G.R. No.

164459 April 24, 2007

LIMITLESS POTENTIALS, INC., Petitioner,

vs.
HON. COURT OF APPEALS, CRISOSTOMO YALUNG, and ATTY. ROY MANUEL
VILLASOR, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of
Civil Procedure seeking to annul and set aside: (1) The Decision,1 dated 16 September 2003, of the
Court of Appeals in CA-G.R. SP No. 73463 entitled, Limitless Potentials, Inc. vs. Hon. Manuel D.
Victorio, in his capacity as the Presiding Judge of the Regional Trial Court of Makati City, Branch
141, Crisostomo Yalung, and Atty. Roy Manuel Villasor, which dismissed herein petitioner’s Petition
for Certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure for lack of merit, and (2)
The Resolution,2 dated 8 July 2004, of the appellate court in the same case which denied petitioner’s
Motion for Reconsideration because the issues and arguments raised therein had already been
passed upon and judiciously resolved in the Decision dated 16 September 2003.

The controversy of this case stemmed from the following facts:

On 12 October 1995, Digital Networks Communications and Computers, Inc. (Digital) and herein
petitioner Limitless Potentials, Inc. (LPI), a domestic corporation duly organized and existing under
Philippine laws, entered into a Billboard Advertisement Contract whereby petitioner was to construct
one billboard advertisement for Digital’s product for a period of one year, with an agreed rental of
₱60,000.00 per month plus Value Added Tax (VAT). It was agreed, among other things, that Digital
will make a three-month deposit in the following manner, to wit: (a) ₱60,000.00 plus VAT upon the
signing of the contract, and (b) ₱120,000.00 plus VAT upon completion of the billboard. Digital
complied with the aforesaid agreement.

The billboard, however, was destroyed by unknown persons. In view thereof, the contract between
Digital and the petitioner was considered terminated. Digital demanded for the return of their rental
deposit for two months, but the petitioner refused to do so claiming that the loss of the billboard was
due to force majeure and that any cause of action should be directed against the responsible
persons. Thus, on 18 April 1997, Digital commenced a suit against herein petitioner before the
Metropolitan Trial Court (MeTC) of Makati City, Branch 66, presided over by then Judge Estela
Perlas-Bernabe (Judge Perlas-Bernabe)3 , for the return of Digital’s deposit, which was equivalent to
two months rental inclusive of VAT and attorney’s fees. The case was docketed as Civil Case No.
55170.

On 18 June 1997, consistent with its defense against Digital’s Complaint, petitioner filed a Third–
Party Complaint4against Macgraphics Carranz International Corporation (Macgraphics) and herein
private respondents Bishop Crisostomo Yalung (Bishop Yalung) and Atty. Roy Manuel Villasor (Atty.
Villasor) alleging that it had entered into a contract of lease with Roman Catholic Archbishop of
Manila (RCAM), as represented by the private respondents, over a space inside San Carlos Manor
Seminary in Guadalupe Viejo, Makati City, where petitioner erected the subject billboard. Petitioner
further averred that despite its full compliance with the terms and conditions of the lease contract,
herein private respondents, together with their cohorts, maliciously dismantled and destroyed the
subject billboard and prevented its men from reconstructing it. Thereafter, petitioner learned that
Macgraphics had "cajoled and induced" RCAM, through the private respondents, to destroy the
subject billboard to enable Macgraphics to erect its own billboard and advertising signs. Thus, by
way of affirmative defenses, petitioner claimed that: (a) the destruction of the subject billboard was
not of its own making and beyond its control, and (b) Digital’s cause of action, if any, should be
directed against the private respondents and Macgraphics. Hence, petitioner prayed that judgment
be rendered in its favor and to hold private respondents liable for the following: (a) moral damages in
the amount of ₱1,000,000.00; (b) exemplary, temperate and nominal damages amounting to
₱300,000.00; (c) ₱300,000.00 as attorney’s fees; (d) ₱50,000.00 as litigation expenses; and (e)
costs of suit, allegedly suffered or incurred by it because of the willful destruction of the billboard by
the private respondents.

In response, private respondents filed a Motion to Dismiss the aforesaid Third-Party Complaint
based on the following grounds: (1) litis pendentia; (2) lack of cause of action; (3) forum shopping;
and (4) lack of privity of contract. The MeTC, in an Order dated 25 August 1997,5 denied the said
Motion to Dismiss. Petitioner filed an Amended Third-Party Complaint. Again, private respondents
filed a Motion to Dismiss Amended Third-Party Complaint. However, the MeTC also denied the
Motion to Dismiss Amended Third-Party Complaint in an Order dated 10 October 1997.6

On 9 December 1997, private respondents filed a Petition for Certiorari with Prayer for Preliminary
Restraining Order and/or Writ of Preliminary Injunction before the Regional Trial Court (RTC) of
Makati City, assailing the Orders dated 25 August 1997 and 10 October 1997 of the MeTC of Makati
City denying their Motion to Dismiss Third-Party Complaint and Motion to Dismiss Amended Third-
Party Complaint, respectively, in Civil Case No. 55170.

The RTC issued an Order on 6 February 1998,7 granting private respondents’ prayer for a writ of
preliminary injunction, conditioned upon the posting of an injunction bond in the amount of
₱10,000.00. Thus, the MeTC was enjoined from hearing the Third-Party Complaint in Civil Case No.
55170. The pertinent portion of the aforesaid Order reads, as follows:

When the application for temporary restraining order and/or preliminary injunction was heard this
afternoon, [herein petitioner] who did not file comment on the petition appeared thru counsel
Emmanuel Magnaye. It was brought out to the attention of this Court that respondent judge is poised
on pursuing the hearing of the case before her despite the pendency of this petition. It appeared that
the case was set by respondent judge for hearing ex-parte for the reception of [herein petitioner’s]
evidence on 23 February 1998. It also appeared that [herein private respondents] were declared in
default despite the fact that they have filed their answer and the motion to lift such order of default
and for admission of the answer was denied by respondent judge.

Upon consideration of the allegations in the petition and the oral manifestations and admissions of
both parties, this Court hereby resolves to issue the writ of preliminary injunction in order to preserve
the status quo as well as not to render the issue herein raised moot and academic.

WHEREFORE, the motion for preliminary injunction is granted. Accordingly, upon the filing by
[herein private respondents] of a bond in the amount of P10,000.00, let a writ of preliminary
injunction be issued, enjoining respondent judge, or her successor, from hearing the [T]hird [P]arty
[C]omplaint against [herein private respondents] in Civil Case No. 55170 until further orders from this
Court.8

Subsequently, however, the RTC rendered a Decision9 on 28 April 2000, dismissing the Petition for
Certiorari filed by private respondents, the dispositive portion of which reads:

WHEREFORE, the petition is hereby dismissed for lack of merit. The preliminary injunction issued
by this Court on 6 February 200010 (sic) is hereby dissolved.
Costs against [herein private respondents].11

Disgruntled, private respondents filed an Urgent Motion for Reconsideration, which was denied by
the RTC in its Order12 dated 26 June 2000.

Petitioner filed its Motion for Judgment Against the Bond, and in compliance with the directive of the
RTC, the petitioner filed a pleading13 specifying its claims, thus: (a) attorney’s fees in the sum of ₱74,
375.00; and (b) moral damages for the tarnished good will in the sum of ₱1,000,000.00.

The RTC, in its Order dated 3 April 2002,14 denied petitioner’s Motion for Judgment Against the Bond
declaring that the preliminary injunction was not wrongfully obtained; therefore, the claim for
damages on the bond is untenable.

Aggrieved, the petitioner moved for the reconsideration of the aforesaid Order, which was also
denied by the RTC in its Order dated 6 August 2002.15

Dissatisfied, the petitioner filed a Petition for Certiorari under Rule 65 of the Revised Rules of Civil
Procedure before the Court of Appeals assailing the Orders of the RTC dated 3 April 2002 and 6
August 2002 for having been issued with grave abuse of discretion amounting to lack and/or excess
of jurisdiction.

On 6 November 2002, the Court of Appeals issued a Resolution16 dismissing the Petition for failure
to show proof that a certain Quirino B. Baterna has been duly authorized by the petitioner to file the
Petition for and in its behalf. Petitioner moved for the reconsideration of the aforesaid Resolution,
which was granted by the appellate court in its Resolution dated 24 January 200317 thereby
reinstating the Petition for Certiorari filed by the petitioner.

On 16 September 2003, the Court of Appeals rendered a Decision dismissing the Petition filed by
the petitioner for utter lack of merit. The petitioner filed a Motion for Reconsideration based on the
following grounds:

I. The dismissal of the petition and dissolution of the injunction amount to a determination
that the injunction was wrongfully or improvidently obtained.

II. The petitioner suffered damages by reason of the issuance of the injunction.

III. The damages claimed by the petitioner are covered by the injunction bond.

The Court of Appeals through a Resolution dated 8 July 2004, denied the petitioner’s Motion for
Reconsideration.

Hence, this Petition.

Petitioner pointed out two basic legal issues wherein the appellate court committed serious and
reversible errors, to wit:

I. Is malice or bad faith a condition sine qua non for liability to attach on the injunction bond?

II. Are attorney’s fees, litigation costs, and cost of delay by reason of the injunction covered
by the injunction bond?
Petitioner argues that malice or lack of good faith is not an element of recovery on the bond. The
dissolution of the injunction, even if the injunction was obtained in good faith, amounts to a
determination that the injunction was wrongfully obtained and a right of action on the injunction
immediately accrues to the defendant. The petitioner maintains that the attorney’s fees, litigation
costs, and cost of delay by reason of the injunction are proper and valid items of damages which can
be claimed against the injunction bond. Hence, having proven through testimonial and documentary
evidence that it suffered damages because of the issuance of the writ of injunction, and since malice
or lack of good faith is not an element of recovery on the injunction bond, petitioner asserts that it
can properly collect such damages on the said bond.

Private respondent Bishop Yalung on the other hand, prays for the outright dismissal of the present
Petition due to the alleged failure of the petitioner to comply with the mandatory rule on proper
certification on non-forum shopping under Section 5, Rule 7 of the 1997 Revised Rules of Civil
Procedure. According to him, it is not sufficient for Mr. Baterna to make the undertaking that "I have
not commenced any other action or proceeding involving the same issue in the Supreme Court, etc."
inasmuch as such undertaking should have been made by the principal party, namely, the petitioner.
He underscores that the verification/disclaimer of forum shopping executed by Mr. Baterna on behalf
of the petitioner is legally defective for failure to enumerate with particularity the multiple civil and
criminal actions, which were filed by him and the petitioner against the private respondents.

Private respondent Bishop Yalung also avers that the petitioner is not entitled to collect damages on
the injunction bond filed before the court a quo. Primarily, as the appellate court mentioned in its
Decision, the preliminary injunction was directed not against the petitioner but against the MeTC.
The petitioner was not restrained from doing any act. What was restrained was the hearing of the
Third-Party Complaint while the Petition for Certiorari was pending, "in order to preserve the status
quo and not to render the issue therein moot and academic."18 Also, the fact that the decision is
favorable to the party against whom the injunction was issued does not automatically entitle the
latter to recover damages on the bond. Therefore, the petitioner cannot claim that it suffered
damages because of the issuance of the writ of injunction.

Private respondent Atty. Villasor shares the same argument as that of his co-respondent Bishop
Yalung that it was the MeTC which was enjoined and not herein petitioner. Private respondent Atty.
Villasor further alleged that in the Special Civil Action for Certiorari, the action is principally against
any tribunal, board, or officer exercising judicial or quasi-judicial functions who has acted without or
in excess of jurisdiction or with grave abuse of discretion. Thus, private respondents’ Petition for
Certiorari before the RTC principally pertains to the MeTC and not to herein petitioner. Additionally,
private respondent Atty. Villasor argues that it was petitioner who was benefited by such writ of
preliminary injunction, because the injunction left Digital unable to prosecute Civil Case No. 55170
against herein petitioner. Lastly, private respondent Atty. Villasor claims that petitioner did not
oppose their application for a writ of preliminary injunction at the hearing wherein petitioner was duly
represented by counsel.

Simply stated, the threshold issues are:

I. Can petitioner recover damages from the injunction bond?

II. Was petitioner able to substantiate the damages?

Quite apart from the above, there appears to be another question concerning the alleged violation by
the petitioner of the mandatory rule on proper certification on non-forum shopping.
In the case at bar, petitioner repeatedly argues that malice or lack of good faith is not an element of
recovery on the injunction bond. In answering this issue raised by petitioner, this Court must initially
establish the nature of the preliminary injunction, the purpose of the injunction bond, as well as the
manner of recovering damages on the said bond.

A preliminary injunction is a provisional remedy that a party may resort to in order to preserve and
protect certain rights and interests during the pendency of an action.19 It is an order granted at any
stage of an action, prior to the judgment or final order, requiring a party, court, agency or person to
perform or to refrain from performing a particular act or acts. A preliminary injunction, as the term
itself suggests, is merely temporary, subject to the final disposition of the principal action.20 It is
issued to preserve the status quo ante, which is the last actual, peaceful, and uncontested status
that preceded the actual controversy,21 in order to protect the rights of the plaintiff during the
pendency of the suit. Otherwise, if no preliminary injunction is issued, the defendant may, before
final judgment, do the act which the plaintiff is seeking the court to restrain. This will make ineffectual
the final judgment that the court may afterwards render in granting relief to the plaintiff.22 The status
quo should be existing ante litem motam, or at the time of the filing of the case. For this reason, a
preliminary injunction should not establish new relations between the parties, but merely maintain or
re-establish the pre-existing relationship between them.23

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to

some of the parties before their claims can be thoroughly studied and adjudicated. Thus, to be
entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:

(1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent
serious damage.24

A preliminary injunction or temporary restraining order may be granted only when, among other
things, the applicant, not explicitly exempted, files with the court, where the action or proceeding is
pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to
the effect that the applicant will pay such party or person all damages which he may sustain by
reason of the injunction or temporary restraining order if the court should finally decide that the
applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.25 Thus, the posting of a bond is a condition sine qua non for a writ of
preliminary injunction to be issued.

The injunction bond is intended as a security for damages in case it is finally decided that the
injunction ought not to have been granted. Its principal purpose is to protect the enjoined party
against loss or damage by reason of the injunction,26 and the bond is usually conditioned
accordingly.

The damages sustained as a result of a wrongfully obtained injunction may be recovered upon the
injunction bond which is required to be deposited with court.27 Rule 57, Section 20, of the 1997
Revised Rules of Civil Procedure, which is similarly applicable to preliminary injunction,28 has
outlined the procedure for the filing of a claim for damages against an injunction bond. The aforesaid
provision of law pertinently provides:

SEC. 20. Claim for damages on account of improper, irregular or excessive attachment. - An
application for damages on account of improper, irregular or excessive attachment must be filed
before the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching party and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper hearing and
shall be included in the judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application
in the appellate court, with notice to the party in whose favor the attachment was issued or his surety
or sureties, before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching party
not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully
satisfy the award.29

Now, it can be clearly gleaned that there is nothing from the aforequoted provision of law which
requires an enjoined party, who suffered damages by reason of the issuance of a writ of injunction,
to prove malice or lack of good faith in the issuance thereof before he can recover damages against
the injunction bond. This Court was very succinct in the case of Aquino v. Socorro,30 citing the case
of Pacis v. Commission on Elections,31 thus:

Malice or lack of good faith is not an element of recovery on the bond. This must be so, because to
require malice as a prerequisite would make the filing of a bond a useless formality. The dissolution
of the injunction, even if the injunction was obtained in good faith, amounts to a determination that
the injunction was wrongfully obtained and a right of action on the injunction bond immediately
accrues. Thus, for the purpose of recovery upon the injunction bond, the dissolution of the injunction
because of petitioner’s main cause of action provides the actionable wrong for the purpose of
recovery upon the bond.

We, therefore, agree with the petitioner that indeed, malice or lack of good faith is not a condition
sine qua non for liability to attach on the injunction bond.

With respect to the issue raised by the petitioner regarding the coverage of the injunction bond, this
Court finds it necessary to quote once again the provision of Section 4(b), Rule 58 of the 1997
Revised Rules of Civil Procedure, to wit:

Unless exempted by the court, the applicant files with the court where the action or proceeding is
pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to
the effect that the applicant will pay to such party or person all damages which he may sustain by
reason of the injunction or temporary restraining order if the court should finally decide that the
applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.

The aforesaid provision of law clearly provides that the injunction bond is answerable for all
damages. The bond insures with all practicable certainty that the defendant may sustain no ultimate
loss in the event that the injunction could finally be dissolved.32 Consequently, the bond may obligate
the bondsmen to account to the defendant in the injunction suit for all damages, or costs and
reasonable counsel’s fees, incurred or sustained by the latter in case it is determined that the
injunction was wrongfully issued.33 Likewise, the posting of a bond in connection with a preliminary
injunction does not operate to relieve the party obtaining an injunction from any and all responsibility
for damages that the writ may thereby cause. It merely gives additional protection to the party
against whom the injunction is directed. It gives the latter a right of recourse against either the
applicant or his surety or against both.34

The contention of the petitioner, thus, is tenable. Attorney’s fees, litigation costs, and costs of delay
can be recovered from the injunction bond as long as it can be shown that said expenses were
sustained by the party seeking recovery by reason of the writ of preliminary injunction, which was
later on determined as not to have been validly issued and that the party who applied for the said
writ was not entitled thereto. The case of Aquino v. Socorro,35 citing the case of Pacis v. Commission
on Elections,36 holds that the dissolution of the injunction, even if the injunction was obtained in good
faith, amounts to a determination that the injunction was wrongfully obtained and a right of action on
the injunction bond immediately accrues. It is also erroneous for the appellate court to rule that
petitioner is not entitled to claim damages from the injunction bond simply because the preliminary
injunction was directed against the MeTC and not against the petitioner. The MeTC does not stand
to suffer damages from the injunction because it has no interest or stake in the Petition pending
before it. Damage or loss is suffered by the party whose right to pursue its case is suspended or
delayed, which in this case, is the petitioner. Upon issuance of the writ of injunction, it is the
petitioner who will stand to suffer damages for the delay in the principal case because, had it not
been for the injunction, the petitioner would not have incurred additional expenses for attending the
separate hearings on the injunction, and the RTC can already decide the main case and make a
prompt determination of the respective rights of the parties therein. Hence, even if the preliminary
injunction was directed against the MeTC and not against the petitioner, it is the latter which has the
right to recover from the injunction bond the damages which it might have suffered by reason of the
said injunction.

As to the second main issue in the present case, although we do recognize that the petitioner had a
right to recover damages from the injunction bond, however, we agree in the findings of the Court of
Appeals, which affirmed the findings of the RTC, that the petitioner did not sustain any damage by
reason of the issuance of the writ of injunction. In the petitioner’s Motion for Judgment Against the
Bond,37 petitioner stated therein, thus:

5. There can be no serious debate that the issuance of the Writ of Preliminary injunction, all at the
instance of [herein private respondents], resulted in actual and pecuniary damages on the part of
[herein petitioner] in the amount more than the value of the bond posted by [private respondents].
The attorney’s fees for expenses in litigation alone expended by [petitioner] to defend itself in this
proceedings, not to mention other pecuniary damages, amounts to P10,000.00.38

In the case at bar, petitioner is claiming attorney’s fees in the sum of ₱74,375.00 it allegedly paid to
defend itself in the main case for certiorari, which it would not have spent had the private
respondents not filed their nuisance Petition and secured a writ of preliminary injunction. Likewise,
by reason of the unfounded suit, the good will of the petitioner was brought to bad light, hence,
damaged.39 It is noteworthy to mention that the undertaking of the injunction bond is that it shall
answer for all damages which the party to be restrained may sustain by reason of the injunction if
the court should finally decide that the plaintiff was not entitled thereto. Apparently, as the appellate
court pointed out in its Decision dated 16 September 2003, the damages being claimed by the
petitioner were not by reason of the injunction but the litigation expenses it incurred in defending
itself in the main case for certiorari, which is definitely not within the coverage of the injunction bond.
Thus, this Court is not convinced that the attorney’s fees in the amount of ₱74,375.00 as well as the
moral damages for the tarnished good will in the sum of ₱1,000,000.00 were suffered by the
petitioner because of the issuance of the writ of injunction.

Furthermore, this Court will not delve into the sufficiency of evidence as to the existence and amount
of damages suffered by petitioner for it is already a question of fact. It is settled that the factual
findings of the trial court, particularly when affirmed by the Court of Appeals, are binding on the
Supreme Court.40 Although this rule is subject to exceptions,41 the present case does not fall into any
of those exceptions which would have allowed this Court to make its own determination of facts. This
Court upholds the factual findings of both the RTC and the Court of Appeals that there is insufficient
evidence to establish that petitioner actually suffered damages because of the preliminary injunction
issued by the RTC.

Now, on the matter of proper certification on non-forum shopping.

The requirement of a Certification on Non-Forum Shopping is contained in Rule 7, Section 5, of the

1997 Revised Rules of Civil Procedure, which states that:

The plaintiff or principal party shall certify under oath 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.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt
of court without prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions.

Private respondent Bishop Yalung might have overlooked the Secretary’s Certificate42 attached to
the petitioner’s Petition for Review, which authorized Mr. Baterna, President of herein petitioner LPI,
to represent the latter in this case. According to the Secretary’s Certificate, the Board of Directors of
petitioner LPI, at a special meeting held on 12 August 2004 at its office at No. 812 J.P. Rizal St.,
Makati City, during which there was a quorum, the following resolutions were approved, to wit:

RESOLVED, AS IT IS HEREBY RESOLVED, that the corporation reiterates the authority of its
President, Mr. Quirino B. Baterna, to represent the corporation in all cases by and/or against the
corporation vis-à-vis the Roman Catholic Archbishop of Manila/Crisostomo Yalung, Roy
Villasor/Digital Netwrok (sic) Communications and Computers, Inc., and/or MacGraphics Carranz
International Corporation, to file a Petition for Review on Certiorari with the Supreme Court docketed
as G.R. No. 164459 to assert/protect LPI’s rights and interests in connection with C.A.-G.R. No.
73463, entitled "Limitless Potentials, Inc., vs. Hon. Manuel Victorio, et al.," Honorable Court of
Appeals, Manila.

