block of SMC shares of stock, we held these to be owned by the Government, having likewise been
acquired using the coconut levy funds. Accordingly, “the properties subject of the January 24, 2012
Decision were declared owned by and ordered reconveyed to the Government, to be used only for the
benefit of all coconut farmers and for the development of the coconut industry.”8redarclaw

Under the Resolution dated September 4, 2012, we denied with finality the motion for reconsideration
filed by the petitioners in G.R. Nos. 177857-58.

The dispositive portion of the September 4, 2012 Resolution in Philippine Coconut Producers
Federation, Inc. (COCOFED) v. Republic of the Philippines9 thus reads:LawlibraryofCRAlaw

WHEREFORE, the Court resolves to DENY with FINALITY the instant Motion for Reconsideration
dated February 14, 2012 for lack of merit.
The Court further resolves to CLARIFY that the 753,848,312 SMC Series 1 preferred shares of the
CIIF companies converted from the CIIF block of SMC shares, with all the dividend earnings as well
as all increments arising from, but not limited to, the exercise of preemptive rights subject of the
September 17, 2009 Resolution, shall now be the subject matter of the January 24, 2012 Decision
and shall be declared owned by the Government and be used only for the benefit of all coconut farmers
and for the development of the coconut industry.

As modified, the fallo of the January 24, 2012 Decision shall read, as follows:LawlibraryofCRAlaw

WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are hereby DENIED. The Partial
Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A as reiterated with modification in
Resolution dated June 5, 2007, as well as the Partial Summary Judgment dated May 7, 2004 in Civil
Case No. 0033-F, which was effectively amended in Resolution dated May 11, 2007, are AFFIRMED
with MODIFICATION, only with respect to those issues subject of the petitions in G.R. Nos. 177857-
58 and 178193. However, the issues raised in G.R. No. 180705 in relation to Partial Summary
Judgment dated July 11, 2003 and Resolution dated June 5, 2007 in Civil Case No. 0033-A, shall be
decided by this Court in a separate decision.

The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is hereby MODIFIED,
and shall read as follows:LawlibraryofCRAlaw

WHEREFORE, in view of the foregoing, We rule as follows:LawlibraryofCRAlaw

SUMMARY OF THE COURT’S RULING.

A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11, 2001
filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al.

The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant
Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit.

B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND
BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff.

1. a. The portion of Section 1 of P.D. No. 755, which reads:LawlibraryofCRAlaw

x x x and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the
shares of stock of the bank it acquired to the coconut farmers under such rules and regulations
it may promulgate.
taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for having allowed the
use of the CCSF to benefit directly private interest by the outright and unconditional grant of
absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the
undefined “coconut farmers”, which negated or circumvented the national policy or public
purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut
industry and achieve its vertical integration; and (ii) for having unduly delegated legislative
power to the PCA.
 b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series
of 1975 and Resolution No. 074-78 are likewise invalid for their failure to see to it that the
distribution of shares serve exclusively or at least primarily or directly the aforementioned
public purpose or national policy declared by P.D. No. 755.

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered
special and/or fiduciary funds nor part of the general funds of the national government and
similar provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene
the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of
ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May
25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely,
Adm. Order No. 1, s. 1975 and Resolution No. 074-78.

4. The so-called “Farmers’ UCPB shares” covered by 64.98% of the UCPB shares of stock, which
formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the
entire consideration of which was charged by PCA to the CCSF, are hereby declared
conclusively owned by, the Plaintiff Republic of the Philippines.

x x x x

SO ORDERED.

The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is hereby MODIFIED,
and shall read as follows:LawlibraryofCRAlaw

WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL SUMMARY JUDGMENT (RE: CIIF
BLOCK OF SMC SHARES OF STOCK) dated August 8, 2005 of the plaintiff is hereby denied for lack
of merit. However, this Court orders the severance of this particular claim of Plaintiff. The Partial
Summary Judgment dated May 7, 2004 is now considered a separate final and appealable judgment
with respect to the said CIIF Block of SMC shares of stock.

The Partial Summary Judgment rendered on May 7, 2004 is modified by deleting the last paragraph
of the dispositive portion, which will now read, as follows:LawlibraryofCRAlaw

WHEREFORE, in view of the foregoing, we hold that:

The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding Companies
and Cocofed, et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES,
NAMELY:

1. Southern Luzon Coconut Oil Mills (SOLCOM);

2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
4. San Pablo Manufacturing Corp. (SPMC);
 5. Granexport Manufacturing Corp. (GRANEX); and
6. Legaspi Oil Co., Inc. (LEGOIL),

AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:

1. Soriano Shares, Inc.;

2. ACS Investors, Inc.;
3. Roxas Shares, Inc.;
4. Arc Investors; Inc.;
5. Toda Holdings, Inc.;
6. AP Holdings, Inc.;
7. Fernandez Holdings, Inc.;
8. SMC Officers Corps, Inc.;
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.

AND THE CONVERTED SMC SERIES 1 PREFERRED SHARES TOTALING 753,848,312 SHARES
SUBJECT OF THE RESOLUTION OF THE COURT DATED SEPTEMBER 17, 2009 TOGETHER
WITH ALL DIVIDENDS DECLARED, PAID OR ISSUED THEREON AFTER THAT DATE, AS WELL
AS ANYINCREMENTS THERETO ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-
EMPTIVE RIGHTS ARE DECLARED OWNED BY THE GOVERNMENT TO BE USED ONLY FOR
THE BENEFIT OF ALL COCONUT FARMERS AND FOR THE DEVELOPMENT OF THE COCONUT
INDUSTRY, AND ORDERED RECONVEYED TO THE GOVERNMENT.

THE COURT AFFIRMS THE RESOLUTIONS ISSUED BY THE SANDIGANBAYAN ON JUNE 5,

2007 IN CIVIL CASE NO. 0033-A AND ON MAY 11, 2007 IN CIVIL CASE NO. 0033-F, THAT THERE
IS NO MORE NECESSITY OF FURTHER TRIAL WITH RESPECT TO THE ISSUE OF OWNERSHIP
OF(1) THE SEQUESTERED UCPB SHARES, (2) THE CIIF FLOCK OF SMC SHARES, AND (3) THE
CIIF COMPANIES, AS THEY HAVE FINALLY BEEN ADJUDICATED IN THE AFOREMENTIONED
PARTIAL SUMMARY JUDGMENTS DATED JULY 11, 2003 AND MAY 7, 2004.

SO ORDERED.
Costs against petitioners COCOFED, et al. in G.R. Nos. 177857-58 and Danilo S. Ursua in G.R. No.
178193.

No further pleadings shall be entertained. Let Entry of Judgment be made in due course.

SO ORDERED.10 (Boldface in the original; additional underscoring supplied)

On December 28, 2012, a petition for declaratory relief11 was filed by respondent UCPB in the RTC of
Makati City (Civil Case No. 12-1251) against the six CIIF oil mills and 14 holding companies (CIIF
companies), PCGG and other corporations “similarly situated.” A similar petition12 was also filed by
respondent United Coconut Planters Life Assurance Corporation (COCOLIFE) against the same
defendants (Civil Case No. 12-1252).

Civil Case No. 12-1251

UCPB alleged that the capital or equity used in establishing the CIIF companies was not exclusively
sourced from the coconut levy funds. It claimed that while P633 Million was invested by it as
Administrator of the CIIF, as universal bank it also invested around P112 million in the six oil mill
companies or oil mills group (CIIF OMG). As to the 14 holding companies, UCPB claimed that while
it had the funds in mid-1983 to purchase the 33,133,266 shares in SMC then being sold by the Soriano
Group for the price of P1.656 Billion to Mr. Eduardo M. Cojuangco, Jr., it could not, under banking
laws, directly engage in the business of brewery. To make the equity investment, the 14 holding
companies were established by the CIIF OMG to serve as corporate vehicles for the investment in
SMC shares (CIIF SMC Block of Shares).