RESOLVED FURTHERMORE, that any and all acts of our President, concerning the above-
referenced subject matter are hereby affirmed, confirmed and ratified by the corporation for all legal
intents and purposes.43

Private respondent Bishop Yalung further argued that Mr. Baterna failed to enumerate in the
Certification against Forum Shopping the multiple cases filed by him and the petitioner against
private respondents. This is also erroneous.
Forum shopping consists of filing multiple suits involving the same parties for the same cause of
action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.44 It
exists where the elements of litis pendentia45 are present or where a final judgment in one case will
amount to res judicata in another.46 It may be resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to seek a favorable opinion in
another, other than by an appeal or a special civil action for certiorari.47

As the RTC correctly found, there was no violation of the rule against forum shopping. The cause of
action in petitioner’s case for consignation and damages docketed as Civil Case No. 95-1559,48 is
different from the cause of action in its Third-Party Complaint in Civil Case No. 55170. The damages
sought in the first case were those suffered by petitioner by reason of the alleged breach of the
contract of lease by the RCAM; whereas the damages sought in the Third-Party Complaint were
those allegedly suffered by petitioner owing to the destruction of its billboard by the private
respondents, thereby terminating the Billboard Advertisement Contract between petitioner and
Digital. Digital also sued petitioner for recovery of the rental deposits it had already paid under the
same contract. Consequently, petitioner had to engage the services of counsel and incurred litigation
expenses in order to defend itself in the case filed against it by Digital. Thus, the two actions are
completely different and distinct from each other so much so that a decision in either case could not
be pleaded as res judicata in the other. Hence, there is no forum shopping that would necessitate
the outright dismissal of this case.

WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and
Resolution of the Court of Appeals dated 16 September 2003 and 8 July 2004, respectively,
affirming the Decision of the RTC dated 28 April 2000, denying herein petitioner’s motion to recover
damages against the injunction bond, are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 189028 July 16, 2013

NATIONAL ARTIST FOR LITERATURE VIRGILIO ALMARIO, NATIONAL ARTIST FOR LITERATURE
BIENVENIDO LUMBERA, NATIONAL ARTIST FOR VISUAL ARTS (PAINTING) BENEDICTO CABRERA,
NATIONAL ARTIST FOR VISUAL ARTS (SCULPTURE) NAPOLEON ABUEVA, NATIONAL ARTIST FOR VISUAL
ARTS (PAINTING AND SCULPTURE) ARTURO LUZ, NATIONAL ARTIST FOR PRODUCTION DESIGN
SALVADOR BERNAL, UNIVERSITY PROFESSOR EMERITUS GEMINO ABAD, DEAN MARVIC M.V.F.
LEONEN (UP COLLEGE OF LAW), DEAN DANILO SILVESTRE (UP COLLEGE OF ARCHITECTURE), DEAN
ROLAND TOLENTINO (UP COLLEGE OF MASS COMMUNICATION), PROF. JOSE DALISAY, DR. ANTON
JUAN, DR. ALEXANDER CORTEZ, DR. JOSE NEIL GARCIA, DR. PEDRO JUN CRUZ REYES, PROF. JOSE
CLAUDIO GUERRERO, PROF. MICHAEL M. COROZA, PROF. GERARD LICO, PROF. VERNE DE LA PENA,
PROF. MARIAN ABUAN, PROF. THEODORE O. TE, DR. CRISTINA PANTOJA-HIDALGO, PROF. JOSE
WENDELL CAPILI, PROF. SIR ANRIAL TIATCO, PROF. NICOLO DEL CASTILLO, PROF. HORACIO
DUMANLIG, PROF. DANTON REMOTO, PROF. PRISCELINA PATAJOLEGASTO, PROF. BELEN
CALINGACION, PROF. AMIEL Y. LEONARDIA, PROF. VIM NADERA, PROF. MARILYN CANTA, PROF.
CECILIA DELA PAZ, ROF. CHARLSON ONG, PROF. CLOD MARLON YAMBAO, PROF. KENNETH
JAMANDRE, PROF. JETHRO JOAQUIN, ATTY. F.D. NICOLAS B. PICHAY, ATTY. ROSE BEATRIX ANGELES,
MR. FERNANDO JOSEF, MS. SUSAN S. LARA, MR. ALFRED YUSON, MS. JING PANGANIBANMENDOZA,
MR. ROMULO BAQUIRAN, JR., MR. CARLJOE JAVIER, MS. REBECCA T. ANONUEVO, MR. JP ANTHONY
D. CUNADA, MS. LEAH NAVARRO, MR. MARK MEILLY, MR. VERGEL O. SANTOS, MR. GIL OLEA
MENDOZA, MR. EDGAR C. SAMAR, MS. CHRISTINE BELLEN, MR. ANGELO R. LACUESTA, MS. ANNA
MARIA KATIGBAKLACUESTA, MR. LEX LEDESMA, MS. KELLY PERIQUET, MS. CARLA PACIS, MR. J.
ALBERT GAMBOA, MR. CESAR EVANGELISTA BUENDIA, MR. PAOLO ALCAZAREN, MR. ALWYN C.
JAVIER, MR. RAYMOND MAGNO GARLITOS, MS. GANG BADOY, MR. LESLIE BOCOBO, MS. FRANCES
BRETANA, MS. JUDITH TORRES, MS. JANNETTE PINZON, MS. JUNE POTICAR-DALISAY, MS. CAMILLE DE
LA ROSA, MR. JAMES LADIORAY, MR. RENATO CONSTANTINO, JR., and CONCERNED ARTISTS OF THE
PHILIPPINES (CAP), Petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT,
THE CULTURAL CENTER OF THE PHILIPPINES, THE NATIONAL COMMISSION ON CULTURE AND THE
ARTS, MS. CECILE GUIDOTE-ALVAREZ, MR. CARLO MAGNO JOSE CAPARAS,1 MR. JOSE MORENO, MR.
FRANCISCO MANOSA, AND ALL PERSONS, PUBLIC AND PRIVATE, ACTING UNDER THEIR
INSTRUCTIONS, DIRECTION, CONTROL AND SUPERVISION IN RELATION TO THE CONFERMENT OF THE
ORDER OF THE NATIONAL ARTIST AND THE RELEASE OF FUNDS IN RELATION TO THE CONFERMENT OF
THE HONORS AND PRIVILEGES OF THE ORDER OF NATIONAL ARTISTS ON RESPONDENTS GUIDOTE-
ALVAREZ, CAPARAS, MORENO AND MANOSA, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Art has traditionally been viewed as the expression of everything that is true, good and beautiful. As
such, it is perceived to evoke and produce a spirit of harmony. Art is also considered as a civilizing force,
a catalyst of nation-building. The notion of art and artists as privileged expressions of national culture
helped shape the grand narratives of the nation and shared symbols of the people. The artist does not
simply express his/her own individual inspiration but articulates the deeper aspirations of history and
the soul of the people.2 The law recognizes this role and views art as something that "reflects and
shapes values, beliefs, aspirations, thereby defining a people’s national identity."3If unduly politicized,
however, art and artists could stir controversy and may even cause discord, as what happened in this
case.

The Antecedents

History of the Order of National Artists

On April 27, 1972, former President Ferdinand E. Marcos issued Proclamation No. 10014 and, upon
recommendation of the Board of Trustees of the Cultural Center of the Philippines (CCP), created the
category of Award and Decoration of National Artist to be awarded to Filipinos who have made distinct
contributions to arts and letters. In the same issuance, Fernando Amorsolo was declared as the first
National Artist.

On May 15, 1973, Proclamation No. 11445 was issued. It amended Proclamation No. 1001 "by creating a
National Artists Awards Committee" that would "administer the conferment of the category of National
Artist" upon deserving Filipino artists. The Committee, composed of members of the Board of Trustees
of the CCP, was tasked to "draft the rules to guide its deliberations in the choice of National Artists, to
the end that those who have created a body of work in the arts and letters capable of withstanding the
test of time will be so recognized."

The authority of the National Artists Awards Committee to administer the conferment of the National
Artist Award was again reiterated in Presidential Decree No. 2086 issued on June 7, 1973.

On April 3, 1992, Republic Act No. 7356, otherwise known as the Law Creating the National Commission
for Culture and the Arts, was signed into law. It established the National Commission for Culture and the
Arts (NCCA) and gave it an extensive mandate over the development, promotion and preservation of the
Filipino national culture and arts and the Filipino cultural heritage. The NCCA was tasked with the
following:

Sec. 8. The Commission. – A National Commission for Culture and Arts is hereby created to formulate
policies for the development of culture and arts; implement these policies in coordination with affiliated
cultural agencies; coordinate the implementation of programs of these affiliated agencies; administer
the National Endowment Fund for Culture and Arts (NEFCA); encourage artistic creation within a climate
of artistic freedom; develop and promote the Filipino national culture and arts; and preserve Filipino
cultural heritage. The Commission shall be an independent agency. It shall render an annual report of its
activities and achievements to the President and to Congress.

Among the specific mandates of the NCCA under Republic Act No. 7356 is to "extend recognition of
artistic achievement through awards, grants and services to artists and cultural groups which contribute
significantly to the Filipino’s cultural legacy."7 In connection with this mandate, the NCCA is vested with
the power to "advise the President on matters pertaining to culture and the arts, including the creation
of a special decoration or award, for persons who have significantly contributed to the development and
promotion of Philippine culture and arts."8

As both the CCP Board of Trustees and the NCCA have been mandated by law to promote, develop and
protect the Philippine national culture and the arts, and authorized to give awards to deserving Filipino
artists, the two bodies decided to team up and jointly administer the National Artists
Award.9 Thereafter, they reviewed the guidelines for the nomination, selection and administration of
the National Artists Award. Pursuant to their respective powers to draft and promulgate rules,
regulations and measures to guide them in their deliberations in the choice of National Artists, the CCP
and NCCA adopted the following revised guidelines in September 200710:

4. ADMINISTRATION OF THE AWARD

4.1. The National Commission for Culture and the Arts (NCCA) shall plan, organize and implement the
Order of National Artists in coordination with the Cultural Center of the Philippines (CCP).

4.2. It shall enlist the support and cooperation of private sector experts from the various fields of art to
ensure that the awards are implemented in a successful and impartial manner.

4.3. The National Artist Award Secretariat shall commission art experts to form a Special Research Group
who shall verify information submitted on nominees and provide essential data.

They shall be selected for their specialization and familiarity with the works and accomplishments of
nominated artists.

4.4. The Special Research Group shall be composed of ten (10) to twenty (20) members who have
expertise in one or more fields or disciplines.

4.5. The National Artist Award Council of Experts shall be created before or during the nomination
period. It is tasked to screen nominees and recommend to the NCCA and CCP Boards the candidates for
the Order of National Artists. It shall be composed of highly regarded peers, scholars, (including cultural
philosophers and historians), academicians, researchers, art critics, and other knowledgeable
individuals. A wider age-range of experts who would have first-hand knowledge of achievements of
nominees shall be considered.

4.6. The selection of the members of the National Artist Award Council of Experts shall be based on the
following criteria:

(a) should have achieved authority, credibility and track record in his field(s) of expertise;

(b) should have extensive knowledge in his field(s) and his views on Philippine art and culture must be
national in perspective;

(c) should be a recognized authority in the study or research of Philippine art and culture;

(d) must be willing to devote sufficient time and effort to the work of the Council;

(e) must be willing to sign a non-disclosure statement in order to safeguard the confidentiality of the
deliberations;

(f) must not have been convicted with finality of any crime by a court of justice or dismissed for cause by
any organization, whether public or private.

4.7. The National Artist Award Council of Experts shall be composed of a maximum of seven (7)
members each of the seven (7) areas/disciplines. The living National Artists will automatically become
members in addition to the forty-nine (49) selected members. These members will constitute the first
deliberation panel and will be invited to evaluate the nominations and materials submitted by the
Special Research Group.

4.8. Any member of the Council of Experts who is nominated or related to a nominee up to the fourth
degree of consanguinity or affinity shall inhibit himself/herself from the deliberation process. Likewise,
any member may decline to participate in the deliberation for any reason or may be removed for just
cause upon recommendation to the NCCA Board by at least two thirds (2/3) of the members; in which
case, the National Artist Award Secretariat shall again select the replacements for those who decline or
resigned until the first deliberation panel is completed.

4.9. The list of nominated members of the National Artist Award Council of Experts shall be reviewed by
the National Artist Award Secretariat as needed, for purposes of adding new members or replacements.

4.10. The members of the National Artist Award Council of Experts shall serve for a fixed term of three
(3) years.

5. CRITERIA FOR SELECTION

The Order of National Artists shall be given to:

5.1 Living artists who are Filipino citizens at the time of nomination, as well as those who died after the
establishment of the award in 1972 but were Filipino citizens at the time of their death.

5.2 Artists who through the content and form of their works have contributed in building a Filipino sense
of nationhood.

5.3. Artists who have pioneered in a mode of creative expression or style, thus, earning distinction and
making an impact on succeeding generations of artists.

5.4. Artists who have created a substantial and significant body of works and/or consistently displayed
excellence in the practice of their art form thus enriching artistic expression or style.

5.5 Artists who enjoy broad acceptance through:

5.5.1. prestigious national and/or international recognition, such as the Gawad CCP Para sa Sining, CCP
Thirteen Artists Award and NCCA Alab ng Haraya

5.5.2. critical acclaim and/or reviews of their works

5.5.3. respect and esteem from peers.

6. NOMINATION PROCEDURE

6.1. The National Artist Award Secretariat shall announce the opening of nominations through media
releases and letters to qualified organizations.

6.2. Candidates may be nominated under one or more of the following categories:

6.2.1. Dance – choreography, direction and/or performance.

6.2.2. Music – composition, direction, and/or performance.

6.2.3. Theater – direction, performance and/or production design.

6.2.4. Visual Arts – painting, sculpture, printmaking, photography, installation art, mixed media works,
illustration, comics/komiks, graphic arts, performance art and/or imaging.

6.2.5. Literature – poetry, fiction (short story, novel and play); non-fiction (essay, journalism, literary
criticism and historical literature).

6.2.6. Film and Broadcast Arts – direction, writing, production design, cinematography, editing, camera
work, and/or performance.

6.2.7. Architecture, Design and Allied Arts – architecture design, interior design, industrial arts design,
landscape architecture and fashion design.

6.3. Nominations for the Order of National Artists may be submitted by government and non-
government cultural organizations and educational institutions, as well as private foundations and
councils.

6.4. Members of the Special Research Group, as well as agencies attached to the NCCA and CCP shall not
submit nominations.

6.5. NCCA and CCP Board members and consultants and NCCA and CCP officers and staff are
automatically disqualified from being nominated.

6.6. Nominations shall be accepted only when these are submitted in writing and with proper
supporting documentation, as follows:

6.6.1. A cover letter signed by the head or designated representative of the nominating organization.

The cover letter shall be accompanied by a Board Resolution approving the nominee concerned with the
said resolution signed by the organization President and duly certified by the Board Secretary.

6.6.2. A duly accomplished nomination form;

6.6.3. A detailed curriculum vitae of the nominee;

6.6.4. A list of the nominee’s significant works categorized according to the criteria;

6.6.5. The latest photograph (color or black and white) of the nominee, either 5" x 7" or 8" x 11";

6.6.6. Pertinent information materials on the nominee’s significant works (on CDs, VCDs and DVDs);

6.6.7. Copies of published reviews;

6.6.8. Any other document that may be required.

6.7. Nominations received beyond the announced deadline for the submission of nominations shall not
be considered.

6.8. The National Artist Award Secretariat shall announce the opening of nominations through media
releases.

6.9. All inquiries and nominations shall be submitted to

The NATIONAL ARTIST AWARD SECRETARIAT

Office of the Artistic Director Cultural Center of the Philippines Roxas Boulevard, 1300 Pasay City or The
NATIONAL ARTIST AWARD SECRETARIAT Office of the Deputy Executive Director National Commission
for Culture and the Arts 633 General Luna Street, Intramuros, Manila

7. SCREENING AND SELECTION PROCESS

7.1. The National Artist Award Secretariat shall pre-screen the nominees based on technical guideline
items 5.1, 6.2, 6.3, 6.4, 6.5 and 6.6. The pre-screening shall not be based on the accomplishments and
merits of the nominee.

7.2. The Special Research Group shall accomplish its task within six (6) months. The main objective is to
verify the validity of the data, and evaluate the quality, true value and significance of works according to
the criteria. It shall come up with the updated and comprehensive profiles of nominees reflecting their
most outstanding achievements.

7.3. The National Artist Award Secretariat will meet to review the list of nominees for oversights.
Consequently, deserving nominees shall be added to the list.

7.4. The first deliberation panel (Council of Experts) shall be intra-disciplinary. The panelists shall be
grouped according to their respective fields of expertise or disciplines to shortlist the nominees in their
disciplines or categories for presentation to the second deliberation panel.

7.5. The second deliberation panel shall be composed of a different set of experts from the first
deliberation panel three (3) experts each of the seven (7) areas/discipline and may include members
from varying backgrounds such as critics and academicians. The achievements of each shortlisted
nominee shall be presented by one designated member of Council of Experts. Then panel deliberates
and ranks the shortlisted nominees according to the order of precedence following the set criteria of the
Order of National Artists. In extreme cases, the Second Deliberation may add new names to the lists.

7.6. The second deliberation panel may recommend not to give award in any category if no nominee is
found deserving. The number of awardees shall also depend on the availability of funds. All decisions
and recommendations shall be in writing.

7.7. The recommendations from the Second Deliberation Panel of the National Artist Award Council of
Experts shall then be presented to the joint boards of NCCA and CCP for final selection. The presentors
shall prepare their presentation in writing together with an audio-visual presentation or powerpoint
presentation. Written interpellations/opinions will be accepted from selected critics. The review shall be
based on the ranking done by the Second Deliberation. The voting shall be across disciplines. The
National Artists will be given the option whether to vote on all categories or on his/her particular
discipline.

7.8. Proxy votes will not be allowed in the Selection Process. Designation of permanent representatives
of agencies should be made at the outset to make them regular Board members of NCCA and thus, may
be allowed to cast votes.

7.9. The list of awardees shall be submitted to the President of the Republic of the Philippines for
confirmation, proclamation and conferral.

8. PRESENTATION OF THE AWARDS

8.1. The Order of National Artists shall not be conferred more frequently than every three (3) years.

8.2. The Order of National Artists shall be conferred by the President of the Philippines on June 11 or
any appropriate date in fitting ceremonies to be organized by the National Artist Secretariat.

8.3. The medallion of the Order of National Artists and citation shall be given to the honoree during the
conferment ceremony. The cash award of ₱100,000.00 in cheque shall be given immediately after the
ceremony or at another time and place as requested by the honoree.

8.4. A posthumous conferral consisting of the medallion and citation shall be given to the family or legal
heir/s of the honoree. The cash award of ₱75,000.00 in cheque shall be given to the honoree’s legal
heir/s or a representative designated by the family immediately after the ceremony or at another time
and place as requested by the family. (Emphases supplied.)

In 1996, the NCCA and the CCP created a National Artist Award Secretariat composed of the NCCA
Executive Director as Chairperson, the CCP President as Vice-Chairperson, and the NCCA Deputy
Executive Director, the CCP Vice-President/Artistic Director, the NCCA National Artist Award Officer and
the CCP National Artist Award Officer as members. They also centralized with the NCCA all financial
resources and management for the administration of the National Artists Award. They added another
layer to the selection process to involve and allow the participation of more members of the arts and
culture sector of the Philippines in the selection of who may be proclaimed a National Artist.

On September 19, 2003, Executive Order No. 236, s. 2003, entitled Establishing the Honors Code of the
Philippines to Create an Order of Precedence of Honors Conferred and for Other Purposes, was issued.
The National Artists Award was renamed the Order of National Artists and raised to the level of a
Cultural Order, fourth in precedence among the orders and decorations that comprise the Honors of the
Philippines. Executive Order No. 236, s. 2003, recognizes the vital role of the NCCA and the CCP in
identifying Filipinos who have made distinct contributions to arts and letters and states that the
National Artist recognition is conferred "upon the recommendation of the Cultural Center of the
Philippines and the National Commission for Culture and the Arts."12 Executive Order No. 236, s. 2003,
further created a Committee on Honors to "assist the President in evaluating nominations for recipients
of Honors,"13 including the Order of National Artists, and presidential awards. The Committee on Honors
has been allowed to "authorize relevant department or government agencies to maintain Honors and/or
Awards Committees to process nominations for Honors and/or Presidential Awards."14 In this
connection, Section 2.4(A) of the Implementing Rules and Regulations15 of Executive Order No. 236, s.
2003, states:

2.4: Awards Committees

There shall be two types of awards committees: the Committee on Honors and the various awards
committees in the various units of the government service.

A. The Committee on Honors

The Committee on Honors serves as a National Awards Committee. It is composed of the following:

The Executive Secretary, Chairman

The Secretary of Foreign Affairs, Vice-Chairman

Head, Presidential Management Staff, member

Presidential Assistant for Historical Affairs, member

Chief of Presidential Protocol, member

Chief of Protocol, DFA, member

All nominations from the various awards committees must be submitted to the Committee on Honors
via the Chancellery of Philippine Orders and State Decorations. The Chancellery shall process
nominations for the consideration of the Committee on Honors. The Committee on Honors shall screen
and recommend these nominations to the President.

The Committee on Honors shall, as a general rule, serve as a screening committee to ensure that
nominations received from the various awards committees meet two tests: that there has not been an
abuse of discretion in making the nomination, and that the nominee is in good standing. Should a
nomination meet these criteria, a recommendation to the President for conferment shall be made.

The President of the Philippines takes the recommendations of the Committee on Honors in the highest
consideration when making the final decision on the conferment of awards. (Emphasis supplied.)

Executive Order No. 435, s. 2005, entitled Amending Section 5(IV) of Executive Order No. 236 Entitled
"Establishing the Honors Code of the Philippines to Create an Order of Precedence of Honors Conferred
and for Other Purposes" was subsequently issued on June 8, 2005. It amended the wording of Executive
Order No. 236, s. 2003, on the Order of National Artists and clarified that the NCCA and the CCP "shall
advise the President on the conferment of the Order of National Artists."

Controversy Surrounding the 2009

Order of National Artists

Petitioners alleged that on January 30, 2007, a joint meeting of the NCCA Board of Commissioners and
the CCP Board of Trustees was held to discuss, among others, the evaluation of the 2009 Order of
National Artists and the convening of the National Artist Award Secretariat. The nomination period was
set for September 2007 to December 31, 2007, which was later extended to February 28, 2008. The pre-
screening of nominations was held from January to March 2008.16

On April 3, 2009, the First Deliberation Panel met.17 A total of 87 nominees18 were considered during the
deliberation and a preliminary shortlist19 of 32 names was compiled.

On April 23, 2009, the Second Deliberation Panel purportedly composed of an entirely new set of
Council of Experts met and shortlisted 13 out of the 32 names in the preliminary shortlist.20 On May 6,
2009, the final deliberation was conducted by the 30-member Final Deliberation Panel comprised of the
CCP Board of Trustees and the NCCA Board of Commissioners and the living National Artists.21 From the
13 names in the second shortlist, a final list of four names was agreed upon.22 The final list, according to
rank, follows:

Name Art Field/Category Number of Votes

 Manuel Conde (+) Film and Broadcast Arts (Film) 26

Ramon Santos Music 19

Lazaro Francisco (+) Literature 15

Federico Aguilar-Alcuaz Visual Arts 15

On May 6, 2009, a letter, signed jointly by the Chairperson of the NCCA, Undersecretary Vilma Labrador,
and the President and Artistic Director of the CCP, Mr. Nestor Jardin, was sent to the President.23 The
letter stated, thus:

May 6, 2009

Her Excellency GLORIA MACAPAGAL-ARROYO

President of the Philippines
Malacañan Palace, Manila

Subject: 2009 Order of National Artist Awardees

Dear President Arroyo:

We are respectfully submitting a recommendation of the NCCA Board of Trustees and CCP Board of
Trustees for the Proclamation of the following as 2009 Order of National Artists:

1. Mr. MANUEL CONDE+ (Posthumous) – Film and Broadcast Arts

2. Dr. RAMON SANTOS – Music

3. Mr. LAZARO FRANCISCO+ (Posthumous) – Literature

4. Mr. FEDERICO AGUILAR-ALCUAZ – Visual Arts

The above persons were identified by experts in the various fields of arts and culture, including living
National Artists. An intensive selection process was observed following established practice. In the past,
awards were presented by the President at a Ceremony held at the Malacañan Palace followed by a
program called "Parangal" at the Cultural Center of the Philippines. We also propose to continue with
past practice of celebrating the life and works of the four (4) Order of National Artists through an exhibit
that will open and a commemorative publication that will be released on the day of the proclamation.

We respectfully suggest, subject to Her Excellency’s availability, that the Proclamation be on June 11,
2009, if possible at the Malacañan Palace.

Thank you for your kind attention.

Very respectfully yours,

(Sgd.)
VILMA L. LABRADOR
Chairman
National Commission for Culture and the Arts

(Sgd.)
NESTOR O. JARDIN
President and Artistic Director
Cultural Center of the Philippines24

According to respondents, the aforementioned letter was referred by the Office of the President to the
Committee on Honors. Meanwhile, the Office of the President allegedly received nominations from
various sectors, cultural groups and individuals strongly endorsing private respondents Cecile Guidote-
Alvarez, Carlo Magno Jose Caparas, Francisco Mañosa and Jose Moreno. The Committee on Honors
purportedly processed these nominations and invited resource persons to validate the qualifications and
credentials of the nominees.25

The Committee on Honors thereafter submitted a memorandum to then President Gloria Macapagal-
Arroyo recommending the conferment of the Order of National Artists on the four recommendees of
the NCCA and the CCP Boards, as well as on private respondents Guidote-Alvarez, Caparas, Mañosa and
Moreno. Acting on this recommendation, Proclamation No. 1823 declaring Manuel Conde a National
Artist was issued on June 30, 2009. Subsequently, on July 6, 2009, Proclamation Nos. 1824 to 1829 were
issued declaring Lazaro Francisco, Federico AguilarAlcuaz and private respondents Guidote-Alvarez,
Caparas, Mañosa and Moreno, respectively, as National Artists. This was subsequently announced to the
public by then Executive Secretary Eduardo Ermita on July 29, 2009.26

Convinced that, by law, it is the exclusive province of the NCCA Board of Commissioners and the CCP
Board of Trustees to select those who will be conferred the Order of National Artists and to set the
standard for entry into that select group, petitioners instituted this petition for prohibition, certiorari
and injunction (with prayer for restraining order) praying that the Order of National Artists be conferred
on Dr. Santos and that the conferment of the Order of National Artists on respondents Guidote-Alvarez,
Caparas, Mañosa and Moreno be enjoined and declared to have been rendered in grave abuse of
discretion.27

In a Resolution28 dated August 25, 2009, the Court issued a status quo order29 enjoining "public
respondents" "from conferring the rank and title of the Order of National Artists on private respondents;
from releasing the cash awards that accompany such conferment and recognition; and from holding the
acknowledgment ceremonies for recognition of the private respondents as National Artists."

What is the nature and scope of the power of the President to confer the Order of the National Artists
and how should it be exercised? This is the essential issue presented in this case. It will determine
whether the proclamation of respondents as National Artists is valid. Preliminary procedural issues on
the standing of the petitioners and the propriety of the remedies taken,30 however, call for resolution as
a prerequisite to the discussion of the main question.

Contention of the Parties

A perusal of the pleadings submitted by the petitioners reveals that they are an aggrupation of at least
three groups, the National Artists, cultural workers and academics, and the Concerned Artists of the
Philippines (CAP). The National Artists assert an "actual as well as legal interest in maintaining the
reputation of the Order of National Artists."31 In particular, they invoke their right to due process not to
have the honor they have been conferred with diminished by the irregular and questionable conferment
of the award on respondents Guidote-Alvarez, Caparas, Mañosa and Moreno. For petitioners, this would
adversely affect their right to live a meaningful life as it detracts not only from their right to enjoy their
honor as a fruit of their lifelong labor but also from the respect of their peers.32

The cultural workers, academics and CAP claim to be Filipinos who are deeply concerned with the
preservation of the country’s rich cultural and artistic heritage. As taxpayers, they are concerned about
the use of public monies for illegal appointments or spurious acts of discretion.33

All of the petitioners claim that former President Macapagal-Arroyo gravely abused her discretion in
disregarding the results of the rigorous screening and selection process for the Order of National Artists
and in substituting her own choice for those of the Deliberation Panels. According to petitioners, the
President’s discretion to name National Artists is not absolute but limited. In particular, her discretion
on the matter cannot be exercised in the absence of or against the recommendation of the NCCA and
the CCP. In adding the names of respondents Caparas, Guidote-Alvarez, Mañosa and Moreno while
dropping Dr. Santos from the list of conferees, the President’s own choices constituted the majority of
the awardees in utter disregard of the choices of the NCCA and the CCP and the arts and culture
community which were arrived at after a long and rigorous process of screening and deliberation.
Moreover, the name of Dr. Santos as National Artist for Music was deleted from the final list submitted
by the NCCA and the CCP Boards without clearly indicating the basis thereof. For petitioners, the
President’s discretion to name National Artists cannot be exercised to defeat the recommendations
made by the CCP and NCCA Boards after a long and rigorous screening process and with the benefit of
expertise and experience. The addition of four names to the final list submitted by the Boards of the CCP
and the NCCA and the deletion of one name from the said list constituted a substitution of judgment by
the President and a unilateral reconsideration without clear justification of the decision of the First,
Second and Final Deliberation Panels composed of experts.34

Petitioners further argue that the choice of respondent GuidoteAlvarez was illegal and unethical
because, as the then Executive Director of the NCCA and presidential adviser on culture and arts, she
was disqualified from even being nominated.35 Moreover, such action on the part of the former
President constituted grave abuse of discretion as it gave preferential treatment to respondent Guidote-
Alvarez by naming the latter a National Artist despite her not having been nominated and, thus, not
subjected to the screening process provided by the rules for selection to the Order of National Artists.
Her inclusion in the list by the President represented a clear and manifest favor given by the President in
that she was exempted from the process that all other artists have to undergo. According to petitioners,
it may be said that the President used a different procedure to qualify respondent Guidote-Alvarez. This
was clearly grave abuse of discretion for being manifest and undue bias violative of the equal protection
clause.36

Respondent Caparas refutes the contention of the petitioning National Artists and insists that there
could be no prejudice to the latter. They remain to be National Artists and continue to receive the
emoluments, benefits and other privileges pertaining to them by virtue of that honor. On the other
hand, all the other petitioners failed to show any material and personal injury or harm caused to them
by the conferment of the Order of National Artists on respondents Guidote-Alvarez, Caparas, Mañosa
and Moreno. The rule on standing may not be relaxed in favor of the petitioners as no question of
constitutionality has been raised and no issue of transcendental importance is involved.37

Respondent Caparas further argues that the remedies of prohibition and injunction are improper as the
act sought to be enjoined – the declaration of respondents Guidote-Alvarez, Caparas, Mañosa and
Moreno as National Artists – had already been consummated. In particular, respondent Caparas was
already proclaimed National Artist through Proclamation No. 1827 issued on July 6, 2009.38

On the merits, respondent Caparas contends that no grave abuse of discretion attended his
proclamation as National Artist. The former President considered the respective recommendations of
the NCCA and the CCP Boards and of the Committee on Honors in eventually declaring him (Caparas) as
National Artist. The function of the NCCA and the CCP Boards is simply to advise the President. The
award of the Order of National Artists is the exclusive prerogative of the President who is not bound in
any way by the recommendation of the NCCA and the CCP Boards. The implementing rules and
regulations or guidelines of the NCCA cannot restrict or limit the exclusive power of the President to
select the recipients of the Order of National Artists.39

For her part, in a letter40 dated March 11, 2010, respondent Guidote-Alvarez manifested that she was
waiving her right to file her comment on the petition and submitted herself to the Court’s discretion and
wisdom.

Respondent Mañosa manifested that his creations speak for themselves as his contribution to Filipino
cultural heritage and his worthiness to receive the award. Nonetheless, he expressed his conviction that
the Order of National Artists is not a right but a privilege that he would willingly relinquish should he be
found not worthy of it.41

Respondent Moreno did not file any pleading despite being given several opportunities to do so. Hence,
the Court dispensed with his pleadings.42

In a Resolution dated July 12, 2011, this Court gave due course to the petition and required the parties
to file their respective memoranda.43 Respondent Caparas filed his memorandum on September 8,
2011,44 the CCP filed its memorandum on September 19, 2011,45 respondent Mañosa on September 20,
2011,46 and the Office of the Solicitor General filed a manifestation stating that it is adopting its
comment as its memorandum on September 21, 2011.47 Respondent Moreno failed to file a
Memorandum, hence, the Court resolved to dispense with the same.48Petitioners filed their
Memorandum on May 14, 2012.49

On the other hand, the original position of the Office of the Solicitor General (OSG) was similar to that of
respondent Caparas.50 In a subsequent manifestation,51 however, the OSG stated that the current Board
of Commissioners of the NCCA agree with the petitioners that the President cannot honor as a National
Artist one who was not recommended by the joint Boards of the NCCA and the CCP. The implementing
rules and regulations of Executive Order No. 236, s. 2003, recognized the binding character of the
recommendation of the NCCA and the CCP Boards and limited the authority of the Committee on
Honors to the determination that (1) there has been no grave abuse of discretion on the part of the
NCCA and the CCP Boards in making the nomination, and (2) the nominee is in good standing. Where a
nomination meets the said two criteria, a recommendation to the President to confer the award shall be
made.52
The OSG further argued that, while the President exercises control over the NCCA and the CCP, the
President has the duty to faithfully execute the laws, including the NCCA-CCP guidelines for selection of
National Artists and the implementing rules of Executive Order No. 236, s. 2003. Moreover, the laws
recognize the expertise of the NCCA and the CCP in the arts and tasked them to screen and select the
artists to be conferred the Order of National Artists. Their mandate is clear and exclusive as no other
agency possesses such expertise.53

The OSG also assailed the former President’s choice of respondent Guidote-Alvarez for being contrary to
Republic Act No. 7356.54 Section 11 of the said law provides:

Sec. 11. Membership Restrictions. – During his/her term as member of the Commission, a Commissioner
shall not be eligible for any grant, or such other financial aid from the Commission as an individual:
Provided, however, That he/she may compete for grants and awards on the same level as other artists
one (1) year after his/her term shall have expired.

The omission of the word "award" in the first portion of the above provision appears to be unintentional
as shown by the proviso which states that a member may compete for grants and awards only one year
after his or her term shall have expired. As such, respondent Guidote-Alvarez is restricted and
disqualified from being conferred the 2009 Order of National Artists.55

The Court’s Ruling

Standing of the Petitioners

Standing is the determination of whether a specific person is the proper party to bring a matter to the
court for adjudication.56 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.57

The parties who assail the constitutionality or legality of a statute or an official act must have a direct
and personal interest. They must show not only that the law or any governmental act is invalid, but also
that they sustained or are in immediate danger of sustaining some direct injury as a result of its
enforcement, and not merely that they suffer thereby in some indefinite way. They must show that they
have been or are about to be denied some right or privilege to which they are lawfully entitled or that
they are about to be subjected to some burdens or penalties by reason of the statute or act complained
of.58

In this case, we find that the petitioning National Artists will be denied some right or privilege to which
they are entitled as members of the Order of National Artists as a result of the conferment of the award
on respondents Guidote-Alvarez, Caparas, Mañosa and Moreno. In particular, they will be denied the
privilege of exclusive membership in the Order of National Artists.

In accordance with Section 2(a)59 of Executive Order No. 236, s. 2003, the Order of National Artists is "an
exclusive association of honored individuals." To ensure the exclusivity of the membership in the Order,
a rigid nomination and screening process has been established with different sets of renowned artists
and respected art critics invited to sit as the Council of Experts for the First and Second Deliberation
Panels. Moreover, all living National Artists are given a voice on who should be included in their
exclusive club as they automatically become members of the Final Deliberation Panel that will vote on
who should be included in the final list to be submitted to the President for conferment of the Order of
National Artists. To allow the untrammeled discretion and authority of the President to confer the Order
of National Artists without regard to the stringent screening and rigorous selection process established
by the NCCA and the CCP will diminish, if not negate, the exclusive nature of the said Order. It will
unduly subject the selection and conferment of the Order of National Artists to politics rather than to
principles and procedures. It will subvert the transparent and rigorous process and allow entry to the
exclusive Order of National Artists through a secret backdoor of lobbying, back channeling and political
accommodation.

Among the other petitioners, Prof. Gemino Abad presents a unique valid personal and substantial
interest. Like respondents Caparas, Mañosa and Moreno, he was among the 87 nominees for the 2009
Order of National Artists. Like respondent Moreno, he made it to the preliminary shortlist. As he did not
make it to the second shortlist, he was not considered by the Final Deliberation Panel, more so by the
former President.

It should be recalled too that respondent Guidote-Alvarez was disqualified to be nominated for being
the Executive Director of the NCCA at that time while respondents Mañosa and Caparas did not make it
to the preliminary shortlist and respondent Moreno was not included in the second shortlist. Yet, the
four of them were treated differently and considered favorably when they were exempted from the
rigorous screening process of the NCCA and the CCP and conferred the Order of National Artists. The
Committee on Honors and the former President effectively treated respondents Guidote-Alvarez,
Caparas, Mañosa and Moreno as a preferred class. The special treatment accorded to respondents
Guidote-Alvarez, Caparas, Mañosa and Moreno fails to pass rational scrutiny.60 No real and substantial
distinction between respondents and petitioner Abad has been shown that would justify deviating from
the laws, guidelines and established procedures, and placing respondents in an exceptional position. The
undue classification was not germane to the purpose of the law. Instead, it contradicted the law and
well-established guidelines, rules and regulations meant to carry the law into effect. While petitioner
Abad cannot claim entitlement to the Order of National Artists,61 he is entitled to be given an equal
opportunity to vie for that honor. In view of the foregoing, there was a violation of petitioner Abad’s
right to equal protection, an interest that is substantial enough to confer him standing in this case.

As regards the other concerned artists and academics as well as the CAP, their claim of deep concern for
the preservation of the country’s rich cultural and artistic heritage, while laudable, falls short of the
injury in fact requirement of standing. Their assertion constitutes a generalized grievance shared in a
substantially equal measure by all or a large class of citizens.62 Nor can they take refuge in their status as
taxpayers as the case does not involve any illegal appropriation or taxation. A taxpayer’s suit is proper
only when there is an exercise of the spending or taxing power of the Congress.63

Nonetheless, as a reading of the petition shows that it has advanced an issue which deserves the
attention of this Court in view of its seriousness, novelty and weight as precedent, it behooves the Court
to relax the rules on standing and to resolve the issue presented before it.64 Moreover, this issue is of
paramount interest,65 which further justifies a liberal stance on standing.

Propriety of the Remedies

The present action is a petition for prohibition, certiorari, injunction, restraining order and all other
legal, just and equitable reliefs.

It has been held that the remedies of prohibition and injunction are preventive and, as such, cannot be
availed of to restrain an act that is already fait accompli.66 Where the act sought to be prohibited or
enjoined has already been accomplished or consummated, prohibition or injunction becomes moot.67

Nevertheless, even if the principal issue is already moot, this Court may still resolve its merits for the
future guidance of both bench and bar. Courts will decide a question otherwise moot and academic if it
is "capable of repetition, yet evading review."68

It is an opportune time for the Court to assert its role as republican schoolmaster,69 a teacher in a vital
national seminar.70 There are times when the controversy is of such character that, to prevent its
recurrence and to assure respect for constitutional limitations, this Court must pass on the merits of a
case.71 This is one such case. More than being a teaching moment, this is not the first time that the
Order of National Artists was conferred in the manner that is being assailed in this case.72 If not
addressed here and now, there is great probability that the central question involved in this case will
haunt us again in the future. Every President may invoke absolute presidential prerogative and thrust
upon us National Artists after his or her own heart, in total disregard of the advise of the CCP and the
NCCA and the voice of the community of artists, resulting to repeated episodes of indignation and
uproar from the artists and the public.

Furthermore, if not corrected, such an act would give rise to mischief and dangerous precedent whereby
those in the corridors of power could avoid judicial intervention and review by merely speedily and
stealthily completing the commission of an illegality.73

In any event, the present petition is also for certiorari and there is no procedural bar for the Court to
pass upon the question of whether the proclamations of respondents Guidote-Alvarez, Caparas, Mañosa
and Moreno as National Artists were attended by grave abuse of presidential discretion.

Limits of the President’s Discretion

The respective powers of the CCP Board of Trustees and of the NCCA Board of Commissioners with
respect to the conferment of the Order of National Artists are clear. They jointly administer the said
award and, upon their recommendation or advice, the President confers the Order of National Artists.

To "recommend" and to "advise" are synonymous. To "recommend" is "to advise or counsel."74 To

"advise" is "to give an opinion or counsel, or recommend a plan or course of action; also to give notice.
To encourage, inform or acquaint."75 "Advise" imports that it is discretionary or optional with the person
addressed whether he will act on such advice or not.76 This has been clearly explained in Cojuangco, Jr.
v. Atty. Palma77:

The "power to recommend" includes the power to give "advice, exhortation or indorsement, which is
essentially persuasive in character, not binding upon the party to whom it is made." (Emphasis
supplied.)

Thus, in the matter of the conferment of the Order of National Artists, the President may or may not
adopt the recommendation or advice of the NCCA and the CCP Boards. In other words, the advice of the
NCCA and the CCP is subject to the President’s discretion.
Nevertheless, the President’s discretion on the matter is not totally unfettered, nor the role of the NCCA
and the CCP Boards meaningless.

Discretion is not a free-spirited stallion that runs and roams wherever it pleases but is reined in to keep
it from straying. In its classic formulation, "discretion is not unconfined and vagrant" but "canalized
within banks that keep it from overflowing."78

The President’s power must be exercised in accordance with existing laws. Section 17, Article VII of the
Constitution prescribes faithful execution of the laws by the President:

Sec. 17. The President shall have control of all the executive departments, bureaus and offices. He shall
ensure that the laws be faithfully executed. (Emphasis supplied.)

The President’s discretion in the conferment of the Order of National Artists should be exercised in
accordance with the duty to faithfully execute the relevant laws. The faithful execution clause is best
construed as an obligation imposed on the President, not a separate grant of power.79 It simply
underscores the rule of law and, corollarily, the cardinal principle that the President is not above the
laws but is obliged to obey and execute them.80 This is precisely why the law provides that
"administrative or executive acts, orders and regulations shall be valid only when they are not contrary
to the laws or the Constitution."81

In this connection, the powers granted to the NCCA and the CCP Boards in connection with the
conferment of the Order of National Artists by executive issuances were institutionalized by two laws,
namely, Presidential Decree No. 208 dated June 7, 1973 and Republic Act No. 7356. In particular,
Proclamation No. 1144 dated May 15, 1973 constituted the CCP Board as the National Artists Awards
Committee and tasked it to "administer the conferment of the category of National Artist" upon
deserving Filipino artists with the mandate to "draft the rules to guide its deliberations in the choice of
National Artists":

Proclamation No. 1001 dated April 27, 1972, creating the Award and Decoration of National Artist, is
hereby amended by creating a National Artists Awards Committee, hereinafter to administer the
conferment of the category of National Artist upon those deserving thereof. The Committee, which shall
be composed of members of the Board of Trustees of the Cultural Center of the Philippines, shall
organize itself immediately and shall draft the rules to guide its deliberations in the choice of National
Artists, to the end that those who have created a body of work in the arts and in letters capable of
withstanding the test of time will be so recognized. (Emphases supplied.)

The authority of the CCP Board of Trustees as National Artists Awards Committee was reiterated in
Presidential Decree No. 208 dated June 7, 1973.

The function of the CCP Board of Trustees as National Artists Awards Committee has been recognized
under Republic Act No. 7356:

Sec. 18. The National Cultural Agencies. – The [NCCA] shall coordinate with the national cultural
agencies including but not limited to the Cultural Center of the Philippines, the Institute of Philippine
Languages, the National Historical Institute, the National Library, the National Museum, the Records
Management and Archives Office. However, they shall continue operating under their respective
charters or as provided by law where provisions therein are not inconsistent with the provisions of this
Act. They shall serve as the national repository and/or showcase, as the case may be, of the best of
Philippine culture and arts. For this purpose, these agencies shall submit periodic reports, including
recommendations to the [NCCA]. (Emphasis supplied.)

On the other hand, the NCCA has been given the following mandate in connection with the conferment
of cultural or arts awards:

Sec. 12. Mandate. – The Commission is hereby mandated to formulate and implement policies and plans
in accordance with the principles stated in Title 1 of this Act.

(a) To encourage the continuing and balanced development of a pluralistic culture by the people
themselves, it shall:

xxxx

(4) extend recognition of artistic achievement through awards, grants and services to artists and cultural
groups which contribute significantly to the Filipino’s cultural legacy;

xxxx

Sec. 13. Powers and Functions. – To carry out its mandate, the Commission shall exercise the following
powers and functions:

xxxx

(j) advise the President on matters pertaining to culture and the arts, including the creation of a special
decoration or award, for persons who have significantly contributed to the development and promotion
of Philippine culture and arts;

(k) promulgate rules, regulations and undertake any and all measures as may be necessary to implement
this Act. (Emphases supplied.)

By virtue of their respective statutory mandates in connection with the conferment of the National
Artist Award, the NCCA and the CCP decided to work together and jointly administer the National Artist
Award. They reviewed the guidelines for the nomination, selection and administration of the National
Artist Award, created a National Artist Award Secretariat, centralized all financial resources and
management for the administration of the National Artist Award, and added another layer to the
selection process so that more members of the arts and culture sector of the Philippines may be
involved and participate in the selection of National Artists.

We have held that an administrative regulation adopted pursuant to law has the force and effect of
law.82 Thus, the rules, guidelines and policies regarding the Order of National Artists jointly issued by the
CCP Board of Trustees and the NCCA pursuant to their respective statutory mandates have the force and
effect of law. Until set aside, they are binding upon executive and administrative agencies,83 including
the President himself/herself as chief executor of laws. In this connection, Section 2.5(A) of the
Implementing Rules and Regulations84 of Executive Order No. 236, s. 2003 provides:

2.5: General Guidelines for Awards Committees

A. National Orders of Cultural and Scientific Merit

The existing modalities of the NCCA for selecting recipients for the Order of National Artists, and the
Gawad sa Manlilikha ng Bayan, and of the NAST for selecting recipients of the Order of National
Scientists, shall remain in force. (Emphases supplied.)