With the foregoing supposed equity in the CIIF companies and contributions to the acquisition of the
SMC shares, UCPB claims 11.03% indirect ownership valued at P7.84 Billion, based on the P71.04
Billion present value of the said sequestered shares (P56.5 Billion redemption price of the redeemed
shares plus P14.54 Billion dividends and accrued interests for the account of the 14 holding
companies). UCPB thus prayed for a judgment

declaring the rights and duties of [UCPB] affirming and confirming [UCPB’s] proportionate right, title
and interest in the Oil Mills Group Companies, its indirect equity of the 14 Coconut Industry Investment
Funds (“CIIF”) Holding Companies and the San Miguel Corporation (“SMC”) Shares, the dividends
thereon and the proceeds of the redemption thereof and that any disbursement or disposition thereof
should x x x respect and take into account [UCPB’s] right, title and interest thereto. 13
PCGG filed a motion to dismiss citing the following grounds: (1) lack of jurisdiction over the subject
matter of the case; (2) the January 24, 2012 Decision of the Supreme Court cannot be the proper
subject of a petition for declaratory relief; (3) a petition for declaratory relief is unavailing since the
alleged right or interest of UCPB over the CIIF companies and the CIIF Block of SMC Shares had long
been breached or violated upon the issuance of the writ of sequestration against the said companies
and shares of stock by the PCGG, which thereafter assumed their administration and voted the shares
of stock; (4) UCPB is now estopped from asserting its alleged right over the subject companies and
shares of stock, having failed to enforce it for a long time (25 years) from the date of filing by PCGG
of the complaint in the Sandiganbayan in 1987 until the Supreme Court decided with finality the issue
of ownership of the subject sequestered companies and shares of stock on September 4, 2012; and
(5) the petition is defective, as it failed to implead an indispensable party, the Republic of the
Philippines.13-aredarclaw

UCPB opposed the motion contending that the subject of its petition is not the Supreme Court Decision
dated January 24, 2012 but the proper documents establishing UCPB’s ownership over the subject
companies and shares of stock. It further asserted that there is no actual breach of right or estoppel
that would bar UCPB’s claim considering that it was not even a party to any previous legal suit involving
the subject properties.13-bredarclaw

On April 29, 2013, respondent Judge issued the first assailed Order denying the motion to dismiss and
directing the PCGG to file its Answer. PCGG’s motion for reconsideration was likewise denied under
the Order dated June 28, 2013.

Civil Case No. 12-1252

COCOLIFE raised similar claims of ownership in the subject companies and shares of stock by virtue
of its being a stockholder, owning 146,610,567 UCPB shares independently of its right as direct
shareholder of the CIIF OMG and the 14 holding companies, as well as the CIIF SMC Block of Shares.
It alleged that on December 18, 1985, it purchased from UCPB shares of stock in four CIIF oil
companies. Using funds coming from COCOLIFE and UCPB, the CIIF OMG was able to raise the
money for the purchase of the 33,133,266 common shares in SMC. Consequently, COCOLIFE’s
percentage ownership in the CIIF SMC Block of Shares being held by the 14 holding companies
is 11.01%. According to COCOLIFE, its investment in the CIIF OMG is evidenced by certificates of
stock issued by San Pablo Manufacturing Corp., Southern Luzon Coconut Oil Mills, Granexport
Manufacturing Corp. and Legaspi Oil Co., Inc.

Like UCPB, COCOLIFE asserted that the CIIF OMG and 14 CIIF holding companies are not wholly
owned by the Government. Since it was not impleaded in the complaint filed by the PCGG for the
recovery of allegedly ill-gotten properties (CIIF companies and CIIF SMC Block of Shares), COCOLIFE
argued that it should not be deprived of its proportionate interest (11.01%) in the said properties
sequestered by PCGG. It thus prayed that judgment be rendered by the RTC declaring the rights and
duties of COCOLIFE affirming and confirming COCOLIFE’s proportionate interest in the four CIIF oil
companies, its indirect equity in the 14 CIIF holding companies and the CIIF SMC Block of Shares
including the proceeds or their equivalent, and that any disbursement or disposition thereof should
preserve, respect and take into account COCOLIFE’s right and interest.

Civil Case No. 12-1252 was consolidated with Civil Case No. 12-1251. PCGG likewise moved to
dismiss the petition in Civil Case No. 12-1252 on the same grounds it raised in Civil Case No. 12-
1251.

The Omnibus Order dated May 15, 2013 denied the motion to dismiss and further required PCGG to
file its Answer. PCGG’s motion for reconsideration was likewise denied by respondent Judge on
December 4, 2013.

Petitioner’s Arguments

PCGG contends that respondent judge gravely abused his discretion in not dismissing the petitions
for declaratory relief, which merely aim to re-litigate the issue of ownership already passed upon by
the Sandiganbayan under the Partial Summary Judgment rendered in Civil Case No. 0033-F and the
January 24, 2012 Decision of this Court in COCOFED v. Republic.14 It argues that the RTC has no
jurisdiction over the acts performed by PCGG pursuant to its quasi-judicial functions, particularly those
relating to the issuance of writs of sequestration, and that all cases involving ill-gotten wealth assets
are under the unquestionable jurisdiction of the Sandiganbayan.

Contrary to the asseveration of respondents UCPB and COCOLIFE, PCGG maintains that their
petitions for declaratory relief actually seek to modify or alter the Decision of this Court in COCOFED
v. Republic, which has become final and executory. PCGG also contends that documents like stock
certificates cannot be a proper subject of a petition for declaratory relief considering that the phrase
“other written instruments” contemplated by the Rules of Court pertains to a written document
constituting a contract upon which rights and obligations are created, which terms could be interpreted
by the courts so as to avoid any conflicting interests between the parties. Further, the alleged
ownership or title of UCPB and COCOLIFE have already been breached or violated by the issuance
of writs of sequestration over the subject properties.

On account of their inaction for more than 25 years that the issue of ownership over the sequestered
CIIF companies and CIIF SMC Block of Shares were being litigated, PCGG argues that UCPB and
COCOLIFE are now estopped from asserting any such right in the said properties. And as to their non-
participation in the cases before the Sandiganbayan, PCGG asserts it has no legal obligation to
implead UCPB and COCOLIFE, as held in Universal Broadcasting Corporation v.
Sandiganbayan (5th Div.).15redarclaw

Respondents’ Arguments

Respondents question the authority of Commissioner Vicente L. Gengos, Jr. in filing the present
petitions before the Court and signing the Verification and Certification Against Forum Shopping. They
point out that the PCGG is a collegial body created by virtue of EO 1, and it may function only as such
“Commission.” Consequently, the present action should have been properly authorized by all
members of the Commission.

On the issue of jurisdiction, UCPB and COCOLIFE argue that since they have properly alleged a case
for declaratory relief, jurisdiction over the subject matter lies in the regular courts such as the RTC of
Makati City. Having filed a motion to dismiss, PCGG is deemed to have admitted the material
allegations of the complaint, specifically that UCPB and COCOLIFE had jointly acquired the six CIIF
oil mills by investing direct equity of P112 Million (UCPB) and P112 Million (COCOLIFE) for the four
CIIF oil mills. Citing San Miguel Corporation v. Kahn16 where this Court held that the Sandiganbayan
has no jurisdiction if the subject matter of the case does not involve or has no relation to the recovery
of ill-gotten wealth, UCPB and COCOLIFE insist that the subject matter of their petitions is the
declaration of their rights under corporate documents, which in turn relate to UCPB and COCOLIFE’s
investments not sourced from the coconut levy funds. It is thus the allegations in the complaint that
determine the cause of action and what court has jurisdiction over such cause of action, and not the
defenses raised in the motion to dismiss and/or answer.

In the same vein, UCPB and COCOLIFE posit that, contrary to PCGG’s position, proceeding to hear
the cases below will not pave the way for re-examining the findings of this Court in its Decision
in COCOFED v. Republic. This is because the subject matter of the petitions for declaratory relief is
not the coconut levy funds but their own investments in the CIIF OMG and consequent indirect
ownership of the CIIF SMC Block of Shares. Neither do their petitions seek to lift the sequestration
orders as these pertain only to those shares in CIIF OMG which were acquired by UCPB as
Administrator, using coconut levy funds. While respondents adhere to the wisdom of the Decision
in COCOFED v. Republic, it is their position that the ruling therein does not affect their respective
claims to 11% proportional equity stake in the CIIF OMG companies. Moreover, since they were not
impleaded in Sandiganbayan Civil Case No. 0033-F and in G.R. Nos. 177857-58 and 178193,
respondents maintain that they are not bound by any adjudication of ownership rendered therein.