Section 2.4(A) of the same implementing rules further states:

2.4: Awards Committees

There shall be two types of awards committees: the Committee on Honors and the various awards
committees in the various units of the government service.

A. The Committee on Honors

The Committee on Honors serves as a National Awards Committee. It is composed of the following:

The Executive Secretary, Chairman

The Secretary of Foreign Affairs, Vice-Chairman

Head, Presidential Management Staff, member

Presidential Assistant for Historical Affairs, member

Chief of Presidential Protocol, member

Chief of Protocol, DFA, member

All nominations from the various awards committees must be submitted to the Committee on Honors
via the Chancellery of Philippine Orders and State Decorations. The Chancellery shall process
nominations for the consideration of the Committee on Honors. The Committee on Honors shall screen
and recommend these nominations to the President.

The Committee on Honors shall, as a general rule, serve as a screening committee to ensure that
nominations received from the various awards committees meet two tests: that there has not been an
abuse of discretion in making the nomination, and that the nominee is in good standing. Should a
nomination meet these criteria, a recommendation to the President for conferment shall be made.

The President of the Philippines takes the recommendations of the Committee on Honors in the highest
consideration when making the final decision on the conferment of awards. (Emphasis supplied.)

Pursuant to the above provision of the implementing rules of Executive Order No. 236, s. 2003, the
authority of the Committee on Honors is limited to determining whether the nominations submitted by
a particular awards committee, in this case, the joint NCCA and CCP Boards, have been tainted by abuse
of discretion, and whether the nominees are in good standing. Should the nominations meet these two
criteria, the Committee on Honors shall make a recommendation to the President for conferment of the
Order of National Artists.

In view of the various stages of deliberation in the selection process and as a consequence of his/her
duty to faithfully enforce the relevant laws, the discretion of the President in the matter of the Order of
National Artists is confined to the names submitted to him/her by the NCCA and the CCP Boards. This
means that the President could not have considered conferment of the Order of National Artists on any
person not considered and recommended by the NCCA and the CCP Boards. That is the proper import of
the provision of Executive Order No. 435, s. 2005, that the NCCA and the CCP "shall advise the President
on the conferment of the Order of National Artists." Applying this to the instant case, the former
President could not have properly considered respondents Guidote-Alvarez, Caparas, Mañosa and
Moreno, as their names were not recommended by the NCCA and the CCP Boards. Otherwise, not only
will the stringent selection and meticulous screening process be rendered futile, the respective
mandates of the NCCA and the CCP Board of Trustees under relevant laws to administer the conferment
of Order of National Artists, draft the rules and regulations to guide its deliberations, formulate and
implement policies and plans, and undertake any and all necessary measures in that regard will also
become meaningless.

Furthermore, with respect to respondent Guidote-Alvarez who was the Executive Director of the NCCA
at that time, the Guidelines expressly provides:

6.5 NCCA and CCP Board members and consultants and NCCA and CCP officers and staff are
automatically disqualified from being nominated.85

Respondent Guidote-Alvarez could not have even been nominated, hence, she was not qualified to be
considered and conferred the Order of National Artists at that time. The President’s discretion on the
matter does not extend to removing a legal impediment or overriding a legal restriction.

From the foregoing, the advice or recommendation of the NCCA and the CCP Boards as to the
conferment of the Order of National Artists on Conde, Dr. Santos, Francisco and Alcuaz was not binding
on the former President but only discretionary or optional for her whether or not to act on such advice
or recommendation. Also, by virtue of the power of control, the President had the authority to alter or
modify or nullify or set aside such recommendation or advice. It was well within the President’s power
and discretion to proclaim all, or some or even none of the recommendees of the CCP and the NCCA
Boards, without having to justify his or her action. Thus, the exclusion of Santos did not constitute grave
abuse of discretion on the part of the former President.

The conferment of the Order of National Artists on respondents Guidote-Alvarez, Caparas, Mañosa and
Moreno was an entirely different matter.

There is grave abuse of discretion when an act is (1) done contrary to the Constitution, the law or
jurisprudence or (2) executed whimsically, capriciously or arbitrarily, out of malice, ill will or personal
bias.86

There was a violation of the equal protection clause of the Constitution87 when the former President
gave preferential treatment to respondents Guidote-Alvarez, Caparas, Mañosa and
Moreno.1âwphi1 The former President’s constitutional duty to faithfully execute the laws and observe
the rules, guidelines and policies of the NCCA and the CCP as to the selection of the nominees for
conferment of the Order of National Artists proscribed her from having a free and uninhibited hand in
the conferment of the said award. The manifest disregard of the rules, guidelines and processes of the
NCCA and the CCP was an arbitrary act that unduly favored respondents Guidote-Alvarez, Caparas,
Mañosa and Moreno. The conferment of the Order of National Artists on said respondents was
therefore made with grave abuse of discretion and should be set aside.
While the Court invalidates today the proclamation of respondents Guidote-Alvarez, Caparas, Mañosa
and Moreno as National Artists, such action should not be taken as a pronouncement on whether they
are worthy to be conferred that honor. Only the President, upon the advise of the NCCA and the CCP
Boards, may determine that. The Court simply declares that, as the former President committed grave
abuse of discretion in issuing Proclamation Nos. 1826 to 1829 dated July 6, 2009, the said proclamations
are invalid. However, nothing in this Decision should be read as a disqualification on the part of
respondents Guidote-Alvarez, Caparas, Mañosa and Moreno to be considered for the honor of National
Artist in the future, subject to compliance with the laws, rules and regulations governing said award.

WHEREFORE, the petition is hereby GRANTED in PART. Proclamation Nos. 1826 to 1829 dated July 6,
2009 proclaiming respondents Cecile Guidote-Alvarez, Carlo Magno Jose Caparas, Francisco Mañosa,
and Jose Moreno, respectively, as National Artists are declared INVALID and

SET ASIDE for having been issued with grave abuse of discretion.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:
G.R. No. 195374 March 10, 2014

PEDRO LUKANG, Petitioner,

vs.
PAGBILAO DEVELOPMENT CORPORATION and EDUARDO T. RODRIGUEZ, Respondents.

DECISION

MENDOZA, J.:

This petition for review under Rule 45 of the Rules of Court assails the October 21, 2010 Decision1 and
the January 19, 2011 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 108809, which nullified
and set aside the May 13, 2008 Order3 of the Regional Trial Court (RTCJ. Branch 53, Lucena City, granting
the petitioner's application for a writ of preliminary injunction.

The Facts:

The patriarch of the family, Arsenio Lukang (Arsenio), and Mercedes Dee (Mercedes) lived as husband
and wife in Calamba, Laguna, from 1922 to 1934 and begot three (3) children, namely, Domingo,
Rosalina and Olympia.

In 1935, he started cohabiting with Leoncia Martinez (Leoncia), with whom he had ten (10) children,
namely, Elpidio, Socorro, Manuel, Pedro, Teresita, Simeon, Eugenio, Hilaria, Concepcion, and Carlos.
During their cohabitation in Lucena, Quezon, they acquired several real properties located in Pagbilao,
Quezon, to wit:

(a) Transfer Certificate of Title (TCT) Nos. T-445474 with an area of 257,967 square meters;

(b) TCT No. T-445485 with an area of 40,000 square meters;

(c) TCT No. T-445496 with an area of 5.0078 hectares; and

(d) TCT No. T-445507 consisting of 5.0803 hectares.

The said properties were then registered in the name of "ARSENIO LUKANG, married to Mercedes Dee,
1/2 share and Leoncia Martinez, single, 1/2 share."

Arsenio and Leoncia later acquired four (4) more parcels of land covered by TCT No. T-103094, TCT No.
T- 101425, TCT No. T-125349, and TCT No. T-125348. It was allegedly agreed that the said properties
should be registered in the name of Simeon, one of their children, in trust for the other heirs and should
be owned in common by their family.

When Arsenio died in 1976, his 13 children and Mercedes, executed the Extrajudicial Settlement of
Estate,8 in which they agreed to adjudicate and transfer among themselves the rights, interest and
ownership of the four (4) parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-44550.
There was, however, no agreement to partition the properties as they remained common to all the
heirs.

Years later, after the execution of the Extrajudicial Settlement of Estate, Mercedes, together with her
three (3) children, Rosalina, Domingo, and Olympia, executed another document, denominated as
Pagbabahaging Labas sa Hukuman Na May Pagtalikod sa Karapatan,9 dated December 19, 1987, wherein
the parties declared that they were the only heirs of Arsenio and partitioned the half portion of the four
(4) parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-44550 among themselves,
with Mercedes waiving her supposed share in favor of her three (3) children.

In 1988, Simeon, alleging that the certificates of title of the properties covered by TCT Nos. T-103094, T-
101425, T-125349, and T-125348 were lost, filed a petition for the issuance of the owner’s duplicate
copy before the RTC, Branch 57, Lucena City. As a result, new owner’s duplicate copies of the allegedly
lost titles were issued in his favor. Thereafter, Simeon, in a deed of donation, transferred the said
properties in favor of his children, Benedict, Heile and Madeleine. Consequently, TCT Nos. T-103094, T-
125348 and T-125349 were cancelled, and TCT No. T-241034 was issued in the name of Benedict; TCT
No. 241035 in the name of Heile; and TCT No. 241036 in the name of Madeleine.10 Furthermore, Simeon
purportedly executed the Bilihang Lampasan and Pagbibilihang Lubusan, where he sold the land covered
by TCT No. 101425 in favor of Mercedes, Rosalina, Leoncia, and Elpidio.

In the meantime, on February 15, 1989, Mercedes, through Rosalinda, filed the Petition for the Issuance
of the Owner’s Duplicate of TCT Nos. T-44547, T-44548, T-44549 and T-4455011 before the RTC, Branch
58, Lucena City. The RTC, in its Order,12 dated March 27, 1989, granted the petition and new titles were
issued in favor of Mercedes. Unknown to Leoncia, Rosalina caused the segregation of the one-half
portion of the said properties in her (Leoncia’s) favor and the division of the remaining half among her
and her siblings, Domingo and Olympia. Hence, TCT Nos. T-44547, T-44548, T-44549, and T-44550 were
cancelled and new titles were issued: TCT Nos. T-247219,13 T-247221,14 T-247223,15 and T-24722516 in
the names of Rosalina, Domingo and Olympia, while TCT Nos. T-247220,17 T-247222,18 T-247224,19 and
T-24722620 were registered in the name of Leoncia.

On September 26, 1990, Leoncia and her children, claiming that the titles of TCT Nos. T-44547, T-44548,
T-44549, and T-44550 were not lost but in her (Leoncia’s) possession, filed a complaint21 for annulment
of extrajudicial partition, affidavit of segregation and annulment of the new certificates of title, which
was docketed as Civil Case No. 90-124. The said case was consolidated with Civil Case No. 89-79, a case
for recovery of four (4) owner’s duplicate copy of TCTs filed by Simeon against his brother Pedro. The
cases were raffled to RTC, Branch 53, Lucena City.

Subsequently, Leoncia, through Pedro, registered her adverse claim on February 3, 1989 on TCT Nos. T-
241034, T-242429, TCT No. T-241036, T-241035, and T-242427 as Entry No. 530545. He further caused
the annotation of a notice of lis pendens on TCT No. T-247221 as Entry No. 556192 on October 1, 1990,
and on TCT Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T-242427 as Entry No. 538916
on November 6, 1989.

In 1993, while Civil Case No. 89-79 and Civil Case No. 90-124 were still pending, respondent Pagbilao
Development Corporation (PDC) purchased from Simeon, Mercedes and Rosalina the six (6) properties
which were the subject of the two cases. Thus, TCT Nos. T-241034, T-242429, T-241036, T-241035, T-
247221, and T-242427 were cancelled and new titles, TCT Nos. T-282100,22 T-282101,23 T-282102,24 T-
282103,25 T-282104,26 and T-28210527 were issued in favor of PDC. Accordingly, the annotations were
carried over to PDC’s titles.

When Pedro and the other heirs learned of the sale of the subject properties to PDC, they filed a motion
to require Simeon and Rosalina to explain why they sold the properties without permission from the
RTC.28 On April 23, 2008, they also filed an application for a writ of preliminary injunction with ex-parte
prayer for temporary restraining order (TRO).29 They alleged that they were in actual and physical
possession of the subject properties; and that PDC entered into the said premises, destroyed some
structures therein and started to construct improvements on the properties without their consent.

In its Order, dated April 23, 2008, the RTC30 granted the issuance of the TRO effective for a period of
twenty (20) days.

On May 13, 2008, after due hearing, the RTC issued the Order31 granting the application for writ of
preliminary injunction by which it restrained PDC from wresting possession of the subject properties and
ordering the movant, Pedro, to file a bond.

PDC filed a motion for reconsideration but it was denied in the RTC Order,32 dated March 18, 2009.

On May 29, 2009, Pedro posted a bond in the amount of One Million Pesos (₱1,000,000.000).33

PDC filed a petition for certiorari before the CA assailing the issuance of the writ of preliminary
injunction. The CA, in its Decision, dated October 21, 2010, granted the petition and set aside the May
13, 2008 and March 18, 2009 Orders of the RTC. The CA explained that Pedro’s right over the said
properties was not clear as it was contingent on the outcome or result of the cases pending before the
RTC; that it was not a present right but a contingent or future right which was not covered by injunction;
and that there was no paramount necessity because there would be no great and irreparable injury.
Moreover, PDC, as the registered owner of the said properties, had the right to enjoy the same as
provided under Articles 428 and 429 of the Civil Code.

Pedro filed a motion for reconsideration but it was denied in the CA Resolution, dated January 19, 2011.
Hence, this petition, anchored on the following

ISSUES

THE COURT OF APPEALS ERRED IN CONSISTENTLY TURNING AWAY FROM THE ISSUE OF RESPONDENT
PAGBILAO’S STATUS AS A TRANSFEREE PENDENTE LITE WHEN THAT IS THE MAIN ISSUE IN THE FIRST
PLACE

II

THE COURT OF APPEALS ERRED IN RULING THAT PAGBILAO AS REGISTERED OWNER OF THE SUBJECT
PROPERTIES HAVE THE RIGHT TO ENJOY AND EXCLUDE OTHER PERSONS FROM THE ENJOYMENT
THEREOF

III

THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT PRE-JUDGED THE MAIN CASE AND
SHIFTED THE BURDEN OF PROOF ON THE HEIRS OF SIMEON LUKANG

IV

THE COURT OF APPEALS ERRED IN RULING THAT NON-ISSUANCE OF THE INJUNCTIVE RELIEF IS NOT OF
PARAMOUNT NECESSITY NOR WILL IT CAUSE GREAT AND IRREPARABLE INJURY TO PEDRO LUKANG
V

THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT COMMITTED GRAVE ABUSE OF
DISCRETION IN NOT FIXING THE BOND.

Synthesized, the issues boil down to the question of whether or not the RTC committed grave abuse of
discretion when it issued the May 13, 2008 Order granting the writ of preliminary injunction.

A writ of preliminary injunction is a provisional remedy which is adjunct to a main suit, as well as a
preservative remedy issued to maintain the status quo of the things subject of the action or the relations
between the parties during the pendency of the suit.34 The purpose of injunction is to prevent
threatened or continuous irremediable injury to the parties before their claims can be thoroughly
studied and educated. Its sole aim is to preserve the status quo until the merits of the case are fully
heard.35 Under Section 3, Rule 58 of the Rules of Court, an application for a writ of preliminary
injunction may be granted if the following grounds are established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

Thus, a writ of preliminary injunction may be issued upon the concurrence of the following essential
requisites, to wit: (a) the invasion of right sought to be protected is material and substantial; (b) the
right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity
for the writ to prevent serious damage.36 While a clear showing of the right is necessary, its existence
need not be conclusively established. Hence, to be entitled to the writ, it is sufficient that the
complainant shows that he has an ostensible right to the final relief prayed for in his complaint.37

The well-entrenched rule is that the grant or denial of the writ of preliminary injunction rests upon the
sound discretion of the court. The trial court is given a wide latitude in this regard. Thus, in the absence
of a manifest abuse, such discretion must not be interfered with.38 "Grave abuse of discretion in the
issuance of writs of preliminary injunction implies a capricious and whimsical exercise of judgment that
is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner
by reason of passion, prejudice or personal aversion amounting to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined, or to act at all in contemplation of law."39

In the present case, the Court finds the RTC grant of injunction to be in order.1âwphi1 The pertinent
parts of its order read:

It is to be emphasized that the deeds of sale between the vendors of the six parcels of land and the
Pagbilao Development Corporation were executed on June 1, 1993. The Affidavit of Adverse Claim of
Leoncia Martinez Vda. De Lukang and the Notice of Lis Pendens of Pedro Lukang over the six properties
were all inscribed on February 3, 1989.
There is no question, therefore, that when the Pagbilao Development Corporation bought the
properties from the vendors, it had full knowledge that there were questions involving ownership of the
parcels of land it bought.

Likewise there is no question that Pagbilao Development Corporation did not take any step to have the
annotation or encumbrance in each title cancelled. [Emphases supplied]

The annotation of an adverse claim and notice of lis pendens over the subject properties is a notice to
third persons that there is a controversy over the ownership of the land and serves to preserve and
protect the right of the adverse claimants during the pendency of the controversy.40 The principle of
filing a notice of lis pendens is based on public policy and necessity, the purpose of which is to keep the
properties in litigation within the power of the court until the litigation is terminated in order to prevent
the defeat of the judgment by subsequent alienation; and in order to bind a purchaser, bona fide or
otherwise, to the judgment that the court would subsequently promulgate. It serves as an
announcement to the whole world that a particular real property is in litigation and as a warning that
those who acquire an interest in the property do so at their own risk -- they gamble on the result of the
litigation over it.41

Here, it must be noted that the annotations of adverse claim and lis pendens have been inscribed in the
certificates of titles on the following dates February 3, 1989, November 6, 1989 and October 1, 1990,
more than three (3) years before PDC bought the subject properties in 1993. It would have been
different if the adverse claims and lis pendens were not annotated in the titles. With PDC having been
officially aware of them, there can be no grave abuse of discretion that can be attributed to the RTC for
issuing the writ of preliminary injunction. There is no question that when PDC purchased the property,
the petitioner and other intervenors were in actual possession of the property and their claims adverse
to its predecessors-in-interest were annotated in the very titles of the properties. In fact, these
annotations were carried over to PDC’s title. PDC cannot invoke its being the registered owner to
dispossess the present possessors for, precisely, when it brought the properties, it was charged with the
knowledge that the ownership and sale of the subject properties by its predecessors-in-interest have
been questioned by their co-heirs. Inevitably, PDC is deemed to have obtained the properties subject to
the outcome of the litigation among the heirs of Arsenio.

During the hearing, Pedro and the other heirs were able to convince the RTC that they had a right over
the properties which should be protected while being litigated. Convinced, the RTC made a preliminary
determination that their right should be protected by a writ of preliminary injunction. Their claimed
ownership and actual possession were then being violated by PDC which had started entering the
premises and preparing the property for the construction of a power plant for liquefied natural gas.
Unless legally stopped, such act would indeed cause irreparable damage to the petitioner and other
claimants. As claimed co-owners, the petitioner and the other heirs have the right to remain in
possession of the subject properties pendente lite. The legal or practical remedy of PDC, who gambled
its lot in purchasing the properties despite the annotations, is to await the final outcome of the cases or
to amicably settle its problems with all the co-owners, co-heirs or claimants.

With regard to the issue of the injunctive bond, the Court has time and again ruled that the posting of
the bond is a condition sine qua non before a writ of preliminary injunction may issue.42 Its purpose is to
secure the person enjoined against any damage that he may sustain in case the court should finally
decide that the applicant was not entitled thereto.43 The rule, does not mean, however, that the
injunction maybe disregarded since it becomes effective only after the bond is actually filed in court.44 In
fact, in the case of Consolidated Workers Union v. Court of Industrial Relations,45 the Court declared that
it was erroneous for the labor court not to require the party to file a bond. Yet, the Court did not annul
the writ of injunction but instead ordered the said court to determine the appropriate amount of bond
to be posted by the party.

In fine, it is erroneous for the CA to rule that the RTC committed grave abuse of discretion simply
because it failed to fix the amount of the bond. This error caused "no substantial prejudice" that would
warrant the quashal of the writ of injunction.46 As a matter of fact, Pedro posted a bond in the amount
of One Million Pesos (₱1,000,000.00), the sufficiency or insufficiency of which was never questioned by
PDC before the RTC.

Hence, the Court will not discuss the sufficiency of the bond not only because the issue was not raised
before the RTC but also it involves a question of fact.

WHEREFORE, the petition is GRANTED. The assailed October 21, 2010 Decision and the January 19, 2011
Resolution of the Court of Appeals in CA-G.R. SP No. 108809 are hereby REVERSED and SET ASIDE. The
May 13, 2008 Order of the Regional Trial Court, Branch 53, Lucena City, in Civil Case No. 89-79 and Civil
Case No. 90-124 ordering the issuance of a Writ of Preliminary Injunction, is hereby ordered
REINSTATED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:
G.R. No. 162230 August 13, 2014

ISABELITA C. VINUY A, VICTORIA C. DELA PENA, HERMINIHILDA MANIMBO, LEONOR H. SUMA WANG,
CANDELARIA L. SOLIMAN, MARIA L. QUILANTANG, MARIA L. MAGISA, NATALIA M. ALONZO, LOURDES
M. NAVARO, FRANCISCA M. ATENCIO, ERLINDA MANALASTAS, TARCILA M. SAMPANG, ESTER M.
PALACIO, MAXIMA R. DELA CRUZ, BELEN A. SAGUM, FELICIDAD TURLA, FLORENCIA M. DELA PENA,
EUGENIA M. LALU, JULIANA G. MAGAT, CECILIA SANGUYO, ANA ALONZO, RUFINA P. MALLARI,
ROSARIO M. ALARCON, RUFINA C. GULAPA, ZOILA B. MANALUS, CORAZON C. CALMA, MARTA A.
GULAPA, TEODORA M. HERNANDEZ, FERMIN B. DELA PENA, MARIA DELA PAZ B. CULALA,ESPERANZA
MANAPOL, JUANITA M. BRIONES, VERGINIA M. GUEVARRA, MAXIMA ANGULO, EMILIA SANGIL,
TEOFILA R. PUNZALAN, JANUARIA G. GARCIA, PERLA B. BALINGIT, BELEN A. CULALA, PILAR Q.
GALANG, ROSARIO C. BUCO, GAUDENCIA C. DELA PENA, RUFINA Q. CATACUTAN, FRANCIA A. BUCO,
PASTORA C. GUEVARRA, VICTORIA M. DELA CRUZ, PETRONILA 0. DELA CRUZ, ZENAIDA P. DELA CRUZ,
CORAZON M. SUBA, EMERINCIANA A. VINUYA, LYDIA A. SANCHEZ, ROSALINA M. BUCO, PATRICIA A.
BERNARDO, LUCILA H. PAYAWAL, MAGDALENA LIWAG, ESTER C. BALINGIT, JOVITA A. DAVID, EMILIA
C. MANGILIT, VERGINIA M. BANGIT, GUILERMA S. BALINGIT, TERECITA PANGILINAN, MAMERTA C.
PUNO, CRISENCIANA C. GULAPA, SEFERINA S. TURLA, MAXIMA B. TURLA, LEONICIA G. GUEVARRA,
ROSALINA M. CULALA, CATALINA Y. MANIO, MAMERTA T. SAGUM, CARIDAD L. TURLA, et al. in their
capacityand as members of the "Malaya Lolas Organizations," Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY ALBERTO G. ROMULO, THE HONORABLE SECRETARY OF
FOREIGN AFFAIRS DELIA DOMINGOALBERT, THE HONORABLE SECRETARY OF JUSTICE MERCEDITAS N.
GUTIERREZ, and THE HONORABLE SOLICITOR GENERAL ALFREDO L. BENIPAYO, Respondents.

RESOLUTION

BERSAMIN, J.:

Petitioners filed a Motion for Reconsideration1 and a Supplemental Motion for Reconsideration,2 praying
that the Court reverse its decision of April 28, 2010, and grant their petition for certiorari.

In their Motion for Reconsideration, petitioners argue that our constitutional and jurisprudential
histories have rejected the Court’s ruling that the foreign policy prerogatives ofthe Executive Branch are
unlimited; that under the relevant jurisprudence and constitutional provisions, such prerogatives are
proscribed by international human rights and international conventions of which the Philippines is a
party; that the Court, in holding that the Chief Executive has the prerogative whether to bring
petitioners’ claims against Japan, has read the foreign policy powers of the Office of the President in
isolation from the rest of the constitutional protections that expressly textualize international human
rights; that the foreign policy prerogatives are subject to obligations to promote international
humanitarian law as incorporated intothe laws of the land through the Incorporation Clause; that the
Court must re-visit its decisions in Yamashita v. Styer3 and Kuroda v. Jalandoni4 which have been noted
for their prescient articulation of the import of laws of humanity; that in said decision, the Court ruled
that the State was bound to observe the laws of war and humanity; that in Yamashita, the Court
expressly recognized rape as an international crime under international humanitarian law, and in
Jalandoni, the Court declared that even if the Philippines had not acceded or signed the Hague
Convention on Rules and Regulations covering Land Warfare, the Rules and Regulations formed part of
the law of the nation by virtue of the Incorporation Clause; that such commitment to the laws ofwar and
humanity has been enshrined in Section 2, Article II of the 1987 Constitution, which provides "that the
Philippines…adopts the generally accepted principles of international law as part of the law of the land
and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations."

The petitioners added that the statusand applicability of the generally accepted principles of
international law within the Philippine jurisdiction would be uncertain without the Incorporation Clause,
and that the clause implied that the general international law forms part of Philippine law only insofar as
they are expressly adopted; that in its rulings in The Holy See, v. Rosario, Jr.5 and U.S. v. Guinto6 the
Court has said that international law is deemed part of the Philippine law as a consequence of
Statehood; that in Agustin v. Edu,7 the Court has declared that a treaty, though not yet ratified by the
Philippines, was part of the law of the land through the Incorporation Clause; that by virtue of the
Incorporation Clause, the Philippines is bound to abide by the erga omnesobligations arising from the jus
cogensnorms embodied in the laws of war and humanity that include the principle of the
imprescriptibility of war crimes; that the crimes committed against petitioners are proscribed under
international human rights law as there were undeniable violations of jus cogensnorms; that the need to
punish crimes against the laws of humanity has long become jus cogensnorms, and that international
legal obligations prevail over national legal norms; that the Court’s invocation of the political doctrine in
the instant case is misplaced; and that the Chief Executive has the constitutional duty to afford redress
and to give justice to the victims ofthe comfort women system in the Philippines.8

Petitioners further argue that the Court has confused diplomatic protection with the broader
responsibility of states to protect the human rights of their citizens, especially where the rights asserted
are subject of erga omnesobligations and pertain to jus cogensnorms; that the claims raised by
petitioners are not simple private claims that are the usual subject of diplomatic protection; that the
crimes committed against petitioners are shocking to the conscience of humanity; and that the
atrocities committed by the Japanese soldiers against petitionersare not subject to the statute of
limitations under international law.9

Petitioners pray that the Court reconsider its April 28, 2010 decision, and declare: (1) that the rapes,
sexual slavery, torture and other forms of sexual violence committed against the Filipina comfort
women are crimes against humanity and war crimes under customary international law; (2) that the
Philippines is not bound by the Treaty of Peace with Japan, insofar as the waiver of the claims of the
Filipina comfort women against Japan is concerned; (3) that the Secretary of Foreign Affairs and the
Executive Secretary committed grave abuse of discretion in refusing to espouse the claims of Filipina
comfort women; and (4) that petitioners are entitled to the issuance of a writ of preliminary injunction
against the respondents.

Petitioners also pray that the Court order the Secretary of Foreign Affairs and the Executive Secretary to
espouse the claims of Filipina comfort women for an official apology,legal compensation and other
forms of reparation from Japan.10

In their Supplemental Motion for Reconsideration, petitioners stress that it was highly improper for the
April 28, 2010 decision to lift commentaries from at least three sources without proper attribution – an
article published in 2009 in the Yale Law Journal of International Law; a book published by the
Cambridge University Press in 2005; and an article published in 2006 in the Western ReserveJournal of
International Law – and make it appear that such commentaries supported its arguments for dismissing
the petition, when in truth the plagiarized sources even made a strong case in favour of petitioners’
claims.11

In their Comment,12 respondents disagree withpetitioners, maintaining that aside from the statements
on plagiarism, the arguments raised by petitioners merely rehashed those made in their June 7, 2005
Memorandum; that they already refuted such arguments in their Memorandumof June 6, 2005 that the
Court resolved through itsApril 28, 2010 decision, specifically as follows:

1. The contentions pertaining tothe alleged plagiarism were then already lodged withthe Committee on
Ethics and Ethical Standards of the Court; hence, the matter of alleged plagiarism should not be
discussed or resolved herein.13

2. A writ of certioraridid not lie in the absence of grave abuse of discretion amounting to lack or excess
of jurisdiction. Hence, in view of the failureof petitioners to show any arbitrary or despotic act on the
part of respondents,the relief of the writ of certiorariwas not warranted.14

3. Respondents hold that the Waiver Clause in the Treaty of Peace with Japan, being valid, bound the
Republic of the Philippines pursuant to the international law principle of pacta sunt servanda.The
validity of the Treaty of Peace was the result of the ratification by two mutually consenting parties.
Consequently, the obligations embodied in the Treaty of Peace must be carried out in accordance with
the common and real intention of the parties at the time the treaty was concluded.15

4. Respondents assert that individuals did not have direct international remedies against any State that
violated their human rights except where such remedies are provided by an international agreement.
Herein, neither of the Treaty of Peace and the Reparations Agreement,the relevant agreements
affecting herein petitioners, provided for the reparation of petitioners’ claims. Respondents aver that
the formal apology by the Government of Japan and the reparation the Government of Japan has
provided through the Asian Women’s Fund (AWF) are sufficient to recompense petitioners on their
claims, specifically:

a. About 700 million yen would be paid from the national treasury over the next 10 years as welfare and
medical services;

b. Instead of paying the money directly to the former comfort women, the services would be provided
through organizations delegated by governmental bodies in the recipient countries (i.e., the Philippines,
the Republic of Korea,and Taiwan); and

c. Compensation would consist of assistance for nursing services (like home helpers), housing,
environmental development, medical expenses, and medical goods.16

Ruling

The Court DENIESthe Motion for Reconsiderationand Supplemental Motion for Reconsideration for
being devoid of merit.

1. Petitioners did not show that their resort was timely under the Rules of Court.

Petitioners did not show that their bringing ofthe special civil action for certiorariwas timely, i.e., within
the 60-day period provided in Section 4, Rule 65 of the Rules of Court, to wit:
Section 4. When and where position filed. – The petition shall be filed not later than sixty (60) daysfrom
notice of judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed,
whether such motion is required or not, the sixty (60) day period shall be counted from notice of the
denial of said motion.

As the rule indicates, the 60-day period starts to run from the date petitioner receives the assailed
judgment, final order or resolution, or the denial of the motion for reconsideration or new trial timely
filed, whether such motion is required or not. To establish the timeliness of the petition for certiorari,
the date of receipt of the assailed judgment, final order or resolution or the denial of the motion for
reconsideration or new trial must be stated in the petition;otherwise, the petition for certiorarimust be
dismissed. The importance of the dates cannot be understated, for such dates determine the timeliness
of the filing of the petition for certiorari. As the Court has emphasized in Tambong v. R. Jorge
Development Corporation:17

There are three essential dates that must be stated in a petition for certiorari brought under Rule 65.
First, the date when notice of the judgment or final order or resolution was received; second, when a
motion for new trial or reconsideration was filed; and third, when notice of the denial thereof was
received. Failure of petitioner to comply with this requirement shall be sufficient ground for the
dismissal of the petition. Substantial compliance will not suffice in a matter involving strict observance
with the Rules. (Emphasis supplied)

The Court has further said in Santos v. Court of Appeals:18

The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65 is for the
purpose of determining its timeliness. Such a petition is required to be filed not later than sixty (60) days
from notice of the judgment, order or Resolution sought to be assailed. Therefore, that the petition for
certiorariwas filed forty-one (41) days from receipt of the denial of the motion for reconsideration is
hardly relevant. The Court of Appeals was notin any position to determine when this period commenced
to run and whether the motion for reconsideration itself was filed on time since the material dates were
not stated. It should not be assumed that in no event would the motion be filed later than fifteen (15)
days. Technical rules of procedure are not designed to frustrate the ends of justice. These are provided
to effect the proper and orderly disposition of cases and thus effectively prevent the clogging of court
dockets. Utter disregard of the Rules cannot justly be rationalized by harking on the policy ofliberal
construction.19

The petition for certioraricontains the following averments, viz:

82. Since 1998, petitioners and other victims of the "comfort women system," approached the Executive
Department through the Department of Justice in order to request for assistance to file a claim against
the Japanese officials and military officers who ordered the establishment of the "comfort women"
stations in the Philippines;

83. Officials of the Executive Department ignored their request and refused to file a claim against the
said Japanese officials and military officers;

84. Undaunted, the Petitioners in turnapproached the Department of Foreign Affairs, Department of
Justice and Office of the of the Solicitor General to file their claim against the responsible Japanese
officials and military officers, but their efforts were similarly and carelessly disregarded;20
The petition thus mentions the year 1998 only as the time when petitioners approached the
Department ofJustice for assistance, but does not specifically state when they received the denial of
their request for assistance by the Executive Department of the Government. This alone warranted the
outright dismissal of the petition.

Even assuming that petitioners received the notice of the denial of their request for assistance in 1998,
their filing of the petition only on March 8, 2004 was still way beyond the 60-day period. Only the most
compelling reasons could justify the Court’s acts of disregarding and lifting the strictures of the rule on
the period. As we pointed out inMTM Garment Mfg. Inc. v. Court of Appeals:21

All these do not mean, however, that procedural rules are to be ignored or disdained at will to suit the
convenience of a party. Procedural law has its own rationale in the orderly administration of justice,
namely: to ensure the effective enforcement of substantive rights by providing for a system that
obviates arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes. Hence, it is a
mistake to suppose that substantive law and procedural law are contradictory to each other, or as often
suggested, that enforcement of procedural rules should never be permitted if it would result in
prejudice to the substantive rights of the litigants.

As we have repeatedly stressed, the right to file a special civil action of certiorariis neither a natural right
noran essential element of due process; a writ of certiorariis a prerogative writ, never demandable as a
matter of right, and never issued except in the exercise of judicial discretion. Hence, he who seeks a writ
of certiorarimust apply for it only in the manner and strictly in accordance with the provisions of the law
and the Rules.

Herein petitioners have not shown any compelling reason for us to relax the rule and the requirements
under current jurisprudence. x x x. (Emphasis supplied)

2. Petitioners did not show that the assailed act was either judicial or quasi-judicial on the part of
respondents.

Petitioners were required to show in their petition for certiorarithat the assailed act was either judicial
or quasi-judicial in character. Section 1, Rule 65 of the Rules of Courtrequires such showing, to wit:

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, nor 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.

The petition shall be accompanied by a certified true copy of the judgment, order, or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification
of nonforum shopping as provided in the third paragraph of Section 3, Rule 46. However, petitioners did
notmake such a showing.

3. Petitioners were not entitled to the injunction.

The Court cannot grant petitioners’ prayer for the writ of preliminary mandatory injunction. Preliminary
injunction is merely a provisional remedy that is adjunct to the main case, and is subject to the latter’s
outcome. It is not a cause of action itself.22 It is provisional because it constitutes a temporary measure
availed of during the pendency of the action; and it is ancillary because it is a mere incident in and is
dependent upon the result of the main action.23Following the dismissal of the petition for certiorari,
there is no more legal basis to issue the writ of injunction sought. As an auxiliary remedy, the writ of
preliminary mandatory injunction cannot be issued independently of the principal action.24

In any event, a mandatory injunction requires the performance of a particular act.1âwphi1 Hence, it is
an extreme remedy,25to be granted only if the following requisites are attendant, namely:

(a) The applicant has a clear and unmistakable right, that is, a right in esse;

(b) There is a material and substantial invasion of such right; and

(c) There is an urgent need for the writ to prevent irreparable injury to the applicant; and no other
ordinary, speedy, and adequate remedy exists to prevent the infliction of irreparable injury.26

In Marquez v. The Presiding Judge (Hon. Ismael B. Sanchez), RTC Br. 58, Lucena City,27 we expounded as
follows:

It is basic that the issuance of a writ of preliminary injunction is addressed to the sound discretion of the
trial court, conditioned on the existence of a clear and positive right of the applicant which should be
protected. It is an extraordinary, peremptory remedy available only on the grounds expressly provided
by law, specifically Section 3, Rule 58 of the Rules of Court. Moreover, extreme caution must be
observed in the exercise of such discretion. It should be granted only when the court is fully satisfied
that the law permits it and the emergency demands it. The very foundation of the jurisdiction to issue a
writ of injunction rests in the existence of a cause of action and in the probability of irreparable injury,
inadequacy of pecuniary compensation, and the prevention of multiplicity of suits. Where facts are not
shown to bring the case within these conditions, the relief of injunction should be refused.28

Here, the Constitution has entrusted to the Executive Department the conduct of foreign relations for
the Philippines. Whether or not to espouse petitioners' claim against the Government of Japan is left to
the exclusive determination and judgment of the Executive Department. The Court cannot interfere with
or question the wisdom of the conduct of foreign relations by the Executive Department. Accordingly,
we cannot direct the Executive Department, either by writ of certiorari or injunction, to conduct our
foreign relations with Japan in a certain manner.

WHEREFORE, the Court DENIES the Motion for Reconsideration and Supplemental Motion for
Reconsideration for their lack of merit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:
G.R. No. 160025 April 23, 2014

SANGGUNIANG PANLUNGSOD NG BAGUIO CITY, Petitioner,

vs.
JADEWELL PARKING SYSTEMS CORPORATION, Respondent.

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

G.R. No. 163052

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
MAYOR BERNARDO M. VERGARA, CITY MAYOR OF BAGUIO, VICE MAYOR BETTY LOURDES F.
TABANDA, VICE MAYOR OF BAGUIO, COUNCILOR BRAULIO D. YARANON, COUNCILOR ELMER O.
DATUIN, COUNCILOR ANTONIO R. TABORA, JR., COUNCILOR GALO D. WEYGAN, COUNCILOR
EDILBERTO B. TENEFRANCIA, COUNCILOR FEDERICO J. MANDAPAT, JR., COUNCILOR RICHARD A.
CARINO, COUNCILOR FAUSTINO A. OLOWAN, COUNCILOR DELFIN V. BALAJADIA, COUNCILOR RUFINO
M. PANAGAN, CITY SECRETARY RONALDO B. PEREZ, SANGGUNIANG PANLUNGSOD NG
BAGUIO,Respondents.

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

G.R. No. 164107

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
CITY MAYOR BRAULIO D. YARANON, Respondent.

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

G.R. No. 165564

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
CITY MAYOR BRAULIO D. YARANON, Respondent.

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

G.R. No. 172215

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
JUDGE FERNANDO VIL PAMINTUAN, PRESIDING JUDGE OF BRANCH 3 OF THE REGIONAL TRIAL COURT
OF BAGUIO CITY, BENEDICTO BALAJADIA, PATERNO AQUINO, RICHARD LABERINTO, ROLANDO
ABELLERA, FERNANDO SANGALANG, ALLAN ATOS, ANGELINO SANGALANG, CITY OF BAGUIO, AND
CITY MAYOR BRAULIO D. YARANON, Respondents.

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

G.R. No. 172216

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,
vs.
JUDGE FERNANDO VIL PAMINTUAN, PRESIDING JUDGE, BRANCH 03 REGIONAL TRIAL COURT OF
BAGUIO CITY, Respondent.

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

G.R. No. 173043

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
CITY MAYOR BRAULIO D. YARANON, Respondent.

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

G.R. No. 174879

JADEWELL PARKING SYSTEMS CORPORATION, Petitioner,

vs.
ACTING CITY MAYOR AND FORMERLY VICE MAYOR AND PRESIDING OFFICER OF THE SANGGUNIANG
PANLUNGSOD NG BAGUIO, REINALDO A. BAUTISTA, JR., MEMBERS OF THE SANGGUNIANG
PANLUNGSOD NG BAGUIO, LEONARDO B. YANGOT, JR., ROCKY THOMAS A. BALISONG, EDILBERTO B.
TENEFRANCIA, FAUSTINO A. OLOWAN, GALO P. WEYGAN, FEDERICO J. MANDAP AT, PERLITA L. CHAN-
RONDEZ, ANTONIO R. TABORA, JOSE M. MOLINTAS AND RUFINO M. PANAGAN AND CITY LEGAL
OFFICER MELCHOR CARLOS R. RABANES, Respondents.

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

G.R. No. 181488

CITY MAYOR BRAULIO D. YARANON, Petitioner,

vs.
JADEWELL PARKING SYSTEMS CORPORATION, HON. EXECUTIVE SECRETARY EDUARDO R. ERMITA,
ACTING BY AUTHORITY OF THE PRESIDENT, AND HON. RONALDO V. PUNO, IN HIS CAPACITY AS
SECRETARY OF THE DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT, Respondents.

DECISION

SERENO, CJ:

Before this Court are nine (9) Petitions involving essentially the same parties - officials of the City
Government of Baguio and Jadewell Parking Systems Corporation (Jadewell). The only party here that is
neither an official of the City Government of Baguio nor an officer of Jadewell is former Judge Fernando
Vil Pamintuan.

The two principal parties executed a Memorandum of Agreement (MOA) on 26 June 2000, whereby the
City of Baguio authorized Jadewell to regulate and collect parking fees for on-street parking in the city,
as well as to implement the installation of modern parking meters.

The legal disputes embodied in the nine Petitions began when the Sangguniang Panlungsod of Baguio
City (Sanggunian) revoked the MOA through City Resolution No. 037, Series of 2002 (Resolution 37),
alleging substantial breach of the MOA on the part of Jadewell. Then Mayor Alfredo Vergara vetoed the
Resolution. The Sanggunian Panlungsod overrode the veto through an unnumbered Resolution dated 17
April 2002. These twin Resolutions constitute what we call here as the first act of Rescission1 of the MOA
by the city officials of Baguio. Jadewell denied the breach and commenced an action before the Regional
Trial Court (RTC) of Baguio,2questioning the validity of the MOA’s revocation and the Sanggunian’s
capacity to pass a resolution revoking the MOA.

There was a second act of rescission that the city officials of Baguio performed in 2006, the
circumstances of which will be narrated later on.

While the main case was under litigation, and then under appeal, the parties filed contempt charges
against each other. Six of these cases are part of the consolidated Petitions before us.

These nine highly-voluminous cases, however, all boil down essentially to just these five sets of legal
questions requiring resolution:

(a) The validity or invalidity and legal efficacy of Saggunian’s two distinct acts of rescission of the MOA;

(b) The duty of a trial judge to dismiss a case assailing the validity of the MOA and the city resolution
approving it in view of the pendency of the various petitions before this Court;

(c) the liability of : (i) respondent city officials of Baguio, for various counts of indirect contempt of this
court, (ii) some respondents, who are lawyers at the same time, for acts that require the disciplinary
action of disbarment, (iii) respondent Judge Pamintuan, for taking cognizance of a civil case allegedly in
defiance of this Court’s authority;

(d) the validity of the administrative suspension of one of the respondents herein, former Mayor Braulio
Yaranon, by the Office of the President in relation to his acts of non-recognition of the MOA; and

(e) the nullification of certain acts of officials of Baguio City directed against Jadewell pursuant to their
belief that the latter had no authority to continue implementing the terms of the MOA.

THE ANTECEDENT FACTS

On 1 March 1999, Jadewell proposed the privatization3 of the administration of on-street parking in
Baguio City using Schlumberger’s DG4S Pay and Display Parking Meter (hereinafter "DG4S P&D"), which
it touted as "technologically advanced, up to the level of more progressive countries and which would
make the city as the first and only city in the Philippines, if not in Asia, to have metered parking as an
important part of its traffic and parking system."4

Respondent Sanggunian acted favorably on the proposal.5 On 31 May 2000, it passed Resolution No.
159, Series of 1999, authorizing the City Mayor of Baguio to negotiate and enter into a Memorandum of
Agreement with Jadewell for the installation of its proposed DG4S parking technology.6

On 16 July 1999, the City Mayor of Baguio wrote to Jadewell, transmitting to it the finalized draft of the
MOA, with amendments emanating from his office. The City Mayor informed Jadewell that the
finalization of the MOA would be subject to the appropriate action of the Sanggunian and the passage of
an enabling ordinance.7
On 27 March 2000, respondent Sanggunian enacted City Ordinance No. 003, Series of 2000 (Ordinance
No. 003-2000) amending Ordinance No. 13, Series of 1983, outlining the rules and policy on the
privatization of the administration of on-street parking in the city streets of Baguio.8 For this purpose,
the City of Baguio authorized the intervention of a private operator for the regulation, charging and
collection of parking fees and the installation of modern parking meters, among others.