Respondents further contend that the writ of sequestration issued by the Sandiganbayan cannot be
considered a breach which gives rise to a cause of action in favor of any of the parties. There was no
“injury” on the part of UCPB and COCOLIFE despite the sequestration proceedings because they
were not impleaded as a party in the sequestration case. They point out that their title and interest in
the subject properties remained unaffected by the sequestration by PCGG considering that the CIIF
companies had not done anything to disown or deny UCPB and COCOLIFE’s stockholdings, as in
fact, in their Answer to the petition for declaratory relief, these companies expressly admitted the
existence of respondents’ stockholdings in each respective company. Also, the CIIF OMG were all in
agreement that there is a need for declaratory relief judgment on respondents’ claims in the
sequestered properties notwithstanding the final decision of this Court which resolved the issue of
ownership in favor of the Government.

On February 26, 2014 in G.R. No. 210901, we issued a temporary restraining order (TRO) immediately
enjoining the respondent judge, the RTC of Makati City, Branch 59, their representatives, agents or
other persons acting on their behalf, from proceeding with the hearing of the petitions for declaratory
relief in Civil Case Nos. 12-1251 and 12-1252.17 Likewise, a TRO was issued in G.R. No. 209447
enjoining the respondent judge from further hearing the said petitions for declaratory relief.18redarclaw

Issues

The issues generated by this controversy are the following:LawlibraryofCRAlaw

1) Non-compliance with the rule on Verification and Certification of Non-Forum Shopping which was
signed by only one PCGG Commissioner;

2) Lack of jurisdiction over the subject matter of Civil Case Nos. 12-1251 and 12-1252;

3) Non-compliance with the requisites of a petition for declaratory relief complied with; and

4) Application of res judicata and/or laches as bar to the suits for declaratory relief filed by UCPB and
COCOLIFE.

Our Ruling

The petitions are meritorious.

Alleged Lack of Authority of PCGG

Commissioner Vicente L. Gengos, Jr.
to file the present petition

Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended, petitions
for certiorari must be verified and accompanied by a sworn certification of non-forum shopping.19 A
pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein
are true and correct of his personal knowledge or based on authentic records.20 The party need not
sign the verification. A party’s representative, lawyer or any person who personally knows the truth of
the facts alleged in the pleading may sign the verification.21redarclaw

On the other hand, a certification of non-forum shopping is a certification under oath by the plaintiff
or principal party in the complaint or other initiatory pleading asserting a claim for relief or in a sworn
certification annexed thereto and simultaneously filed therewith, (a) that he has not theretofore
commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b)
if there is such other pending action or claim, a complete statement of the present status thereof; and
(c) if he should thereafter learn that the same or similar action or claim has been filed or is pending,
he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.22redarclaw

It is obligatory that the one signing the verification and certification against forum shopping on behalf
of the principal party or the other petitioners has the authority to do the same.23 We hold that the
signature of only one Commissioner of petitioner PCGG in the verification and certification against
forum shopping is not a fatal defect.

It has been consistently held that the verification of a pleading is only a formal, not a jurisdictional,
requirement. The purpose of requiring a verification is to secure an assurance that the allegations in
the petition are true and correct, not merely speculative. This requirement is simply a condition
affecting the form of pleadings, and noncompliance therewith does not necessarily render the pleading
fatally defective.24redarclaw

As to the certification of non-forum shopping, a rigid application of the rules should not defeat the
PCGG’s mandate under EO 1, EO 2, EO 14 and EO 14-A to prosecute cases for the recovery of ill-
gotten wealth, and to conserve sequestered assets and corporations, which are in custodia legis,
under its administration. Indeed, relaxation of the rules is warranted in this case involving coconut levy
funds previously declared by this Court as “affected with public interest” and judicially determined as
public funds. Relevantly, after the promulgation of the decision of this Court in COCOFED v.
Republic, EO 180 was issued on March 18, 2015 reiterating the Government’s policy to ensure that
all coco levy funds and coco levy assets be utilized “solely and exclusively for the benefit of all the
coconut farmers and for the development of the coconut industry.” In line with such policy, Section 3
thereof provides:LawlibraryofCRAlaw

Section 3. Actions to Preserve, Protect and Recover Coco Levy Assets. The Office of the
Solicitor General (OSG), the Presidential Commission on Good Government (PCGG), and any other
concerned government agency shall, under the general supervision of the Secretary of Justice, file the
proper pleadings or institute and maintain the necessary legal actions to preserve, protect, or
recover the Government’s rights and interests in the Coco Levy Assets and to prevent any
dissipation or reduction in their value. (Emphasis and underscoring supplied)
Apropos PCGG v. Cojuangco, Jr.,25 involving the issue of who has the right to vote the sequestered
SMC shares, we gave due course to the petition for certiorari and mandamus despite the lack of
signature of the Solicitor General; but it was signed by two special counsels and the verification was
signed by Commissioner Herminio Mendoza. We noted the extraordinary circumstances in the filing
of the petition by the said government officials that justified a liberal interpretation of the rules.
The RTC has no jurisdiction over
suits involving the sequestered coco
levy assets and coco levy funds.

Jurisdiction is defined as the power and authority of a court to hear, try, and decide a
case.26 Jurisdiction over the subject matter is conferred by the Constitution or by law and is
determined by the allegations of the complaint and the relief prayed for, regardless of whether the
plaintiff is entitled to recovery upon all or some of the claims prayed for therein. Jurisdiction is not
acquired by agreement or consent of the parties, and neither does it depend upon the defenses raised
in the answer or in a motion to dismiss.27redarclaw

Under Section 4 (C) of P.D. No. 1606, as amended by R.A. No. 7975 and R.A. No. 8249, the
jurisdiction of the Sandiganbayan included suits for recovery of ill-gotten wealth and related
cases:LawlibraryofCRAlaw

(C) Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and
14-A, issued in 1986.

x x x x

The Sandiganbayan shall have exclusive original jurisdiction over petitions for the issuance of
the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and
processes in aid of its appellate jurisdiction and over petitions of similar nature, including quo warranto,
arising or that may arise in cases filed or which may be filed under Executive Order Nos. 1, 2, 14 and
14-A, issued in 1986: Provided, That the jurisdiction over these petitions shall not be exclusive of the
Supreme Court. (Italics in the original; emphasis supplied)

In PCGG v. Peña,28 we made the following clarification on the extent of the Sandiganbayan’s
jurisdiction:LawlibraryofCRAlaw

x x x Under section 2 of the President’s Executive Order No. 14 issued on May 7, 1986, all cases of
the Commission regarding “the Funds, Moneys, Assets, and Properties Illegally Acquired or
Misappropriated by Former President Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their Close
Relatives, Subordinates, Business Associates, Dummies, Agents, or Nominees” whether civil or
criminal, are lodged within the “exclusive and original jurisdiction of the Sandiganbayan” and all
incidents arising from, incidental to, or related to, such cases necessarily fall likewise under the
Sandiganbayan’s exclusive and original jurisdiction, subject to review on certiorari exclusively by the
Supreme Court.29 (Emphasis supplied)

Soriano III v. Yuzon30 reiterated the above ruling, thus:LawlibraryofCRAlaw

Now, that exclusive jurisdiction conferred on the Sandiganbayan would evidently extend not only
to the principal causes of action, i.e., the recovery of alleged ill-gotten wealth, but also to “all
incidents arising from, incidental to, or related to, such cases,” such as the dispute over the sale
of the shares, the propriety of the issuance of ancillary writs or provisional remedies relative thereto,
the sequestration thereof, which may not be made the subject of separate actions or proceedings in
another forum. As explained by the Court in Peña:LawlibraryofCRAlaw
“The rationale of the exclusivity of such jurisdiction is readily understood. Given the magnitude of the
past regime’s ‘organized pillage’ and the ingenuity of the plunderers and pillagers with the assistance
of the experts and best legal minds available in the market, it is a matter of sheer necessity to
restrict access to the lower courts, which would have tied into knots and made impossible the
commission’s gigantic task of recovering the plundered wealth of the nation, whom the past
regime in the process had saddled and laid prostrate with a huge $27 billion foreign debt that has since
ballooned to $28.5 billion.” (italics and emphasis supplied.) (Additional emphasis supplied)

Respondents’ petitions for declaratory relief filed in the RTC asserted their claim of ownership over
the sequestered CIIF companies and indirectly the CIIF SMC Block of Shares, in the following
percentages: 11.03% (UCPB) and 11.01% (COCOLIFE). Undeniably, these are related to the ill-
gotten wealth cases (Civil Case Nos. 0033-A and 0033-F) involving the issue of ownership of the
aforesaid sequestered companies and shares of stock, which have been tried and decided by the
Sandiganbayan, and the decision had been appealed to and finally disposed of by this Court in G.R.
Nos. 177857-5831 (COCOFED and Lobregat, et. al’s ownership claim over the CIIF companies and
CIIF SMC Block of Shares) and G.R. No. 18070532 (Eduardo M. Cojuangco, Jr.’s claim over UCPB
shares under an Agreement with PCA).