On 10 April 2000, the City Legal Officer of Baguio City advised the City Mayor that the project for the
regulation of on-street parking and installation of parking meters was not an infrastructure. Hence, the
project was not covered by the Build-Operate-Transfer Law9 and did not require publication of a notice
for its validity.10

Nevertheless, for the sake of transparency, the City Legal Officer recommended the publication of the
appropriate notice on the project and an invitation to bid. An invitation to bid for the proposed
regulation of on-street parking and installation of parking meters on Baguio City’s streets was published
in the Philippine Daily Inquirer on 8, 9 and 10 May 2000. Four interested bidders submitted their
proposals, but three were disqualified. The bid of Jadewell was the only one not disqualified; hence, it
was awarded the project.11

On 26 June 2000, the MOA was finally executed between Jadewell and the City of Baguio – through its
then City Mayor, Mauricio G. Domogan – for the installation, management and operation of the DG4S
P&D parking meters.12

On 17 July 2000, the Sanggunian confirmed the MOA through its Resolution No. 205-2000.13

On 31 August 2000, the parties executed a supplemental MOA to include the Ganza/Burnham parking
space, owned by the Philippine Tourism Authority and managed by the City of Baguio, in the
project.14 This supplemental agreement was neither confirmed nor ratified by the Sanggunian.

In September of 2000, Jadewell began to mobilize and take over the parking facilities at the
Ganza/Burnham Park area.15 Around this time, questions arose regarding the compliance by Jadewell
with the provisions of the MOA, notably on matters such as obtaining the recommendation from the
Department of Public Works and Highways (DPWH) for the installation of the parking meters and the
legality of the collection of parking fees being done by its parking attendants prior to the installation of
the parking meters at Burnham Park.16

On 20 December 2000, Jadewell wrote then Vice-Mayor Daniel T. Fariñas to inform him of the progress
of the deputization by the Department of Transportation and Communications–Land Transportation
Office (DOTC-LTO) of parking attendants required for the implementation of the MOA. Jadewell
explained that they were still working on the required deputization of Jadewell’s parking attendants.
Nevertheless, it claimed that its parking attendants were authorized to collect parking fees pending the
actual installation of the parking meters. It also claimed that the parking meters had not yet been
installed because the necessary civil works were yet to be completed.17

Shortly thereafter, a case was filed by Edgar M. Avila, et al. with the RTC-Baguio City (Branch 61),
assailing Ordinance No. 003-2000 as unconstitutional and seeking to restrain the City Government of
Baguio from implementing the provisions of the MOA. It further alleged that the City Government could
not delegate the designation of pay parking zones to Jadewell, that the parking attendants deployed by
Jadewell were not deputized, and that the questioned ordinance creates class legislation as the
designated taxi and jeepney stands were discriminatorily removed. The case was docketed as Civil Case
No. 4892-R.18 This was dismissed on motion by Jadewell joined by the City Government of Baguio. The
lower court declared that Ordinance No. 003-2000 is constitutional and that all acts emanating from it
are deemed "reasonable and non-discriminatory...having been enacted in accordance with the powers
granted to Baguio City by law."19 Complainants’ Motion for Reconsideration (MR) was denied.

On 24 August 2001, Edgar Avila, et al., filed a Rule 65 Petition for Certiorari, Prohibition and Mandamus
with the Supreme Court assailing the RTC’s dismissal of their Complaint. The case was docketed as G.R.
No. 149642. On 10 October 2001, this Court issued a Resolution dismissing the petition of Avila, et al. for
failure to state in their petition the material dates when they received the appealed resolution and
order, and to append the original or certified true copies of the questioned resolution and order subject
of their petition.20 There was no resolution on the merits. The Resolution became final and executory on
2 April 2002.21

A case was also filed by Nelia G. Cid against then Mayor Bernardo Vergara, et al. when her vehicle was
clamped, towed away, and impounded by Jadewell after the latter found her car to be illegally parked.
She refused to pay the corresponding fees to Jadewell and as a result, the latter refused to release her
vehicle.22 Cid filed a case for replevin and questioned the validity of Ordinance No. 003-2000 and the
MOA, as well as the authority of Jadewell to clamp down/tow away vehicles whose owners refuse to pay
parking fees. The case was docketed as Civil Case No. 5165-R and was assigned to Branch 7 of RTC-
Baguio. On 24 May 2002, an Omnibus Order was issued by this RTC that addressed several pending
incidents related to the authority of Jadewell to clamp down/tow away vehicles. The Omnibus Order
upheld Jadewell’s authority to retain the vehicle of petitioner Nelia G. Cid pending her payment of the
parking and towage fees to Jadewell, and held that the authority of Jadewell was lawfully provided in
Ordinance No. 003-2000 and the MOA. Also, the RTC-Baguio took cognizance of the ruling by this Court
in G.R. No. 149642 which, in its mistaken view, upheld the validity of the questioned ordinance and the
MOA.23

Ultimately, Jadewell was able to install no more than 14 parking meters in three (3) areas of Baguio City:
six (6) on Session Road, five (5) on Harrison Road and three (3) on Lake Drive.24 At the time that these
meters were installed, there were already verbal complaints being raised against Jadewell by the
Sanggunian for the following alleged violations:

a. Failure to install parking meters for each parking space as specified in Section 3-F of Ordinance No.
003-2000;25

b. Failure to install a convenient and technologically advanced parking device that is solar-powered and
can measure the time a vehicle stays in a parking slot;26

c. Failure to give the City of Baguio the latter's share of the collected parking fee;27

d. Failure to post a performance bond in the amount of ₱1 million after its previous bond expired.28

The Sanggunian passed Resolution No. 395, Series of 2000, directing Jadewell to comply with its
obligations under the MOA for the installation of the necessary number of parking meters.29

On 15 March 2001, Jadewell wrote to the City Mayor in response to the mentioned Resolution,
informing the said office that the former had started operation of the off-street parking on 2 December
2000 and of the on-street parking on 15 December 2000.30 On 27 January 2001, Jadewell also wrote the
City Treasurer that the former had completed installation of the parking meters.31

In response to the letter of Jadewell, the City Treasurer demanded the remittance of Baguio’s share of
the parking fees collected by Jadewell since it started operations. Jadewell responded by saying that it
had complied with this obligation.32

On 19 February 2002, the Sanggunian passed Resolution 37,33 expressing its intent to rescind the MOA
with Jadewell. The said Resolution enumerated in the "Whereas" clauses the alleged violations of
Jadewell prompting it to rescind the MOA. It reads:

xxxx

WHEREAS, it now appears from verified facts that:

1. contrary to its commitment to install a technologically based P & D parking system, at no cost to the
City, including "such equipment and paraphernalia to meter the length of usage of the affected parking
spaces for purposes of payment of the parking fees", Jadewell has installed only fourteen (14) parking
meters (only 12 of which are working) in only three (3) streets, and Jadewell does not intend to install
anymore [sic]; instead it has resorted as a rule to an exceptional circumstance of manual collection of
parking fees by parking attendants who, despite express provisions of the Ordinance, are not duly
deputized by the DOTC-LTO. Despite assurances to the Honorable City Mayor that Jadewell would stop
collection of parking fees until the parking meters have been duly installed, Jadewell continues to collect
parking fees manually by using undeputized parking attendants to do the collection;

2. contrary to its commitment to install a technologically based P & D parking system, at no cost to the
City, Jadewell has charged the cost of such and similar equipment as direct costs, thus substantially
eroding the share of the City in the parking fees;

3. contrary to its obligation to post a performance bond, Jadewell has not fully complied, and when
required to update its performance bond Jadewell refused to do so rationalizing its non-compliance by
the assertion that they are already performing and therefore are no longer obligated to post a
performance bond;

4. contrary to its obligation to remit the share of the City within the first ten (10) days of the following
month, Jadewell had initially resisted making payments to the City on the pretext that the profits cannot
be determined until after the end of the fiscal year and initially failed to have their tickets pre-numbered
and registered with the Office of the City Treasurer;

5. contrary to its promise that the City would derive substantial revenue from the on-street pay parking
system, Jadewell has not paid a single centavo of the City share in on-street parking operation; whatever
Jadewell has remitted to the City are properly chargeable against the share of the City in the MOA on
off-street parking (the Burnham Parking Area near Ganza), and it appears less than what the City is
entitled thereto; and

6. contrary to its representations that the P & D System which it proposed would eliminate fraud in the
collection of parking fees, Jadewell has perpetrated fraud on the City by, according to the affidavit of its
former bookkeeper, Mr. Adonis Cabungan, doctoring the financial statements before the same are
submitted to City authorities.34
WHEREAS, there has been no substantial improvement of the traffic situation in the City even with the
introduction of the P & D Parking System and thus it increasingly appears that the system introduced by
Jadewell is more for revenue raising than for regulatory purposes. As a consequence the legal principle
applies that the collection of taxes cannot be let to any person. In other words, government cannot
allow private persons to collect public funds for themselves with the agreement that part thereof or as it
turned out in this case no part thereof is shared with the City;

WHEREAS, in its financial reports to the City showing substantial loses [sic] and in its statement to other
persons that it is losing money on the project, the kindest thing that the City can do for Jadewell is to
prevent Jadewell from incurring anymore [sic] loses.

NOW THEREFORE, on motion of Hon. Bautista, and Hon. Cariño, seconded by Hon. Yaranon, Hon.
Weygan and Hon. Tabora, be it RESOLVED, as it is hereby resolved, to rescind the Memorandum of
Agreement (MOA) executed between the City of Baguio and Jadewell Parking System Corporation dated
26 June 2000 on the basis of the foregoing premises and exercising its rights under Section 12 of the
MOA on the subject of On-Street Parking executed between the City of Baguio and Jadewell Parking
Systems Corporation dated 26 June 2000 and, more importantly, performing its duty to protect and
promote the general welfare of the people of Baguio City.

RESOLVED FURTHER, to direct the City Legal Officer to cause the proper notice of rescission to Jadewell
Parking Systems Corporation forthwith and to take all appropriate steps to implement and enforce the
intent of this Resolution.

RESOLVED FURTHERMORE, to inform all City officials and employees and all other persons concerned to
be guided accordingly.35

On 1 March 2002, the then City Mayor of Baguio, Bernardo M. Vergara, vetoed Resolution 37, through a
letter dated 1 March 2002 addressed to the Vice-Mayor, as Presiding Officer of the Sanggunian, and its
members. Mayor Vergara reasoned that it was premature for the Sangguniang Panlungsod to rescind
the MOA, because the latter provides for a minimum period of five years before the right of rescission
can be exercised; and, that the right of Jadewell to due process was violated due to the lack of
opportunity to hear the latter’s side. The City Mayor proposed a re-negotiation of the MOA with
Jadewell as a solution to the problem.36

Meanwhile, on 13 March 2002, the DOTC–Cordillera Autonomous Region (DOTC-CAR) issued a cease
and desist order to Jadewell prohibiting it from clamping down and/or towing away vehicles in Baguio
City for violation of traffic rules and regulations.37

On 17 April 2002, the Sanggunian resolved through a Resolution of the same date, to override the veto
of the City Mayor, worded thus:

NOW THEREFORE, the Sangguniang Panlungsod (City Council) in Regular Session assembled, by twelve
affirmative votes constituting more that [sic] a two-thirds vote of all its Members, has resolved to
override, as it hereby overrides, the veto of His Honor, Mayor Bernardo M. Vergara, of City Resolution
Numbered 037, Series of 2002, entitled "Rescinding the Memorandum of Agreement (MOA) Executed
Between the City of Baguio and Jadewell Parking Systems Corporation Dated 26 June 2000."38
Also at this time, Braulio D. Yaranon, who was then a member of the Sanggunian, requested a special
audit from the Commission on Audit–Cordillera Autonomous Region (COA-CAR) on the operations of
Jadewell as regards the pay parking project embodied in the MOA.

On 27 May 2002, Jadewell filed with the RTC of Baguio City a Rule 65 Petition for Certiorari, Prohibition
and Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction, assailing the validity of
Resolution No. 037-2002, which rescinded the MOA between the Sangguniang Panlungsod and
Jadewell.39 The case was docketed as Civil Case No. 5285-R and was raffled off to RTC-Baguio (Branch
61).

On 8 October 2002, the RTC Br. 61 promulgated its Decision40 finding the Sanggunian’s rescission of the
MOA unlawful. The Sanggunian then filed an appeal assailing the RTC’s decision with the Court of
Appeals; the case was docketed as CA-G.R. SP No. 74756.

Meanwhile, pending resolution of CA-G.R. SP No. 74756 before the CA, the Sanggunian passed
Resolution No. 089, Series of 2003. The resolution sought the assistance of the DOTC-CAR specifically,
for it to take immediate action against the officers and personnel of Jadewell for defying the 13 March
2002 cease-and-desist Order it issued prohibiting the latter from clamping down and/or towing away
vehicles.41 On 27 May 2003, City Mayor Vergara approved and signed Resolution No. 089-2003. In
response, Jadewell filed a Petition for Indirect Contempt with the CA against Mayor Vergara, the
Sanggunian and other local government officers. The case was docketed as CA-G.R. SP No. 77341. The
original petition was followed by three (3) supplemental petitions filed by Jadewell in the same case.

On 7 July 2003, the CA rendered a Decision42 in CA G.R. SP No. 74756, affirming the assailed Decision of
the trial court which declared as invalid the Sanggunian’s rescission of the MOA. The Sanggunian filed a
Motion For Reconsideration, but this was denied by the CA through a Resolution dated 4 September
2003.43 Aggrieved by the denial of their appeal, the Sanggunian filed a Rule 45 Petition for Review on
Certiorari with this Court, seeking to reverse and set aside the 7 July 2003 Decision and its Resolution
dated 04 September 2003 of the CA. The petition was docketed as G.R. No. 160025, the first of the
consolidated petitions herein.44

In CA-G.R. SP No. 77341, the CA dismissed in a Decision45 promulgated on 28 July 2004 the contempt
petitions filed by Jadewell for lack of merit. The latter’s Motion For Reconsideration was likewise denied
by the CA.46Jadewell elevated the dismissal of its contempt petitions to this Court on 8 December 2004
by filing a Rule 45 Petition for Review on Certiorari. The case was docketed as G.R. No. 166094. This is
not among the consolidated petitions herein.

On 13 July 2003, the COA-CAR promulgated the requested Report.47 The Report’s objective was to
ascertain compliance by the contracting parties – the City of Baguio and Jadewell – with Ordinance No.
003-2000 and the MOA. The COA-CAR Report has 12 findings, essentially as follows:

1) The provisions of the MOA and its Supplement as regards the sharing of the fees are contradicting,
hence the share of the City Government cannot be determined;48

2) There was no proper segregation by area of the parking fees collected, hence the proper share of
Baguio City cannot be determined;49
3) The City Government did not strictly implement the collection of penalties arising from the late
remittances of Jadewell, hence additional revenues were not collected;50

4) The City Treasurer did not conduct an audit of the books and accounts of Jadewell, thus the City
Government’s share from parking fees cannot be ascertained;51

5) The use of the P&D parking meters were [sic] not maximized due to Jadewell’s non-compliance with
Ordinance No. 003-2000 and the MOA, resulting in the collection of meager income from its use;52

6) The MOA does not specify the guidelines for determining the economic viability of installing the
parking meters and the period within which to install it [sic];53

7) The Supplemental MOA was not confirmed by the City Council of Baguio in violation of R.A. No. 7160
(the Local Government Code);54

8) The coverage of the parking operations contained in Annex "A" of the MOA was not confirmed by the
City Council in violation of R.A. No. 7160;55

9) The City Government failed to ensure proper compliance by Jadewell with the MOA provisions;56

10) The pay parking project was awarded to a bidder who did not have all the qualifications as stated in
the "Invitation to Bid" in violation of R.A. No. 7160 and Audit Circular No. 92-386;57

11) The provisions on deputization in Ordinance No. 003-2000 and the MOA are contrary to R.A. No.
4136 (the Land Transportation and Traffic Code), thus rendering it invalid;58

12) The monthly minimum amount to be remitted to the City Government is doubtful due to the
discrepancy in the amounts collected and expenses for the year 1999 provided by the City Government
to Jadewell as against the amount certified by the Office of the City Architect and Parks Superintendent-
Burnham Parks Office for the City Government overseeing the Ganza-Burnham parking spaces.59

On 11 February 2004, after G.R. No. 160025 was filed and pending resolution by this Court, the
Sangguniang Panlungsod adopted Resolution No. 056, Series of 2004. The said Resolution informs the
general public that Jadewell had neither the authority nor the police power to clamp, tow, or impound
vehicles at any place in the City of Baguio.60 Also, on the same date, the Sangguniang Panlungsod passed
Resolution No. 059, Series of 2004, in which it made a formal demand upon Jadewell to restore to it
possession of the Ganza Parking Area.61

With these developments, Jadewell filed directly with this Court its first indirect contempt case against
Bernardo M. Vergara (then City Mayor of Baguio), its Vice-Mayor, and the entire City Council for
enacting Resolution Nos. 056 & 059, Series of 2004 pending resolution by this Court of G.R. 160025. The
case was docketed as G.R. No. 163052.

On 23 June 2004, this Court through its First Division, ordered G.R. No. 163052 consolidated with G.R.
No. 160025.62

On 1 July 2004, then Baguio City Mayor Braulio D. Yaranon issued Executive Order No. 001-04,63 the
decretal portion of which reads:

NOW, THEREFORE, the undersigned City Mayor, pursuant to his authority to enforce all laws and
ordinances relative to the governance of the City, and to issue executive orders for the faithful and
appropriate enforcement and execution of such laws and ordinances (Sec. 455 (b) (2) and (iii), R.A. 7160)
hereby affirms and gives protection to the right of the citizenry, particularly affected motor vehicle
owners, operators, and drivers, to refuse to submit to the enforcement of Ordinance 003-2000, by the
Jadewell Parking Systems Corporation, and further to refuse to pay public revenue in the form of fees,
charges, impositions, fines, and penalties provided for in the said ordinance, to the said entity, such acts
being patently illegal and prohibited by law; this Executive Order shall be in force and effect until the
City Council, as the legislative arm of the City of Baguio, shall have adopted appropriate remedial or
corrective measures on the matters and concerns specified hereinabove.

On 8 July 2004, Mayor Yaranon issued a Memorandum64 to the City Director of the Baguio City Police
Department, directing the department to stop and prevent Jadewell from clamping, towing, and
impounding vehicles; to arrest and file criminal charges against Jadewell personnel who would execute
the proscribed acts specified in the said Memorandum; and to confiscate the equipment used by
Jadewell to clamp, tow, or impound vehicles under the authority of the rescinded MOA.

On 12 July 2004, Jadewell filed its second Petition for indirect contempt again with this Court, this time
against Mayor Yaranon for having issued the above-cited Order also for the same reasons given in its
first contempt petition with this Court. The Petition was docketed as G.R. No. 164107.

Furthermore, on 15 July 2004, Jadewell filed an administrative case against Mayor Yaranon before the
Office of the President (OP). Docketed as Case No. OP 04-G-294, it sought the mayor’s suspension and
removal from office. The case against Mayor Yaranon was for his issuance of the following: (1) Executive
Order No. 001-04 dated 1 July 2004; (2) the Memorandum dated 7 July 2004 limiting the pay parking
business of Jadewell to certain parts of Baguio City;; and (3) Memorandum dated 8 July 2004 directing
the Baguio City Police Department to prevent Jadewell from apprehending, towing and impounding
vehicles. A supplemental petition filed by Jadewell on 19 January 2005, complaining of Executive Order
No. 005-2004, which was issued on 15 October 2004, was also included in administrative case OP 04-G-
294.

On the following day, 16 July 2004, Jadewell filed a Supplemental Petition with Motion for Leave of this
Court65 in the second contempt petition before this Court, G.R. No. 164107, alleging as a supplemental
fact, Mayor Yaranon’s Memorandum of 08 July 2004.

On 15 October 2004, Mayor Yaranon issued Executive Order No. 005-2004.66 This was a cease and desist
order against Jadewell to prevent it from performing the following acts: (1) charging and collecting from
motorists, parking fees without their consent;67 (2) seizing and detaining vehicles of motorists who
refuse to pay parking fees to Jadewell;68 and (3) using yellow-colored heavy wreckers or tow trucks
bearing the name "City of Baguio".69

In addition to Executive Order No. 005-2004, Mayor Yaranon issued Executive Order No. 005-2004-A,
which is essentially a rehash of Executive Order No. 005-2004.70

On 25 October 2004, Jadewell filed a third Petition with this Court, praying that Mayor Yaranon be cited
for contempt and that Executive Order No. 005-2004 be nullified.71 This case was docketed as G.R. No.
165564. On 16 November 2004, Jadewell filed a Supplemental Petition to this Petition alleging as a
supplemental ground the issuance of Executive Order No. 005-2004-A.72
On 20 December 2004, Mayor Yaranon issued Administrative Order No. 622, Series of 2004, which
declared that Jadewell exceeded its area of operations for the administration of on-street parking and
was thus required to show lawful cause why its business permit should not be revoked. In response to
this Order, Jadewell filed a Second Supplemental Petition for contempt against Mayor Yaranon in G.R.
No. 165564 on 25 January 2005.

On 10 January 2005, this Court through a Resolution73 ordered the consolidation of G.R. No. 160025
with G.R. Nos. 163052, 164107, and 165564.

On 17 January 2005, this Court denied Jadewell’s petition in G.R. No. 166094 for failure to show any
reversible error on the part of the CA in dismissing its petition for contempt in CA-G.R. SP No.
77341.74 Its Motion For Reconsideration was likewise denied with finality.75

In the beginning of the year 2005, Jadewell attempted to renew its business permit from the City of
Baguio and tendered the fees required. However, the Office of the City Mayor refused to renew the
business permit and returned the amount tendered.76 Because of these actions of Mayor Yaranon,
Jadewell filed on 15 April 2005 its Third Supplemental Petition in G.R. No. 164107, which had been
consolidated with G.R. Nos. 160025, 163052, and 165564. Aside from its main prayer to cite the mayor
for contempt, Jadewell also prayed that Mayor Yaranon, a lawyer, be disbarred.77 On 25 April 2005, this
Court, through its Third Division, admitted the Third Supplemental Petition of Jadewell.78

On 9 February 2005, this Court, in G.R. No. 160025, issued a Writ of preliminary mandatory injunction
ordering Mayor Yaranon to immediately reopen the streets and premises occupied and/or operated by
Jadewell. The Court also required Jadewell to post a cash or surety bond in the amount of ₱100,000
within five days from receipt of the order.79

The order, in part, reads:

Acting on the urgent motion dated January 26, 2005 of respondent Jadewell Parking Systems
Corporation for the issuance of a temporary mandatory/preventive order and/or for writ of preliminary
mandatory/prohibitory injunction pending appeal in G.R. No. 160025, alleging that the effects of the
acts of City Mayor Yaranon, unless stayed, would also make effective what the petitioner Sangguniang
Panglungsod ng Baguio failed to obtain in the instant case, the net effect of which would not only be
grave damage and injury to the respondent but also to the City of Baguio, the Court further Resolved:

(a) to ISSUE, the WRIT OF PRELIMINARY MANDATORY INJUNCTION prayed for, effective immediately,
commanding City Mayor Yaranon to immediately reopen the streets and/or premises operated and/or
occupied by the respondent and to let them remain open, until further orders of this Court; and

(b) to require petitioner to POST a CASH BOND or a SURETY BOND from a reputable bonding company of
indubitable solvency in the amount of ONE HUNDRED THOUSAND PESOS (₱100,000.00), with terms and
conditions to be approved by the Court, within five (5) days from notice, otherwise, the writ of
preliminary mandatory injunction herein issued shall AUTOMATICALLY be lifted.