Contrary to respondents’ contention, the subject matter of their petitions for declaratory relief, i.e., their
purported contribution to the acquisition of four CIIF OMG companies and the 14 holding companies,
as well as indirect ownership of a portion of the CIIF SMC Block of Shares, is inextricably intertwined
with the issue of ownership judicially settled in the aforementioned appeals from the Partial Summary
Judgments rendered in Civil Case Nos. 0033-A and 0033-F.

The allegation that no coconut levy funds were actually used to purchase stockholdings in the CIIF
companies is of no moment. Since the CIIF companies and CIIF SMC Block of Shares have long
been sequestered and placed under the administration of the PCGG, the latter’s functions may not be
interfered with by a co-equal court. In Republic v. Investa Corporation33 involving the propriety of
dilution of the Government’s percentage in the stockholdings of a sequestered corporation (DOMSAT),
we held that it is the Sandiganbayan and not the Securities and Exchange Commission (SEC) which
has jurisdiction over the petition filed by the Republic and DOMSAT. As conservator of sequestered
shares, PCGG has the duty to ensure that the sequestered properties are not dissipated under its
watch.

Previously, this Court affirmed the jurisdiction of the RTC in a suit also involving a claim of ownership
in the sequestered corporation, and ruled in this wise:34redarclaw

We disagree with the RTC and the CA on the issue of jurisdiction. While there can be no dispute that
PCOC was sequestered, the fact of sequestration alone did not automatically oust the RTC of
jurisdiction to decide upon the question of ownership of the subject gaming and office
equipment. The PCGG must be a party to the suit in order that the Sandiganbayan’s exclusive
jurisdiction may be correctly invoked. This is deducible from no less than E.O. No. 14, the “Peña”
and “Nepomuceno” cases relied upon by both subordinates courts. Note that in Section 2 of E.O. No.
14 which provides:LawlibraryofCRAlaw
“Section 2. The Presidential Commission on Good Government shall file all such cases, whether civil
or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof.”
it speaks of the PCGG as party-plaintiff. On the other hand, the PCGG was impleaded as co-
defendant in both the “Peña” and “Nepomuceno” cases. But here, the PCGG does not appear in either
capacity, as the complaint is solely between PAGCOR and respondents PCOC and Marcelo. The
“Peña” and “Nepomuceno” cases which recognize the independence of the PCGG and the
Sandiganbayan in sequestration cases, therefore, cannot be invoked in the instant case so as to divest
the RTC of its jurisdiction, under Section 19 of B.P. 129, over PAGCOR’s action for recovery of
personal property.35 (Emphasis supplied)

In Cuenca v. PCGG,36 we upheld the exclusive jurisdiction of the Sandiganbayan over all incidents
affecting the shares of a sequestered corporation considering that the action before the RTC is
inexorably entwined with the Government’s case for recovery of ill-gotten wealth pending with the
Sandiganbayan. Thus:LawlibraryofCRAlaw

Petitioners contend that even if UHC was indeed sequestered, jurisdiction over the subject matter of
petitioners’ Complaint for enforcement or rescission of contract between petitioners and respondents
belonged to the RTC and not the Sandiganbayan. Petitioners cited Philippine Amusement and Gaming
Corporation v. Court of Appeals, x x x, this Court held that the fact of sequestration alone did not
automatically oust the RTC of jurisdiction to decide upon the question of ownership of the disputed
gaming and office equipment as PCGG must be a party to the suit in order that the Sandiganbayan’s
exclusive jurisdiction may be correctly invoked, and as Section 2 of EO 14 was duly applied in PCGG
v. Peña and PCGG v. Nepomuceno, which ineluctably spoke of respondent PCGG as a party-litigant.

x x x x

Sandiganbayan has exclusive jurisdiction over the instant case

A rigorous examination of the antecedent facts and existing records at hand shows that
Sandiganbayan has exclusive jurisdiction over the instant case.

Thus, the petition must fail for the following reasons:LawlibraryofCRAlaw

First, it is a fact that the shares of stock of UHC and CDCP, the subject matter of Civil Case No. 91-
2721 before the Makati City RTC, were also the subject matter of an ill-gotten wealth case, specifically
Civil Case No. 0016 before the Sandiganbayan. In Civil Case No. 91-2721 of the Makati City RTC,
petitioners prayed for a judgment either transferring the UHC shares or restoring and reconveying the
PNCC shares to them. In the event a final judgment is rendered in said Makati City RTC case in favor
of petitioners, then such adjudication tends to render moot and academic the judgment to be rendered
in Sandiganbayan Civil Case No. 0016 considering that the legal ownership of either the UHC or PNCC
shares would now be transferred to petitioners Rodolfo Cuenca and CIC. Such adverse judgment
would run counter to the rights of ownership of the government over the UHC and PNCC shares in
question. x x x

Moreover, inasmuch as UHC was impleaded in Civil Case No. 0016 as a defendant and was listed
among the corporations beneficially owned or controlled by petitioner Cuenca, the issue of the
latter’s right to acquire ownership of UHC shares is inexorably intertwined with the right of the
Republic of the Philippines, through PCGG, to retain ownership of said UHC shares.

It must be borne in mind that the Sandiganbayan was created in 1978 pursuant to Presidential Decree
No. (PD) 1606. Said law has been amended during the interim period after the Edsa Revolution of
1986 and before the 1987 Constitution was drafted, passed, and ratified. Thus, the executive
issuances during such period before the ratification of the 1987 Constitution had the force and effect
of laws. Specifically, then President Corazon C. Aquino issued the following Executive Orders which
amended PD 1606 in so far as the jurisdiction of the Sandiganbayan over civil and criminal cases
instituted and prosecuted by the PCGG is concerned, viz:LawlibraryofCRAlaw

x x x x

Bearing on the jurisdiction of the Sandiganbayan over cases of ill-gotten wealth, EO 14, Secs. 1 and
2 provide:LawlibraryofCRAlaw
SECTION 1. Any provision of the law to the contrary notwithstanding, the Presidential Commission
on Good Government with the assistance of the Office of the Solicitor General and other government
agencies, is hereby empowered to file and prosecute all cases investigated by it
under Executive Order No. 1, dated February 28, 1986 and Executive Order No. 2, dated March
12, 1986, as may be warranted by its findings.

SECTION 2. The Presidential Commission on Good Government shall file all such cases, whether civil
or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof.
(Emphasis supplied.)
Notably, these amendments had been duly recognized and reflected in subsequent amendments to
PD 1606, specifically Republic Act Nos. 7975 and 8249.

In the light of the foregoing provisions, it is clear that it is the Sandiganbayan and not the
Makati City RTC that has jurisdiction over the disputed UHC and PNCC shares, being the
alleged “ill-gotten wealth” of former President Ferdinand E. Marcos and petitioner Cuenca. The
fact that the Makati City RTC civil case involved the performance of contractual obligations relative to
the UHC shares is of no importance. The benchmark is whether said UHC shares are alleged to
be ill-gotten wealth of the Marcoses and their perceived cronies. More importantly, the interests
of orderly administration of justice dictate that all incidents affecting the UHC shares and
PCGG’s right of supervision or control over the UHC must be addressed to and resolved by
the Sandiganbayan. Indeed, the law and courts frown upon split jurisdiction and the resultant
multiplicity of suits, which result in much lost time, wasted effort, more expenses, and irreparable injury
to the public interest.

Second, the UHC shares in dispute were sequestered by respondent PCGG. Sequestration is a
provisional remedy or freeze order issued by the PCGG designed to prevent the disposal and
dissipation of ill-gotten wealth. The power to sequester property means to
place or cause to be placed under [PCGG’s] possession or control said property, or any building or
office wherein any such property or any records pertaining thereto may be found, including business
enterprises and entities, for the purpose of preventing the destruction of, and otherwise conserving
and preserving the same, until it can be determined, through appropriate judicial proceedings, whether
the property was in truth ill-gotten. (Silverio v. PCGG, 155 SCRA 60 [1987]).

Considering that the UHC shares were already sequestered, enabling the PCGG to exercise the
power of supervision, possession, and control over said shares, then such power would collide
with the legal custody of the Makati City RTC over the UHC shares subject of Civil Case No. 91-
2721. Whatever the outcome of Civil Case No. 91-2721, whether from enforcement or rescission of
the contract, would directly militate on PCGG’s control and management of IRC and UHC, and
consequently hamper or interfere with its mandate to recover ill-gotten wealth. As aptly pointed out by
respondents, petitioners’ action is inexorably entwined with the Government’s action for the
recovery of ill-gotten wealth – the subject of the pending case before the Sandiganbayan. Verily,
the transfer of shares of stock of UHC to petitioners or the return of the shares of stock of CDCP (now
PNCC) will wreak havoc on the sequestration case as both UHC and CDCP are subject of
sequestration by PCGG.

Third, Philippine Amusement and Gaming Corporation and Holiday Inn (Phils.), Inc. are not analogous
to the case at bar. The first dealt with ownership of gaming and office equipment, which is distinct from
and will not impact on the sequestration issue of PCOC. The second dealt with an ordinary civil case
for performance of a contractual obligation which did not in any way affect the sequestration
proceeding of NRHDCI; thus, the complaint-in-intervention of Holiday Inn (Phils.), Inc. was properly
denied for lack of jurisdiction over the subject matter.

In both cases cited by petitioners, there was a substantial distinction between the
sequestration proceedings and the subject matter of the actions. This does not prevail in the
instant case, as the ownership of the shares of stock of the sequestered companies, UHC and
CDCP, is the subject matter of a pending case and thus addressed to the exclusive jurisdiction
of the Sandiganbayan.

Sec. 2 of EO 14 pertinently provides: “The Presidential Commission on Good Government shall file all
such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original
jurisdiction thereof.”

The above proviso has been squarely applied in Peña, where this Court held that the exclusive
jurisdiction conferred on the Sandiganbayan would evidently extend not only to the principal causes
of action, that is, recovery of alleged ill-gotten wealth, but also to all incidents arising from, incidental
to, or related to such cases, including a dispute over the sale of the shares, the propriety of the
issuance of ancillary writs of relative provisional remedies, and the sequestration of the shares, which
may not be made the subject of separate actions or proceedings in another forum. Indeed, the issue
of the ownership of the sequestered companies, UHC and PNCC, as well as IRC’s ownership
of them, is undeniably related to the recovery of the alleged ill-gotten wealth and can be
squarely addressed via the exclusive jurisdiction of the Sandiganbayan.

Fourth, while it is clear that the exclusive jurisdiction of the Sandiganbayan only encompasses cases
where PCGG is impleaded, such requirement is satisfied in the instant case. The appellate court
clearly granted PCGG’s petition for certiorari in CA-G.R. SP No. 49686, assailing the trial court’s denial
of its Motion for Leave to Intervene with Motion to Dismiss. Thus, the trial court’s April 20, 1998 Order
was reversed and set aside by the appellate court through its assailed Decision. Consequently,
PCGG was granted the right to intervene and thus became properly impleaded in the instant
case. Without doubt, the trial court has no jurisdiction to hear and decide Civil Case No. 91-
2721.37 (Additional emphasis supplied)

In the light of the foregoing, it is clear that the Sandiganbayan has exclusive jurisdiction over the
subject matter of Civil Case Nos. 12-1251 and 12-1252.

First, the subject matters of respondents’ petitions in Civil Case Nos. 0033-A and 0033-F filed by the
PCGG against Eduardo M. Cojuangco, et al. are the same, i.e., the ownership of CIIF companies and
CIIF SMC Block of Shares, which were claimed by the Government as acquired by the defendants
using public funds (coco levy funds). In the interest of orderly administration of justice and the policy
against multiplicity of suits, it is but proper that all incidents affecting the coconut levy funds and assets
be addressed and resolved by the Sandiganbayan. Claims of ownership of a portion of the subject
CIIF companies and SMC shares by private entities such as UCPB and COCOLIFE are inextricably
related to the aforementioned ill-gotten wealth cases filed in the Sandiganbayan.

Second, UCPB, along with the CIIF companies and CIIF SMC Block of Shares, were duly sequestered
by the PCGG and had been under the latter’s administration for more than 25 years. With the final
determination made by this Court in COCOFED v. Republic that these properties unquestionably
belong to the Government as they were acquired using the coconut levy funds, the PCGG can now
exercise full acts of ownership as evident from the latest executive issuance, EO 180, by President
Benigno Simeon C. Aquino III.

Third, aside from their sequestration by PCGG, the ownership of the aforesaid assets is the subject
matter in both Civil Case Nos. 12-1251 and 12-1252 filed in the RTC and Civil Case Nos. 0033-A and
0033-F in the Sandiganbayan. Respondents’ assertion that the subject matter of their petitions for
declaratory relief is different due to private funds used in buying shares in UCPB and CIIF oil mills is
but a feeble attempt to create an exception to the Sandiganbayan’s exclusive jurisdiction. As
underscored in Cuenca v. PCGG,38 the benchmark is whether such shares of UCPB and CIIF oil mills
are alleged to be ill-gotten wealth of the Marcoses and their perceived cronies, which is sufficient to
bring the case within the exclusive jurisdiction of the Sandiganbayan pursuant to existing laws and
decrees.

Fourth, the requirement in Peña and Nepomuceno that the PCGG must be a party to the suit in order
to invoke the Sandiganbayan’s exclusive jurisdiction was satisfied in this case. PCGG was impleaded
as co-defendant in Civil Case Nos. 12-1251 and 12-1252. It even filed a motion to dismiss in both
cases and appealed from the denial of said motions by respondent judge. Thus, while the Republic
itself was not impleaded in the petitions for declaratory relief, PCGG was formally made a party thereto.

Applicability of Res Judicata

The doctrine of res judicata provides that a final judgment on the merits rendered by a court of
competent jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an
absolute bar to subsequent actions involving the same claim, demand, or cause of action.39 The
following requisites must obtain for the application of the doctrine: (1) the former judgment or order
must be final; (2) it must be a judgment or order on the merits, that is, it was rendered after a
consideration of the evidence or stipulations submitted by the parties at the trial of the case; (3) it must
have been rendered by a court having jurisdiction over the subject matter and the parties; and (4)
there must be, between the first and second actions, identity of parties, of subject matter and of cause
of action. This requisite is satisfied if the two actions are substantially between the same
parties.40redarclaw

There is no question regarding compliance with the first, second and third requisites. However,
respondents maintain that while they adhere to the Decision in COCOFED v. Republic, said decision
did not affect their right or title to the subject properties since the subject matter in their petitions for
declaratory relief is not the coconut levy funds but their own private funds used by them in purchasing
shares from UCPB and CIIF companies, that in turn resulted in their indirect ownership of the CIIF
SMC Block of Shares in their respective proportions: 11.03% (UCPB) and 11.01% (COCOLIFE).

Respondents further assert that they are not bound by the adjudication of ownership in COCOFED v.
Republic considering that they were not impleaded as defendants in Civil Case Nos. 0033-A and 0033-
F.

We disagree.

In Universal Broadcasting Corporation v. Sandiganbayan (5th Div.),41 we reiterated that it is not

necessary to implead companies which are the res of suits for recovery of ill-gotten wealth. We held
that –

Petitioner submits that the Sandiganbayan never acquired jurisdiction over it as it was not impleaded
as a party-defendant in Civil Case No. 0035.