NOW THEREFORE, You, [City Mayor Braulio D. Yaranon], your agents, representatives and/or any person
or persons acting upon your orders or in your place or stead, are hereby DIRECTED to IMMEDIATELY
REOPEN the streets and/or premises operated and/or occupied by the respondents and to let the said
streets and premises remain OPEN, until further orders from this Court.
On 8 April 2005, Mayor Yaranon issued a Memorandum80 directing Col. Isagani Nerez, Director of the
Baguio City Police District, to create a special task force to stop Jadewell from clamping, towing, and
impounding vehicles in violation of parking rules in Baguio City; to impound the wrecker/tow trucks
used by Jadewell.

On 20 April 2005, this Court promulgated a Resolution in G.R. No. 160025, finding Mayor Yaranon guilty
of direct and indirect contempt. He was cited for direct contempt when it was proven that he had
submitted pleadings before this Court containing falsehoods. Mayor Yaranon had stated in his
Compliance that the streets were opened for Jadewell to resume operations, but upon inspection these
were found to be closed.81 He was also cited for indirect contempt, for having continuously refused to
carry out the writ issued by this Court to reopen the streets so Jadewell could resume operations.82 This
Court likewise fined Mayor Yaranon the amount of ₱10,000, which he paid. The Court further ordered
the National Bureau of Investigation (NBI) to immediately arrest and detain Mayor Yaranon pending his
compliance with the 9 February 2005 writ of preliminary mandatory injunction issued by this Court,
which ordered the reopening of some streets so Jadewell could continue its operations.83

On 10 August 2005, Benedicto Balajadia, et al. filed Civil Case No. 6089-R against Jadewell before the
RTC–Baguio City. The case was subsequently raffled to Branch 3 of the RTC presided by Judge Fernando
Vil Pamintuan.84 Balajadia, et al. sought to nullify the MOA between Jadewell and the City Government
of Baguio and its enabling ordinance, Ordinance No. 003-2000. The complainants also prayed for the
issuance of a Temporary Restraining Order (TRO) and for a writ of preliminary injunction against
Jadewell.

On 19 April 2006, Judge Pamintuan issued an Order in Civil Case No. 6089-R granting the prayer of
complainants Balajadia et al. for the issuance of a Writ of Preliminary Prohibitory Injunction. The
injunction was meant to restrain Jadewell from proceeding with the supervision and collection of
parking, towing, and impounding fees on the streets of Baguio City. Further, Judge Pamintuan ordered
the holding in abeyance of the implementation of City Ordinance No. 003-2000 and the MOA.85

On 27 April 2006, Jadewell filed with this Court a Rule 65 Petition for Certiorari, Prohibition, and
Mandamus against Judge Pamintuan86 for refusing to dismiss Civil Case No. 6089-R. The case was
docketed as G.R. No. 172215. On the same day, Jadewell filed a Petition asking this Court to cite Judge
Pamintuan for contempt. This fourth contempt case, albeit primarily against a member of the judiciary,
was docketed as G.R. No. 172216.

On 19 June 2006, G.R. No. 172215 was ordered consolidated with G.R. Nos. 160025, 163052, 164107,
and 165564.87

On 23 June 2006, Mayor Yaranon wrote Jadewell a letter demanding that it desist from operating the
pay parking system in Baguio City. Simultaneously, he wrote the Sanggunian, requesting it to cancel
Ordinance No. 003-2000, the enabling ordinance for the MOA.

On 26 June 2006, Jadewell filed a Supplemental Petition88 in G.R. No. 172215 complaining of Judge
Pamintuan’s issuance of the following Orders in Civil Case No. 6089-R: (a) Order dated 24 April
200689 directing the parties to file a pre-trial brief and setting the pre-trial of the case; (b) Order dated
01 June 200690 informing Jadewell that public respondent was not suspending the proceedings, because
he believed he was not covered by the writ issued by this Court; (c) Order dated 14 June
200691 upholding the writ he issued in the civil case despite his receipt of a copy of the writ of
preliminary injunction issued by this Court; and (d) Order dated 16 June 200692 directing Jadewell to
comply with the writ of preliminary prohibitory injunction under pain of direct contempt.

On the same day, 26 June 2006, the Office of the President (OP) rendered a Decision in OP 04-G-294, the
administrative case Jadewell had filed against Mayor Yaranon, finding him guilty of grave misconduct,
abuse of authority, and oppression. Mayor Yaranon was meted out a penalty totalling 12 months
suspension from office.93This suspension was implemented by the Department of Interior and Local
Government (DILG). Aggrieved by his suspension, Mayor Yaranon filed his Motion For Reconsideration,
which was denied on 22 August 2006 by the OP.

On 29 June 2006, in response to Mayor Yaranon’s letters of 23 June 2006, Jadewell filed before this
Court yet another case for contempt – its fifth contempt case, and the third one specifically against
Mayor Yaranon. In addition to its prayer to cite the mayor for contempt, Jadewell also prayed that
Mayor Yaranon, a lawyer, be disbarred.94 The case was docketed as G.R. No. 173043.

On 31 July 2006, G.R. No. 173043 was ordered consolidated with G.R. Nos. 160025, 163052, 164107,
165564, and 172215.95 On 27 September 2006, G.R. No. 172216 was consolidated with G.R. Nos.
160025, 163052, 164107, 165564.96

On 23 August 2006, while the consolidated cases were pending resolution before this Court, the
Sangguniang Panlungsod enacted Resolution No. 204, Series of 2006. The Resolution directed the City
Legal Officer to notify Jadewell of the Baguio City Government’s intention to rescind the MOA, and to
inform Jadewell to stop its operations under the MOA 60 days after receipt of the Notice.97

On 28 August 2006, the legal counsel for Jadewell wrote to Baguio City Vice-Mayor Bautista, Jr.,
informing him that the OP had denied the Motion for Reconsideration of Mayor Yaranon assailing the
OP resolution ordering the latter’s suspension as City Mayor of Baguio City.98 The counsel for Jadewell
likewise stated in his letter that they were aware that the Sanggunian was planning to issue a resolution
to repeal Ordinance No. 003-2000 and rescind the MOA. The letter requested the Vice-Mayor to veto
the measure in light of the pending petitions with the Supreme Court.99 The said counsel likewise sent a
similar letter to the Sanggunian, urging it to desist from implementing the repeal of Ordinance No. 003-
2000 and the rescission of the MOA pending the resolution of the cases with the Supreme Court.100

On 13 September 2006, Mayor Yaranon appealed to the CA, in a case docketed as CA G.R. CV SP No.
96116, praying for the lifting of the penalty of suspension meted him in OP 04-G-294, but this appeal
was denied. Mayor Yaranon moved for reconsideration.101

On 22 September 2006, City Legal Officer Rabanes wrote a letter to Jadewell, through its President, Mr.
Rogelio Tan, informing Jadewell of Resolution No. 204, Series of 2006, which rescinded the MOA, and
ordering it to stop operations within 60 days from notice.102 This letter was received on the same day it
was issued;103 hence, the 60-day period lapsed on 22 November 2006. This notice, together with the
resolution, constitute the second act of rescission of the MOA by the city officials of Baguio.

On 19 October 2006, Jadewell filed the sixth contempt case with this Court against the acting City Mayor
of Baguio, Reinaldo A. Bautista, Jr., and the members of the Sanggunian, including City Legal Officer
Melchor Carlos R. Rabanes, for the second act of rescission of the MOA.104 The case was docketed as
G.R. No. 174879.
On 9 October 2007, the CA dismissed Mayor Yaranon’s Petition in CA G.R. CV SP No. 96116 on the
ground that it had become moot and academic due to Mayor Yaranon’s failure to be re-elected in the 17
May 2007 elections. Mayor Yaranon filed a Motion for Reconsideration on 07 November 2007, but this
was also denied by the CA on 24 January 2008. Thus, on 17 March 2008, Mayor Yaranon filed a Rule 45
Petition before this Court seeking to reverse and set aside the CA Decision and Resolution. It was
docketed as G.R. No. 181488.

On 12 November 2008, G.R. No. 181488 was ordered consolidated with the cases already mentioned.105

THE ISSUES

1. On G.R. No. 160025 and on the

claim in G.R. No. 174879 that the second
act of rescission was a valid act of
rescission.

Whilst the issues are spread out among the nine cases, we have grouped these according to what are
common to the specific cases.

In our effort to simplify the issues and provide forms of relief to the parties that are not purely
academic, it is necessary to examine the operative effects that may result from any resolution of this
Court. Such examination may also help guide the parties in their future actions, and perhaps the overly-
litigated matters brought before us in the consolidated petitions may finally be put to rest.

We note at the outset that on 22 November 2006, 60 days had lapsed from receipt of the letter dated
22 September 2006, informing Jadewell of the decision of the City of Baguio to rescind the MOA under
Section 12 thereof. It may be recalled that Section 12 requires that notice of the intention to rescind be
given 60 days prior to the effectivity of the rescission. Jadewell has not questioned the legal efficacy of
this notice. It has brought this matter of a second rescission to the Court’s attention only as a matter of
contumacious behavior on the part of the respondents in G.R. No. 174879, in the same way that it
brought various actions of the public respondents before the Court in its other contempt petitions. Since
the legal efficacy of the rescission in 2006 has not been contested by Jadewell in any of the petitions
before us, we thus consider this notice of rescission to have taken legal effect and therefore, at the
latest, the MOA between the City of Baguio and Jadewell has ceased to legally exist as of 22 November
2006.

Parenthetically, we note that while the validity of the second act of rescission described in G.R. No.
174879 is not principally determinative of the respondents’ liability for indirect contempt therein, a
conclusion that the second act of rescission was undertaken competently and appropriately will to a
certain degree impact our appreciation of such possible liability. We will discuss this issue in our
subsequent discussion on the charges of contempt.

Inasmuch as there is no longer any existing MOA, no order of this Court can have the effect of directing
the City of Baguio to enforce any of the terms of the MOA, which brings us to the matter of G.R. No.
160025. In whatever direction we rule on the question of the validity of the first act of rescission, such
ruling will only have the effect of either providing Jadewell a basis to seek damages from the City of
Baguio for the wrongful termination of the MOA, should we find wrongful termination to have taken
place, or, deny Jadewell that right. The possible susceptibility of the City of Baguio and its officials to an
action for damages on a finding of wrongful termination is why we do not consider G.R. No. 160025 as
having been rendered moot by the lawful rescission of the MOA on 22 November 2006. Thus, we will
proceed to rule on the issues in G.R. No. 160025.

The fallo of the RTC Decision upheld by the CA, which affirmance is the lis mota in G.R. No. 160025,
reads as follows:

WHEREFORE, judgment is rendered declaring both Sangguniang Panlungsod Resolution No. 037, Series
of 2002 and the April 17, 2002 Resolution overriding the Mayor’s veto as NULL and VOID. The Writ of
Preliminary Injunction earlier issued by this Court is made PERMANENT, with costs against
respondents.106

The RTC did not order the respondents therein to comply with the MOA. An order to perform a contract
is not necessarily subsumed in an order not to terminate the same.

Contrast this legal point with the fact that the prayer of Jadewell in its original petition asked the RTC, in
relevant part:

...that the writ of preliminary injunction be made permanent and the writs applied for be issued against
the respondents nullifying and voiding Resolution No. 037, series of 2002 and the resolution over-riding
the veto … and instead, directing them to perform what the memorandum of agreement requires them
to do. (Emphasis supplied)107

This latter part, which is effectively a prayer for a permanent mandatory injunction against respondents
therein to perform the terms of the MOA, are not in the fallo of the RTC decision. We consider therefore
that the RTC deliberately withheld granting the specific prayer to order Baguio City to perform the MOA.
No motion to correct or clarify the said fallo having been filed by Jadewell, the prayer to order the city
officials of Baguio to perform the MOA is hereby deemed abandoned.

We further note three things:

1. Jadewell has not questioned - in its Petition, Reply to Comment, and Memorandum before this Court -
the implication of the RTC and CA Decisions to the effect that the Sanggunian had the authority to
perform acts of contractual rescission on behalf of the City of Baguio when both these courts ignored
the issue raised by Jadewell in its Petition before the RTC, and we therefore do not consider this to be a
genuine issue in this Petition before us;

2. While the Sangguniang Panlungsod has insinuated that there was fraud and excess of authority on the
part of the mayor in the execution108 of the MOA - because the latter provided for a smaller sharing of
"20 % from the gross profit of the operation or 50% of the net profit whichever is higher" instead of the
intended "20% of gross receipts,"109- petitioners in G.R. No. 160025 conceded even at the RTC level that
they are not assailing the MOA for being defective but for having been breached in the performance.
We thus disregard all arguments in G.R. No. 160025 regarding the validity of the execution of the MOA,
for being a non-issue in this case;110

3. We also immediately set aside claims of Jadewell in its Petition before the RTC that an alternative
relief should be provided by the courts in the form of compensation for terminated Build-Operate-
Transfer (BOT) contracts under the BOT Law (Republic Act No. 6957) as there is not the slightest basis on
record that the administration of on-street parking can be classified as an infrastructure contract, a basic
element that must be present for any contract to come within the terms of the BOT Law.

Having preliminarily screened out the non-issues in this case, we proceed to examine the rulings of the
courts a quo in G.R. 160025.

The CA affirmed the RTC Decision in toto, along the following points:

1. On the sole procedural issue. - The RTC was correct in treating the Petition as one for permanent
injunction with a prayer for a preliminary injunction, instead of treating it by its formal title: "Petition for
Certiorari, Prohibition and Mandamus with a Prayer for a Writ of Preliminary Injunction." It was correct
in holding that if the Petition had been treated by its formal denomination, then it would have been
dismissed for failing to satisfy the requirement that the act sought to be nullified was rendered in a
judicial or quasi-judicial capacity by the respondents, but then this formal denomination could be
disregarded and the nature of the Petition should be determined by its allegations and prayers. Since
there was a prayer to permanently enjoin respondents from enforcing the questioned resolutions, the
RTC was correct in treating it as one for permanent injunction.

2. On the substantive issues:

a. On the lack of due process afforded Jadewell. – The RTC was correct in ruling that Jadewell was
denied the right to be heard before the Sanggunian rescinded the MOA. There is no evidence on record
that the Sanggunian afforded Jadewell an opportunity to present its side or refute the charges of the
latter’s violation committed under the MOA.111

b. On the authority of the RTC to consider the effect of Section 9 of the MOA112 when Jadewell never
raised the matter of Section 9 in any of its pleadings. – The RTC correctly considered Jadewell’s letter
dated 24 November 2001, addressed to the Sanggunian and offered during the trial, which introduced
the subject matter of the five (5) year guarantee against rescission provided in Section 9 of the MOA.
The CA regarded the RTC’s consideration of said letter as judicious and added that even without it, the
MOA, and its provisions, form part of the case records.113

c. On the failure to observe the 60-day notice requirement. – The RTC correctly found that the
Sanggunian cannot validly and unilaterally rescind the MOA without observing the provisions in Section
12 of the MOA requiring that a 60-day notice be given before rescission can take place. To allow the
Sanggunian to unilaterally rescind the MOA without giving Jadewell an opportunity to present its side is
to render the right to rescission provided in the MOA legally vulnerable.114

d. On the lack of substantiveness of the alleged breach of performance of the MOA by Jadewell. – The
CA reviewed the records of the case and upheld the findings of the RTC that the violations of Jadewell
were not substantial to merit the consequence of rescission under the MOA.115

We elucidate on the arguments of the parties, the RTC, and the CA.

In its Petition before the RTC, Jadewell argues that the rescission of the MOA was not valid, on due
process grounds, and also because there was no substantial breach on its part to justify a rescission of
the MOA.116 It also asserts that the Sanggunian had no authority to rescind the MOA, because the latter
was not a party thereto.117
Jadewell sought a writ of preliminary injunction to prevent the implementation of the questioned
Resolution, and prayed that after hearing, the preliminary injunction be made permanent. It further
prayed for the issuance of a writ of certiorari to nullify the assailed Resolution; and for a mandatory
injunction to compel the City Government to perform the latter’s obligations under the
MOA.118 Jadewell alternatively invoked the provisions of Section 18 of the Implementing Rules and
Regulations (IRR) of the BOT Law,119 in the event the RTC would uphold the validity of the questioned
Resolution.

The trial court ruled that the rescission violated the due process clause of the Constitution and failed to
meet the requirements for rescission under the Civil Code and the MOA itself. In the Sanggunian’s
Memorandum, on appeal before the CA, the Sanggunian assigned three errors to the Decision of the
trial court: (1) the RTC ignored the evidence on record and the requirements of Rule 65 when it declared
the subject Resolution void; (2) Jadewell was not denied due process when the MOA was rescinded; and
(3) by ruling that the Sangguniang Panlungsod had no right of rescission for the first 5 years of the MOA
– an issue not raised in the pleadings – the trial court improperly took up the cudgels for Jadewell in the
case.120

As earlier stated, the CA upheld the RTC’s Decision in toto.

The Sanggunian filed its Motion for Reconsideration arguing that the CA had erred as follows: (1)
treating Jadewell’s petition as an original action for injunction;121 (2) ruling that Jadewell was deprived of
due process122 when it rescinded the MOA; and (3) finding that the MOA stipulated for a five-year
minimum guarantee against rescission.123This was denied, and this denial and the CA Decision are the
subjects of G. R. 160025.

2. G.R. No. 172215 – Certiorari,

Prohibition and Mandamus, filed by
Jadewell against Judge Pamintuan
for not dismissing Civil Case No. 6089-R

Jadewell directly filed the instant Rule 65 Petition for Certiorari before this Court to nullify the denial by
the trial court of its Motion to Dismiss and its Motion for Reconsideration of the same order,124 and for
ordering Jadewell to cease collecting parking fees, and from towing and impounding vehicles on the
streets of Baguio City. It also seeks to nullify the proceedings in Civil Case No. 6089-R, invoking both res
judicata and litis pendentia.125 It contends that, since the issue on the validity of the questioned city
ordinance and the MOA was favorably ruled upon previously by RTC Branches 7 and 61 of Baguio City in
separate cases, Branch 3 of the same RTC presided by Judge Pamintuan is bound by the rulings of the
other branches.126 Litis pendentia is being invoked in relation to the petitions already before this Court.

Mayor Yaranon is impleaded in this case on the basis of the order of Judge Pamintuan to the city mayor
to perform his duty to supervise the roads, streets and park of Baguio City, in coordination with the
police and the LTO during the validity of the Writ of Injunction that Judge Pamintuan issued.127

The main issue to be resolved in Jadewell’s Petition for certiorari is whether Judge Pamintuan’s rulings in
Civil Case No. 6089-R violated the res judicata/litis pendentia doctrines.

3. G.R. No. 181488 – The

Certiorari petition filed by Yaranon
seeking to reverse Resolutions dated
9 October 2008 and 24 January 2008
in CA-G.R. SP No. 96116 which
upheld the validity of his suspension
as City Mayor of Baguio.

Mayor Yaranon’s instant Petition before this Court raises the following issues: (1) that his failed re-
election bid was not a supervening event in the final determination by the CA of whether he was guilty
of grave misconduct, abuse of authority, and oppression; and (2) that the CA should rule on the
substantive validity of his suspension.

4. The Petitions for Contempt

a. G.R. No. 163052 – This is the first contempt petition filed by Jadewell directly with this Court against
City Mayor Vergara, the Vice Mayor, and the entire Sanggunian, for enacting Resolution Nos. 056 & 059,
Series of 2004. To recall, Resolution No. 056, Series of 2004 informs the general public that Jadewell had
neither the authority nor the police power to clamp, tow or impound vehicles at any place in the City of
Baguio.128 In Resolution No. 059, Series of 2004, the City of Baguio made a formal demand upon
Jadewell to surrender the Ganza and Burnham Park Parking Areas within thirty days. In the same
Resolution, the City of Baguio also directed the City Legal Officer to file the appropriate legal actions
necessary to recover the said parking areas and to ask for damages against Jadewell.129

The core issue to be resolved in this case is whether the Sanggunian Panlungsod is guilty of indirect
contempt for enacting the above resolutions, pending resolution of G.R. No. 160025.

b. G.R. No. 164107 – This contempt petition was filed directly with this Court against then Baguio City
Mayor Braulio D. Yaranon after he issued Executive Order No. 001-04 announcing that, as City Mayor, he
would give protection to motor vehicle owners, operators, and drivers who would refuse to submit to
the enforcement of traffic rules by Jadewell such as by refusing to pay the parking fees or fines the latter
imposes.

Yaranon also issued a Memorandum dated 8 July 2004, ordering the arrest and filing of criminal charges
against Jadewell personnel who would clamp, tow, or impound motor vehicles in defiance of Executive
Order No. 001-04. This was followed by a Memorandum on 8 April 2005 directing the Baguio City Police
District to create a special task force to prevent Jadewell from clamping, towing, and impounding
vehicles found to be in violation of the parking rules in Baguio City.

The issue to be resolved in this petition is whether Mayor Yaranon could be cited for contempt for the
above, pending resolution of the issue of the validity of the rescission of the MOA in G.R. Nos. 160025
and 163052.

c. G.R. No. 165564 – Jadewell filed this third contempt petition against Mayor Yaranon for issuing
Executive Order No. 005-2004 dated 15 October 2004. The order directs Jadewell to cease and desist
from: (a) charging and collecting parking fees on the streets of Baguio City without the consent of the
City Government;130 (b) seizing and detaining vehicles of motorists who refuse to pay the parking fees to
Jadewell131 and (c) using yellow-colored tow trucks bearing the name "City of Baguio".132 Jadewell’s
petition also seeks to nullify Executive Order No. 005-2004.
On 16 November 2004, Jadewell filed a Supplemental Petition. The act complained of this time was the
issuance of Executive Order No. 005-2004-A which is a mere rehash of Executive Order No. 005-
2004.133 On 25 January 2005, Jadewell filed a Second Supplemental Petition in connection with Mayor
Yaranon’s issuance of Administrative Order No. 622, Series of 2004. The said administrative order
declared that Jadewell exceeded its area of operations for the administration of on-street parking and it
required to show lawful cause why its business permit should not be revoked.

Like in the earlier contempt petitions, Jadewell alleges that these issuances by Mayor Yaranon are
contumacious because they were made while the main petition, G.R. No. 160025 questioning the
rescission of the MOA by the Sanggunian, is still pending resolution with this Court.

d. G.R. No. 172216 – On 27 April 2006, Jadewell filed a petition for contempt against Judge Fernando Vil
Pamintuan, Presiding Judge of RTC-Branch 3 of Baguio City, in relation to Civil Case No. 6089-R pending
before his sala.134 In the said civil case, Judge Pamintuan issued an Order directing Jadewell to desist
from the collection of parking fees, from towing and impounding vehicles on the streets of Baguio City
and to hold in abeyance the implementation of City Ordinance 003-2000 and the MOA. The validity of
the Order of Judge Pamintuan is the subject of a Petition for Certiorari, Prohibition, and Mandamus
instituted by Jadewell in G.R. No. 172215.