The submission has no merit.

The Price Mansion property is an asset alleged to be ill-gotten. Like UBC, it is listed as among the
properties of Benjamin Romualdez. For sure, UBC is among the corporations listed as alleged
repositories of shares of stock controlled by Romualdez.

In Republic v. Sandiganbayan, the Court held that there is no need to implead firms which are
merely the res of the actions in ill-gotten wealth cases and that judgment may simply be directed
against the assets, thus:LawlibraryofCRAlaw

C. Impleading Unnecessary Re Firms which are the Res of the Actions

And as to corporations organized with ill-gotten wealth, but are not themselves guilty of
misappropriation, fraud or other illicit conduct – in other words, the companies themselves are the
object or thing involved in the action, the res thereof - there is no need to implead them
either. Indeed, their impleading is not proper on the strength alone of their having been formed with
ill-gotten funds, absent any other particular wrongdoing on their part. The judgment may simply be
directed against the shares of stock shown to have been issued in consideration of ill-gotten
wealth. x x x
x x x In this light, they are simply the res in the actions for the recovery of illegally acquired wealth, and
there is, in principle, no cause of action against them and no ground to implead them as defendants
in said actions. x x x 42 (Additional emphasis supplied)

The doctrine of res judicata has two aspects. The first, known as “bar by prior judgment,” or “estoppel
by verdict,” is the effect of a judgment as a bar to the prosecution of a second action upon the same
claim, demand or cause of action. The second, known as “conclusiveness of judgment,” otherwise
known as the rule of auter action pendent, ordains that issues actually and directly resolved in a former
suit cannot again be raised in any future case between the same parties involving a different cause of
action.43redarclaw

[C]onclusiveness of judgment – states that a fact or question which was in issue in a former suit and
there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively
settled by the judgment therein as far as the parties to that action and persons in privity with them are
concerned and cannot be again litigated in any future action between such parties or their privies, in
the same court or any other court of concurrent jurisdiction on either the same or different cause of
action, while the judgment remains unreversed by proper authority. It has been held that in order that
a judgment in one action can be conclusive as to a particular matter in another action between the
same parties or their privies, it is essential that the issue be identical. If a particular point or
question is in issue in the second action, and the judgment will depend on the determination
of that particular point or question, a former judgment between the same parties or their privies
will be final and conclusive in the second if that same point or question was in issue and
adjudicated in the first suit. Identity of cause of action is not required but merely identity of
issues.44 (Emphasis and italics supplied)

We have applied the doctrine of conclusiveness of judgment in a previous case involving ownership
of shares of stock in a sequestered corporation, as follows:LawlibraryofCRAlaw

In cases wherein the doctrine of “conclusiveness of judgment” applies, there is, as in Civil Case No.
0034 and Civil Case No. 0188 identity of issues not necessarily identity of causes of action. The prior
adjudication of the Sandiganbayan affirmed by this Court in G.R. No. 140615, as to the
ownership of the 1/7 Piedras shares of Arambulo, is conclusive in the second case, as it has
been judicially resolved.

The filing of Civil Case No. 0188, although it has a different cause of action from Civil Case No. 0034,
will not enable the PCGG to escape the operation of the principle of res judicata. A case litigated once
shall not be relitigated in another action as it would violate the interest of the State to put an end to
litigation – republicae ut sit litium and the policy that no man shall be vexed twice for the same cause
– nemo debet bis vexari et eadem causa. Once a litigant’s rights had been adjudicated in a valid final
judgment by a competent court, he should not be granted an unbridled license to come back for
another try.45 (Additional italcis and emphasis supplied)

We hold that res judicata under the second aspect (conclusiveness of judgment) is applicable in this
case. The issue of ownership of the sequestered CIIF companies and CIIF SMC Block of Shares was
directly and actually resolved by the Sandiganbayan and affirmed by this Court in COCOFED v.
Republic. More important, in the said decision, we categorically affirmed the resolutions issued by the
Sandiganbayan in Civil Case Nos. 0033-A and 0033-F “THAT THERE IS NO MORE NECESSITY OF
FURTHER TRIAL WITH RESPECT TO THE ISSUE OF OWNERSHIP OF (1) THE SEQUESTERED
UCPB SHARES, (2) THE CIIF BLOCK OF SMC SHARES, AND (3) THE CIIF COMPANIES, AS THEY
HAVE FINALLY BEEN ADJUDICATED IN THE AFOREMENTIONED PARTIAL SUMMARY
JUDGMENTS DATED JULY 11, 2003 AND MAY 7, 2004.” Among the admitted facts set forth in the
Order dated February 23, 2004 is the acquisition by UCPB of the “controlling interests” in the six
CIIF oil mills. The Partial Summary Judgment further quoted from the Answer to Third Amended
Complaint (Subdivided) with Compulsory Counterclaims dated January 7, 2000 filed by the CIIF oil
mills and 14 holding companies, in which they also alleged that pursuant to the authority granted to it
by P.D. 961 and P.D. 1568, “UCPB acquired controlling interests” in the six CIIF oil mills.46redarclaw

In the same decision we specifically upheld the Sandiganbayan’s findings and conclusion on the issue
of ownership of the CIIF OMG, the 14 holding companies and the CIIF SMC Block of
Shares, viz.:LawlibraryofCRAlaw

The CIIF Companies and the CIIF Block

of SMC shares are public funds/assets

From the foregoing discussions, it is fairly established that the coconut levy funds are special public
funds. Consequently, any property purchased by means of the coconut levy funds should
likewise be treated as public funds or public property, subject to burdens and restrictions attached
by law to such property.

In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds. On the
other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil
Mills. Conversely, these companies were acquired using or whose capitalization comes from the
coconut levy funds. However, as in the case of UCPB, UCPB itself distributed a part of its investments
in the CIIF oil mills to coconut farmers, and retained a part thereof as administrator. The portion
distributed to the supposed coconut farmers followed the procedure outlined in PCA Resolution No.
033-78. And as the administrator of the CIIF holding companies, the UCPB authorized the acquisition
of the SMC shares. In fact, these companies were formed or organized solely for the purpose of
holding the SMC shares. As found by the Sandiganbayan, the 14 CIIF holding companies used
borrowed funds from the UCPB to acquire the SMC shares in the aggregate amount of P1.656 Billion.

Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy funds
– funds, which have been established to be public in character – it goes without saying that these
acquired corporations and assets ought to be regarded and treated as government assets. Being
government properties, they are accordingly owned by the Government, for the coconut industry
pursuant to currently existing laws.

It may be conceded hypothetically, as COCOFED, et al. urge, that the 14 CIIF holding companies
acquired the SMC shares in question using advances from the CIIF companies and from UCPB loans.
But there can be no gainsaying that the same advances and UCPB loans are public in character,
constituting as they do assets of the 14 holding companies, which in turn are wholly-owned
subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized, capitalized and/or financed
using coconut levy funds. In net effect, the CIIF block of SMC shares are simply the fruits of the
coconut levy funds acquired at the expense of the coconut industry. In Republic v. COCOFED, the en
bancCourt, speaking through Justice (later Chief Justice) Artemio Panganiban, stated: “Because the
subject UCPB shares were acquired with government funds, the government becomes their prima
facie beneficial and true owner.” By parity of reasoning, the adverted block of SMC shares, acquired
as they were with government funds, belong to the government as, at the very least, their beneficial
and true owner.

We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier discussed,
reiterating our holding in Republic v. COCOFED, the State’s avowed policy or purpose in creating the
coconut levy fund is for the development of the entire coconut industry, which is one of the major
industries that promotes sustained economic stability, and not merely the livelihood of a significant
segment of the population. Accordingly, We sustain the ruling of the Sandiganbayan in CC No.
0033-F that the CIIF companies and the CIIF block of SMC shares are public funds necessarily
owned by the Government. We, however, modify the same in the following wise: These shares
shall belong to the Government, which shall be used only for the benefit of the coconut farmers
and for the development of the coconut industry.47 (Emphasis and underscoring supplied)

In G.R. No. 180705, separately decided by this Court on November 27, 2012, we also affirmed the
Sandiganbayan’s decision nullifying the shares of stock transfer to Eduardo M. Cojuangco, Jr. We
held that as the coconut levy funds partake of the nature of taxes and can only be used for public
purpose, and importantly, for the purpose for which it was exacted, i.e., the development, rehabilitation
and stabilization of the coconut industry, they cannot be used to benefit––whether directly or indirectly–
–private individuals, be it by way of a commission, or as the PCA-Cojuangco Agreement words it,
compensation. Accordingly, the UCPB shares of stock representing the 7.22% fully paid shares
subject of the petition, with all dividends declared, paid or issued thereon, as well as any increments
thereto arising from, but not limited to, the exercise of pre-emptive rights, were ordered reconveyed to
the Government of the Republic of the Philippines, which shall “be used only for the benefit of all
coconut farmers and for the development of the coconut industry.”48redarclaw

Having resolved that subject matter jurisdiction pertains to the Sandiganbayan and not the RTC, and
that the petitions for declaratory relief are barred by our January 24, 2012 Decision which settled with
finality the issue of ownership of the CIIF oil mills, the 14 holding companies and CIIF SMC Block of
Shares, we deem it unnecessary to address the other issues presented.

WHEREFORE, the petitions are GRANTED. The Orders dated April 29, 2013 and June 28, 2013 in
Civil Case No. 12-1251; and Omnibus Order dated May 15, 2013 (Branch 138) and Order dated
December 4, 2013 in Civil Case Nos. 12-1251 and 12-1252 (consolidated petitions) of the Regional
Trial Court of Makati City, Branch 59, are hereby ANNULLED and SET ASIDE. The petitions in Civil
Case Nos. 12-1251 and 12-1252 filed by UCPB and COCOLIFE, respectively, are DISMISSED.

No pronouncement as to costs.

SO ORDERED.cralawlawlibrary
 22. REGULUS DEV. INC. V. DE LA CRUZ

SECOND DIVISION

January 25, 2016

G.R. No. 198172

REGULUS DEVELOPMENT, INC., Petitioner,

vs.
ANTONIO DELA CRUZ, Respondent.

DECISION

BRION, J.:

Before us is a petition for review on certiorari filed by petitioner Regulus Development,

Inc. (petitioner) to challenge the November 23, 2010 Decision1 and August 10, 2011 resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 105290. CA Associate Justice Juan Q. Enriquez, Jr. penned
the rulings, concurred in by Associate Justices Ramon M. Bato, Jr. and Fiorito S. Macalino.

ANTECEDENT FACTS

The petitioner is the owner of an apartment (San Juan Apartments) located at San Juan Street, Pasay
City. Antonio dela Cruz (respondent) leased two units (Unit 2002-A and Unit 2002-B) of the San Juan
Apartments in 1993 and 1994. The contract of lease for each of the two units similarly provides a lease
period of one (1) month, subject to automatic renewals, unless terminated by the petitioner upon
written notice.

The petitioner sent the respondent a letter to terminate the lease of the two subject units. Due to the
respondent’s refusal to vacate the units, the petitioner filed a complaint3 for ejectment before the
Metropolitan Trial Court (MTC) of Pasay City, Manila, on May 1, 2001.

The MTC resolved the case in the petitioner’s favor and ordered the respondent to vacate the
premises, and pay the rentals due until the respondent actually complies.4

The respondent appealed to the Regional Trial Court (RTC). Pending appeal, the respondent
consigned the monthly rentals to the RTC due to the petitioner’s refusal to receive the rentals.

The RTC affirmed5 the decision of the MTC in toto and denied the motion for reconsideration filed
by the respondent.

CA-G.R. SP No. 69504: Dismissal of Ejectment Case

In a Petition for Review filed by the respondent, the CA reversed the lower courts’ decisions and
dismissed the ejectment case.6 On March 19, 2003, the dismissal of the case became final and
executory.7

Orders dated July 25, 2003 and November 28, 2003 for payment of rentals due under lease
contracts

The petitioner filed a motion (to withdraw funds deposited by the defendant-appellant as
lessee)8 praying for the withdrawal of the rentals consigned by the respondent with the RTC.

In an order dated July 25, 2003,9 the RTC granted the petitioner’s motion. The RTC explained that
the effect of the complaint’s dismissal would mean that there was no complaint filed at all. The
petitioner, however, is entitled to the amount of rentals for the use and occupation of the subject units,
as provided in the executed contracts of lease and on the basis of justice and equity.

The court denied the respondent’s motion for reconsideration10 in an order dated November 28,
2003.11

On the petitioner’s motion, the RTC issued a writ of execution on December 18, 2003, to cause the
enforcement of its order dated July 25, 2003.12

CA-G.R. SP No. 81277: Affirmed RTC Orders

The respondent filed a petition for certiorari under Rule 65 before the CA to assail the RTC Orders
dated July 25, 2003 and November 28, 2003 (RTC orders), which granted the petitioner’s motion to
withdraw funds.

The CA dismissed13 the petition and held that the assailed RTC Orders were issued pursuant to its
equity jurisdiction, in accordance with Section 5, Rule 39,14 and Rules 515 and 616 of Rule 135 of the
Rules of Court. The respondent’s motion for reconsideration was similarly denied.

G.R. SP No. 171429: Affirmed CA Ruling on RTC Orders

The respondent filed a petition for review on certiorari before this Court to assail the decision of the
CA in CA-G.R. SP No. 81277. In a resolution dated June 7, 2006,17 we denied the petition for
insufficiency in form and for failure to show any reversible error committed by the CA.

Our resolution became final and executory and an entry of judgment18 was issued.

Execution of RTC Orders

The petitioner returned to the RTC and moved for the issuance of a writ of execution to allow it to
proceed against the supersedeas bond the respondent posted, representing rentals for the leased
properties from May 2001 to October 2001, and to withdraw the lease payments deposited by
respondent from November 2001 until August 2003.19 The RTC granted the motion.20
The RTC issued an Alias Writ of Execution21 dated April 26, 2007, allowing the withdrawal of the rental
deposits and the value of the supersedeas bond.

The petitioner claimed that the withdrawn deposits, supersedeas bond, and payments directly made
by the respondent to the petitioner, were insufficient to cover rentals due for the period of May 2001
to May 2004. Hence, the petitioner filed a manifestation and motion22 dated October 23, 2007, praying
that the RTC levy upon the respondent’s property covered by Transfer Certificate of Title (TCT) No.
136829 to satisfy the judgment credit.

The RTC granted the petitioner’s motion in an order dated June 30, 2008.23 The respondent filed a
motion for reconsideration which was denied by the RTC in an order dated August 26, 2008.24

CA-G.R. SP No. 105290: Assailed the levy of the respondent’s property

On October 3, 2008, the respondent filed with the CA a Petition for Certiorari25 with application for
issuance of a temporary restraining order. The petition sought to nullify and set aside the orders of the
RTC directing the levy of the respondent’s real property. The CA dismissed the petition. Thereafter,
the respondent filed a motion for reconsideration26 dated November 3, 2008.

Pursuant to the order dated June 30, 2008, a public auction for the respondent’s property covered by
TCT No. 136829 was held on November 4, 2008,27 where the petitioner was declared highest bidder.
Subsequently, the Certificate of Sale28 in favor of the petitioner was registered.

Meanwhile, on January 7, 2010, the respondent redeemed the property with the RTC Clerk of Court,
paying the equivalent of the petitioner’s bid price with legal interest. The petitioner filed a motion to
release funds29 for the release of the redemption price paid. The RTC granted30 the motion.

On February 12, 2010, the respondent filed a manifestation and motion31 before the CA to withdraw
the petition for the reason that the redemption of the property and release of the price paid rendered
the petition moot and academic.

Thereafter, the petitioner received the CA decision dated November 23, 2010, which reversed and set
aside the orders of the RTC directing the levy of the respondent’s property. The CA held that while the
approval of the petitioner’s motion to withdraw the consigned rentals and the
posted supersedeas bond was within the RTC’s jurisdiction, the RTC had no jurisdiction to levy on the
respondent’s real property.

The CA explained that the approval of the levy on the respondent’s real property could not be
considered as a case pending appeal, because the decision of the MTC had already become final and
executory. As such, the matter of execution of the judgment lies with the MTC where the complaint for
ejectment was originally filed and presented.

The CA ordered the RTC to remand the case to the MTC for execution. The petitioner filed its motion
for reconsideration which was denied32 by the CA.

THE PETITION
The petitioner filed the present petition for review on certiorari to challenge the CA ruling in CA-G.R.
SP No. 105290 which held that the RTC had no jurisdiction to levy on the respondent’s real property.

The petitioner argues: first, that the RTC’s release of the consigned rentals and levy were ordered in
the exercise of its equity jurisdiction; second, that the respondent’s petition in CA-G.R. SP No. 105290
was already moot and academic with the conduct of the auction sale and redemption of the
respondent’s real property; third, that the petition in CAG. R. SP No. 105290 should have been
dismissed outright for lack of signature under oath on the Verification and Certification against Forum
Shopping.

The respondent duly filed its comment33 and refuted the petitioner’s arguments. On the first argument,
respondent merely reiterated the CA’s conclusion that the RTC had no jurisdiction to order the levy on
respondent’s real property as it no longer falls under the allowed execution pending appeal. On
the second argument, the respondent contended that the levy on execution and sale at public auction
were null and void, hence the CA decision is not moot and academic. On the third argument, the
respondent simply argued that it was too late to raise the alleged formal defect as an issue.

THE ISSUE

The petitioner poses the core issue of whether the RTC had jurisdiction to levy on the respondent’s
real property.

OUR RULING

We grant the petition.

Procedural issue: Lack of notarial seal on the Verification and Certification against Forum
Shopping is not fatal to the petition.

The petitioner alleged that the assailed CA petition should have been dismissed since the notary public
failed to affix his seal on the attached Verification and Certification against Forum Shopping.

We cannot uphold the petitioner’s argument.

The lack of notarial seal in the notarial certificate34 is a defect in a document that is required to be
executed under oath.

Nevertheless, a defect in the verification does not necessarily render the pleading fatally defective.
The court may order its submission or correction, or act on the pleading if the attending circumstances
are such that strict compliance with the Rule may be dispensed with in order that the ends of justice
may be served.35

Noncompliance or a defect in a certification against forum shopping, unlike in the case of a verification,
is generally not curable by its subsequent submission or correction, unless the covering Rule is relaxed
on the ground of "substantial compliance" or based on the presence of "special circumstances or
compelling reasons."36 Although the submission of a certificate against forum shopping is deemed
obligatory, it is not however jurisdictional.37

In the present case, the Verification and Certification against Forum Shopping were in fact submitted.
An examination of these documents shows that the notary public’s signature and stamp were duly
affixed. Except for the notarial seal, all the requirements for the verification and certification documents
were complied with.

The rule is that courts should not be unduly strict on procedural lapses that do not really impair the
proper administration of justice. The higher objective of procedural rules is to ensure that the
substantive rights of the parties are protected. Litigations should, as much as possible, be decided on
the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for the
proper and just determination of his case, free from the unacceptable plea of technicalities.38

The CA correctly refused to dismiss and instead gave due course to the petition as it substantially
complied with the requirements on the Verification and Certification against Forum Shopping.

An issue on jurisdiction prevents the petition from becoming "moot and academic."

The petitioner claims that the assailed CA petition should have been dismissed because the
subsequent redemption of the property by the respondent and the release of the price paid to the
petitioner rendered the case moot and academic.

A case or issue is considered moot and academic when it ceases to present a justiciable controversy
because of supervening events, rendering the adjudication of the case or the resolution of the issue
without any practical use or value.39 Courts generally decline jurisdiction over such case or dismiss it
on the ground of mootness except when, among others, the case is capable of repetition yet evades
judicial review.40

The CA found that there is an issue on whether the RTC had jurisdiction to issue the orders directing
the levy of the respondent’s property. The issue on jurisdiction is a justiciable controversy that
prevented the assailed CA petition from becoming moot and academic.

It is well-settled in jurisprudence that jurisdiction is vested by law and cannot be conferred or waived
by the parties. "Even on appeal and even if the reviewing parties did not raise the issue of jurisdiction,
the reviewing court is not precluded from ruling that the lower court had no jurisdiction over the case."41

Even assuming that the case has been rendered moot due to the respondent’s redemption of the
property, the CA may still entertain the jurisdictional issue since it poses a situation capable of
repetition yet evading judicial review.

Under this perspective, the CA correctly exercised its jurisdiction over the petition.

Equity jurisdiction versus appellate jurisdiction of the RTC

The appellate jurisdiction of courts is conferred by law. The appellate court acquires jurisdiction over
the subject matter and parties when an appeal is perfected.42

On the other hand, equity jurisdiction aims to provide complete justice in cases where a court of law
is unable to adapt its judgments to the special circumstances of a case because of a resulting legal
inflexibility when the law is applied to a given situation. The purpose of the exercise of equity
jurisdiction, among others, is to prevent unjust enrichment and to ensure restitution.43

The RTC orders which allowed the withdrawal of the deposited funds for the use and occupation of
the subject units were issued pursuant to the RTC’s equity jurisdiction, as the CA held in the petition
docketed as CA-G.R. SP No. 81277.

The RTC’s equity jurisdiction is separate and distinct from its appellate jurisdiction on the ejectment
case. The RTC could not have issued its orders in the exercise of its appellate jurisdiction since there
was nothing more to execute on the dismissed ejectment case. As the RTC orders explained, the
dismissal of the ejectment case effectively and completely blotted out and cancelled the complaint.
Hence, the RTC orders were clearly issued in the exercise of the RTC’s equity jurisdiction, not on the
basis of its appellate jurisdiction.

This Court takes judicial notice44 that the validity of the RTC Orders has been upheld in a separate
petition before this Court, under G.R. SP No. 171429 entitled Antonio Dela Cruz v. Regulus
Development, Inc.

The levy of real property was ordered by the RTC in the exercise of its equity jurisdiction.

The levy of the respondent’s property was made pursuant to the RTC orders issued in the exercise of
its equity jurisdiction, independent of the ejectment case originally filed with the MTC.

An examination of the RTC order dated June 30, 2008, directing the levy of the respondent’s real
property shows that it was based on the RTC order dated July 25, 2003. The levy of the respondent’s
property was issued to satisfy the amounts due under the lease contracts, and not as a result of the
decision in the ejectment case.

The CA erred when it concluded that the RTC exercised its appellate jurisdiction in the ejectment case
when it directed the levy of the respondent’s property.

Furthermore, the order to levy on the respondent’s real property was consistent with the first writ of
execution issued by the RTC on December 18, 2003, to implement the RTC orders. The writ of
execution states that:

xxx In case of [sic] sufficient personal property of the defendant cannot be found whereof to satisfy the
amount of the said judgment, you are directed to levy [on] the real property of said defendant
and to sell the same or so much thereof in the manner provided by law for the satisfaction of
the said judgment and to make return of your proceedings together with this Writ within sixty (60)
days from receipt hereof. (emphasis supplied)
The subsequent order of the RTC to levy on the respondent’s property was merely a reiteration and
an enforcement of the original writ of execution issued. 1âw phi1

Since the order of levy is clearly rooted on the RTC Orders, the only question that needs to be resolved
is which court has jurisdiction to order the execution of the RTC orders.

The RTC, as the court of origin, has jurisdiction to order the levy of the respondent's real
property.

Execution shall be applied for in the court of origin, in accordance with Section 1,45 Rule 39 of the Rules
of Court.

The court of origin with respect to the assailed RTC orders is the court which issued these orders. The
RTC is the court with jurisdiction to order the execution of the issued RTC orders.

Hence, the petitioner correctly moved for the issuance of the writ of execution and levy of the
respondent's real property before the RTC as the court of origin.

WHEREFORE, we hereby GRANT the petition for review on certiorari. The decision dated November
23, 2010, and the resolution dated August 10, 2011, of the Court of Appeals in CA-G.R. SP No. 105290
are hereby REVERSED and SET ASIDE. The orders dated June 30, 2008, and August 26, 2008, of
Branch 108 of the Regional Trial Court of Pasay City, are hereby REINSTATED. Costs against
respondent Antonio dela Cruz.

SO ORDERED.