The main issue to be resolved in this case is whether Judge Pamintuan should be cited for indirect
contempt by this Court for issuing the assailed Orders.

e. G.R. No. 173043 – On 29 June 2006, Jadewell filed yet another contempt case against Mayor Yaranon.
In addition to its prayer to cite him for contempt, Jadewell also prays that Mayor Yaranon, as a lawyer,
be disbarred.135Jadewell instituted this fifth contempt case after it received a letter from Mayor Yaranon
demanding that it stop its business operations in Baguio City, at the same time directing the
Sangguniang Panlungsod to cancel Ordinance 003-2000.

The issue to be resolved in this case is whether Mayor Yaranon was guilty of indirect contempt and
professional misconduct for the above acts pending resolution of G.R. Nos. 160025, 163052,164107,
165564 and 172215.136

f. G.R. No. 174879 - On 19 October 2006, Jadewell filed a contempt case against the acting City Mayor of
Baguio, Reinaldo A. Bautista, Jr., and the members of the Sangguniang Panlungsod, including City Legal
Officer Melchor Carlos R. Rabanes, in connection with the second act of rescission.137 Jadewell also asks
that the respondents who are lawyers, namely: Rocky Thomas A. Balisong, Edilberto B. Tenefrancia,
Faustino A. Olowan, Federico J. Mandapat, Perlita L. Chan-Rondez, and Jose M. Molintas, be disbarred.

These acts, in Jadewell’s view, are contumacious in light of the pending G.R. No. 160025 before this
Court.

OUR RULINGS

1. On G.R. No. 160025

a. On the Treatment of
Jadewell’s Petition as one for
Permanent Injunction.
The CA sustained the position of the Sanggunian that certiorari could not prosper because when the
latter enacted Resolution 37, the Sanggunian was exercising its legislative function and not its judicial or
quasi-judicial function. The writ of certiorari under Rule 65 requires: (a) that it is directed against a
tribunal, a board or an officer exercising judicial or quasi-judicial functions; (b) that such tribunal, board,
or officer has acted without or in excess of jurisdiction or with grave abuse of discretion; and (c) that
there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law.138

The CA nevertheless proceeded to treat the Petition as an original action for injunction, ruling in this
wise:

xxxx

Although in the trial court, Jadewell filed said petition for Certiorari, Prohibition and Mandamus under
Rule 65, it is essentially one for Injunction under Rule 58. Said petition’s form and substance satisfied all
the requirements of a civil action for Injunction, which is the proper remedy under the attendant
circumstances.

The rules of procedure ought not to be applied in a very rigid technical sense, rules of procedure are
used only to help secure, not override substantial justice. If a technical and rigid enforcement of the
rules is made, their aim would be defeated.

Considering the clear and patent denial of due process committed by the Sanggunian in precipitately
rescinding the MOA and in the interest of substantial justice, WE deem it more prudent to treat the
petition filed below as an action for Injunction under Rule 58, which is well within the jurisdiction of the
trial court. Consequently, the present appeal shall be considered as an appeal from the permanent
injunction ordered by the trial court, which is properly appealable to this Court, as held in Casilan vs.
Ybaňez.139

xxxx

We sustain the ruling of the appellate court treating Jadewell’s original action for certiorari as one for
injunction based on the allegations in the latter’s pleadings.

In Ramon Jimenez, Jr. v. Juan Jose Jordana,140 the issue to be resolved was whether the nature of the
action was one for specific performance or for recovery of real property. In determining that the case
was one for the recovery of real property, the Court characterized the suit on the basis of the allegations
in the Complaint. We restated the rule that the nature of an action is determined by the material
averments in the complaint and the character of the relief sought. In the recent case of Reyes v. Alsons
Development and Investment Corporation,141 we likewise ruled that the nature of an action is
determined by the allegations in the pleadings.

In Lee, Jr. v. Court of Appeals,142 the controversy to be resolved was whether the appeal filed by the
petitioner was one under Rule 65 or Rule 42. The determination of the issue was crucial, because the
appellate court had dismissed the appeal of the petitioner, saying that the wrong mode of appeal had
been used. The CA had ruled that petitioner should have filed a certiorari petition under Rule 65 –
instead of a petition under Rule 42 – to appeal the assailed decision rendered by the RTC in the exercise
of its appellate jurisdiction.

We held:
Our perusal of the petition filed before the Court of Appeals clearly shows that it is a petition for review
under Rule 42, and not a special civil action for certiorari under Rule 65. We note that in the Court of
Appeals’ petition, under the heading "Nature of the Petition," petitioner stated that it was a "petition
for review on certiorari to set aside, invalidate and reverse the Decision dated December 14, 2001 of
public respondent Judge Victor T. Llamas, Jr." Also, the reversal sought was premised on the ground that
the decision was issued in gross error. The statement under the heading "Nature of the Petition" that
the trial courts’ decisions were issued with grave abuse of discretion amounting to lack of jurisdiction,
and even the caption impleading the lower courts, would not automatically bring the petition within the
coverage of Rule 65. It is hornbook doctrine that it is not the caption of the pleading but the allegations
therein that determine the nature of the action. (Emphasis supplied)

In the original action filed by Jadewell before the RTC of Baguio City, although the action was clearly
denominated as a Petition for Certiorari, Prohibition and Mandamus against the Sangguniang
Panlungsod, the allegations actually supported an action for injunction under Rule 58 of the Revised
Rules on Civil Procedure. As can be gleaned from its allegations and especially in its prayers, Jadewell
filed the case with the trial court with the ultimate end of restraining the implementation of Resolution
No. 037, Series of 2002.

We agree with the CA when it ruled that Jadewell sought permanent injunction aside from the auxiliary
remedy of preliminary injunction, thus:

An action for injunction is a recognized remedy in this jurisdiction. It is a suit for the purpose of enjoining
the defendant, perpetually or for a particular time, from committing or continuing to commit a specific
act, or compelling the defendant to continue performing a particular act. It has an independent
existence. The action for injunction is distinct from the ancillary remedy of preliminary injunction, which
cannot exist except only as part or an incident of an independent action or proceeding.143 xxxx...

In Garcia v. Adeva,144 this Court had the opportunity to clarify that while injunction can be a provisional
remedy, it can also be a main case. The Court had to make this preliminary distinction in order to find
out whether the SEC had the jurisdiction to prevent, on a permanent basis, the commission of certain
acts by the respondents. Thus, the necessity to make the distinction between injunction as a provisional
remedy and injunction as a main case. It found guidance from Garayblas v. Atienza, Jr.,145 and quoting
from the latter:

Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing
a certain act. It may be the main action or merely a provisional remedy for and as an incident in the
main action. The Court has distinguished the main action for injunction from the provisional or ancillary
remedy of preliminary injunction, thus:

The main action for injunction is distinct from the provisional or ancillary remedy of preliminary
injunction which cannot exist except only as part or an incident of an independent action or proceeding.
As a matter of course, in an action for injunction, the auxiliary remedy of preliminary injunction,
whether prohibitory or mandatory, may issue. Under the law, the main action for injunction seeks a
judgment embodying a final injunction which is distinct from, and should not be confused with, the
provisional remedy of preliminary injunction, the sole object of which is to preserve the status quo until
the merits can be heard. A preliminary injunction is granted at any stage of an action or proceeding prior
to the judgment or final order. It persists until it is dissolved or until the termination of the action
without the court issuing a final injunction.

We, therefore, rule that the CA did not commit any error in treating Jadewell’s Petition for Certiorari as
an original action for injunction.

b. On the denial of due process.

The second issue in this Petition is the correctness of the CA’s ruling that Jadewell was deprived of due
process when the Sangguniang Panlungsod rescinded the MOA. The findings of the CA are as follows:

In the instant case, evidence on record does not show that before the Sanggunian passed the disputed
Resolution it gave Jadewell an opportunity to present its side. Neither did the Sanggunian convene an
investigatory body to inquire into Jadewell’s alleged violations nor at least invite Jadewell to a
conference to discuss the alleged violations, if only to give Jadewell the chance to refute any evidence
gathered by it against the latter. As it is, the Sanggunian arrogated upon itself the role of a prosecutor,
judge and executioner in rescinding the MOA, all in clear violation of Jadewell’s constitutionally
embedded right to due process.146

x x x.

Both courts held that Jadewell was denied due process. When the denial of due process argument is
raised, it is directed primarily against the exercise of governmental authority that "deprives life, liberty
and property" without observance what is, in the circumstances, the applicable standards of "due
process." It is not an argument that is relevant in situations of contractual breach between two purely
private entities, nor is it available against the government when the latter is not discharging a
governmental function, but merely pursuing a purely commercial activity in a proprietary capacity. In
order to consider the due process argument, this Court must first determine whether the MOA was
entered into by the City of Baguio in a governmental capacity, or in a purely proprietary capacity.

The regulation of on-street and off-street parking is a governmental function that can be exercised by
local governments. It is important to understand the objective of the Baguio City Government in: (1)
privatizing the administration of on-street and off-street parking; and (2) its execution of a MOA with
Jadewell. This can be gleaned from the Explanatory Note and other provisions of the agreement, to wit:

The City of Baguio has earned the reputation of the CLEANEST AND GREENEST HIGHLY URBANIZED CITY
for the previous years. This has become possible due to the collective effort of both the Citizens of
Baguio and the City Government. However, the increase in population, volume of vehicles and the
absence of a regulatory measure to address this concern gradually tainted what used to be a reputation
we were proud of.

The ever increasing problems, specifically those relevant to the Traffic situation is at this point the
biggest contributor to environmental degradation. Other Salient points we must consider relevant to
this matter are the problems on OBSTRUCTION AND DOUBLE PARKING which are very rampant. We
further add to these the problems on DISORGANIZED PARKING, LACK OF DEPUTIZED AGENTS to monitor,
supervise and enforce traffic rules and regulations.

At this point in time, we feel the immediate need of focusing on these problems. There is an urgent
need to adopt measures that would alleviate these matters. This we recommend that PARKING SPACES
should be REGULATED in such a manner that it would bring advantage both to the City Government and
the Citizens of Baguio. We further propose the collection of REGULATORY FEES that would be used in
maintaining our roads and to hire people that would de deputized to help ease the problems as stated
above.

Finally, we believe that our roads are beyond the Commerce of Man. To convert our roads into PAY
PARKING SPACES, would be violative of this principle. However to REGULATE its use and its eventual
effect would redound to the GENERAL WELFARE will be an appreciated gesture to help preserve our
image as the CLEANEST AND GREENEST HIGHLY URBANIZED CITY.

xxxx

SECTION 4. Parking spaces. A parking place may be divided into parking spaces and for the purposes of
this Ordinance, each space or for a number of spaces as determined by the private parking operator in
consultation with the concerned Official of the City of Baguio.

xxxx

SECTION 5. Prohibitions against parking outside the parking spaces. No spaces shall park any motor
vehicle on the sidewalk or cause or permit any motor vehicle to wait to any road or length of road on
which in any place in which or adjacent to or in close proximity to which there is a parking place.

xxxx

SECTION 7. Payment of Prescribed Charges. (1) No person shall park any motor vehicle in a parking place
or parking space during the times specified in this Ordinance without paying the prescribed charge for
the required parking period; (2) The prescribed charge payable in respect to the parking of a motor
vehicle in a parking space shall be paid by the insertion into the parking meter provided for that parking
space a coin/coins of Philippine Currency or by using cards in order to obtain the payment ticket to
evidence the payment of the prescribed charge; (3) The payment ticket shall be displayed at a
conspicuous part of a motor vehicle in a parking place or parking space; (4) The payment ticket shall be
valid to be used on any parking space within the authorized period indicated in the payment ticket.

xxxx

SECTION 22. Rules. The Memorandum of Agreement (MOA) to be entered into by the City Mayor shall
be governed by this Ordinance.

From the above, the following are clear: (1) that the City of Baguio decided on the privatization of the
administration of parking for environmental and peace and safety reasons, both of which are within its
powers under Section 458(A)(5)(v) and (vi) of the Local Government Code; and (2) that the terms of
agreement between the City of Baguio and Jadewell involve the delegation of governmental functions in
terms of regulating the designation and use of parking spaces as well as the collection of fees for such
use. These are indicators that any privatization contract pursuant to the above Resolution takes the
essential character of a franchise because what is being privatized is a government-monopolized
function.

It would thus be relevant to ask if there is a provision in the applicable laws or the franchise (MOA) that
grants the City of Baguio the right to revoke the latter either at will, or upon the satisfaction of certain
conditions, such that ordinary due process protection can be considered to have been waived by the
franchisee. We must caution that when we refer to revocation at will here, we are referring to the
revocation of resolutory, not suspensive, obligations.147

We have looked closely at Resolution No. 003-2000 and the MOA and have additionally reflected on the
applicable provision under the Civil Code. We have come to the conclusion that:

(a) There is only one provision that allows for unilateral revocation of the MOA, which can be found in
Section 9 thereof:

9. Minimum Guaranty – The FIRST PARTY guaranties (sic) a minimum period of five (5) years against
rescission; provided that after such period, the parties may agree to increase to a reasonable rate the
parking fees and the share of the city from the parking fees collected as provided for in the guidelines,
(Annex "B");

(b) This Section 9 requires that five years must have lapsed – presumably from the date of execution of
the MOA – before the unilateral right to revoke the MOA can be exercised;

(c) Therefore, before the five year period has lapsed, the right to revoke the MOA arises only under
Article 1191 of the Civil Code, which reads:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law.

From the above, it appears that in order to effect a valid revocation of the MOA prior to the lapse of the
5-year period provided for in Section 9, the City of Baguio had to approach the problem from one or
both of two perspectives: one, negotiate the termination of the MOA with Jadewell, or two, exercise its
option under Article 1191 of the Civil Code.

The first option, a negotiated pretermination of the contract, is an inherent right of every party in a
contract. This can be inferred from the freedom of the parties to contract and modify their previous
covenants provided it would not be contrary to law, morals, good customs, public order or public
policy.148 Despite the provision on the minimum warranty against rescission stipulated in the MOA, the
parties were not constrained to mutually modify such restriction. The Sanggunian could have proposed
to Jadewell the possibility of lifting the warranty against rescission subject to the condition that the
latter will comply with its obligations under the MOA.

This scenario could have impressed upon Jadewell that its contractual relations with the city
government of Baguio were less than ideal. The suggested approach for the Sanggunian could have been
legally sound and practical. Obviously, this was not done in this case; thus, Jadewell’s Complaint before
the RTC of Baguio City.

The second option is the exercise of the unilateral right to rescind a bilateral contract on the part of a
party who believes that it has been injured by a breach substantial enough to warrant revocation.
Where one party allegedly failed to comply with his obligations under a contract, the injured party may
rescind the obligation if the other does not perform or is not ready and willing to perform.149 We will
examine the acts of Baguio City in relation to what is allowed under Article 1191.

Rescission under Article 1191 takes place through either of two modes: (1) through an extrajudicial
declaration of rescission; or (2) upon the grant of a judicial decree of rescission.

Extrajudicial declaration of rescission is recognized as a power which does not require judicial
intervention.150 If the rescission is not opposed, extrajudicial declaration of rescission produces legal
effect151 such that the injured party is already relieved from performing the undertaking.152

However, the power of declaring extrajudicial rescission conferred upon the injured party is regulated by
the Civil Code. If the extrajudicial rescission is impugned by the other party, it shall be subject to a
judicial determination153where court action must be taken, and the function of the court is to declare
the rescission as having been properly or improperly made, or to give a period within which the debtor
must perform the obligation alleged to be breached.154 A unilateral cancellation of a contract may be
questioned in courts by the affected party to determine whether or not cancellation is
warranted.155 Thus, in an extrajudicial decree of rescission, revocation cannot be completely exercised
solely on a party’s own judgment that the other has committed a breach of the obligation156 but always
subject to the right of the other party to judicially impugn such decision.

It is important to contextualize that the agreement entered into by the City of Baguio with Jadewell is
the embodiment of a grant of franchise imbued with public interest and is not merely an agreement
between two private parties.

It is our view that the first act of rescission by the City of Baguio may be valid even if there is a
stipulation against it within the first five years of the MOA’s existence. Article 1191 of the New Civil Code
provides a party the right to rescind the agreement and clearly overrides any stipulation to the contrary.
However, the grounds that would serve as basis to the application of the said article must be clearly
established.

In the exercise of this option under Article 1191, was it necessary for the City of Baguio to provide
Jadewell an opportunity to air its side on the matter before the former implemented the rescission of
the MOA? In the instant case, was Jadewell deprived of procedural due process?

We answer in the negative. We disagree with the rulings of the RTC and the CA that Jadewell was
deprived of due process. In Taxicab Operators of Metro Manila v. The Board of Transportation,157 we
confronted the issue of whether the petitioners were denied procedural due process when the
respondent Board of Transportation issued a circular ordering the phasing out of old vehicles to be used
as taxicabs. In the said case, the phase-out was embodied in a circular that was promulgated without
holding a public hearing or at least requiring those affected to submit their position papers on the policy
to be implemented. We held for the respondent Board, and ruled in this wise:
Dispensing with a public hearing prior to the issuance of the Circulars is neither violative of procedural
due process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307 (1972):

Previous notice and hearing as elements of due process, are constitutionally required for the protection
of life or vested property rights, as well as of liberty, when its limitation or loss takes place in
consequence of a judicial or quasi-judicial proceeding, generally dependent upon a past act or event
which has to be established or ascertained. It is not essential to the validity of general rules or
regulations promulgated to govern future conduct of a class or persons or enterprises, unless the law
provides otherwise.

In the instant case, the assailed act by the Sanggunian Panlungsod in rescinding the MOA – be it first or
second act of rescission – was clearly in the exercise of its legislative or administrative functions and was
not an exercise of a judicial or quasi-judicial function. The Sanggunian Panlungsod does not possess any
judicial or quasi-judicial functions. The preamble of the MOA lends support to this view. Evidently, the
foremost reason why the agreement was entered into by the parties was to provide order, given Baguio
City’s parking problems in identified areas, as well as to generate income.

The objectives of the Sanggunian Panlungsod, as well as its intention to rescind the MOA; because it
deems to no longer serve the interest of the City of Baguio, are clearly an exercise of its legislative or
administrative function. However, it is another matter as to whether the City of Baguio was able to
clearly establish the grounds as basis for the exercise of its right to rescind.

c. On the allegation of Jadewell’s

substantial breach of the MOA.

The Baguio City government has repeatedly mentioned that Jadewell had so far installed only 14 parking
meters, with only 12 functioning. The COA-CAR Report dated 13 July 2003 enumerated 12 findings,158 a
majority of which indicates that Jadewell was remiss in the fulfilment of its obligations under the MOA.
While Finding Nos. (1), (2), (3), (4), (5), (8) and (12) of the COA-CAR Report state that Jadewell collected
parking fees, Jadewell failed to properly remit the same. Finding No. (11) of the COA-CAR Report states
that Jadewell failed to have its parking attendants deputized,159 a condition under the MOA that is also
important to the overall objective of the endeavor.

The MOA does not specifically provide for the exact number of parking meters to be installed by
Jadewell pursuant to the parties’ objective in regulating parking in the city. Nevertheless, 100 parking
spaces were allotted as mentioned in Annex A of the MOA.160 The agreement also obligates Jadewell to
have its parking attendants deputized by the DOTC-LTO so that they shall have the authority to enforce
traffic rules and regulations in the regulated areas.161 To the Court’s mind, these are two of the most
important obligations that Jadewell had to comply with, considering the nature and objective of the
agreement it had entered into.

Despite the enumeration of the above-mentioned faults of Jadewell, we do not make a categorical
finding that there was substantial breach committed by Jadewell to justify a unilateral rescission of the
MOA. We find, however, that the RTC had not properly received evidence that would allow it to
determine the extent of the claimed violations of the MOA. Had these violations by Jadewell been
proven in a proper hearing, the finding of a substantial breach of the MOA would have been a distinct
probability.
Unfortunately, neither the RTC nor the CA provided a clear basis for their rulings on the extent of the
breach of the MOA by Jadewell. Save from reiterating the Sanggunian’s litany of violations said to be
committed by Jadewell, there was no testimony on record to prove such facts and no indication as to
whether the RTC or CA dismissed them or took them at face value.

Whatever the extent of breach of contract that Jadewell may have committed – and the enumeration of
Jadewell’s alleged faults in Resolution 37 is quite extensive – the City of Baguio was still duty-bound to
establish the alleged breach.

Matters became complicated when the RTC and the CA lumped the issues on the due process violation
of Baguio City with Jadewell’s alleged substantial breaches under the MOA, instead of making a clear
finding on the existence and extent of such breach. The facts and legal issues were thus muddled.

We find fault in the lower and appellate court’s lapse in examining the issue on Jadewell’s alleged
substantial breach. Evidence-taking had to be undertaken by these courts before they could arrive at a
judicial conclusion on the presence of substantial breach.

We thus DENY the Petition of the Sanggunian Panlungsod in G.R. No. 160025 and AFFIRM the
questioned CA Decision. However, we reject the ruling made by the appellate court that the violations of
Jadewell under the MOA were not substantial. We hold that there is no sufficient evidence on record to
make such determination.

While Jadewell prays for damages against the public respondent, and while ordinarily we could grant the
same, the context of this case prevents us from giving any form of recompense to Jadewell even if the
rescission of the MOA did not follow the required legal procedure. This is because it would be appalling
to grant Jadewell any award of damages, considering (1) it installed only 14 out of the apparently 100
contemplated parking meters; (2) its employees, private citizens who did not possess any authority from
the LTO, were manually collecting parking fees from the public, and (3) it did not, apparently properly
remit any significant amount of money to the City of Baguio. These three facts are uncontested, these
omissions are offensive to the concept of public service that the residents of Baguio were promised
through Jadewell. From its ambiguous responses extant in the records, it is clear that Jadewell does not
appear to be an investor who has lost in its investments in the Baguio City project. Thus, we do not
award any damages to Jadewell.

2. On G.R. Nos. 163052, 164107,

165564, 172216, 173043 and 174879
(The Contempt Petitions)

Section 3 of Rule 71 of the Revised Rules of Civil Procedure enumerates the acts constituting indirect
contempt, thus:

(a) Misbehavior of an officer of a court in the performance of his official duties or in his official
transactions;

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including the
act of a person who, after being dispossessed or ejected from any real property by the judgment or
process of any court of competent jurisdiction, enters or attempts or induces another to enter into or
upon such real property, for the purpose of executing acts of ownership or possession, or in any manner
disturbs the possession given to the person adjudged to be entitled thereto;

(c) Any abuse of or any unlawful interference with the processes or proceedings of a court not
constituting direct contempt under Section 1 of this Rule;

(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice;

(e) Assuming to be an attorney or an officer of a court, and acting as such without authority;

(f) Failure to obey a subpoena duly served;

(g) The rescue, or attempted rescue, of a person or property in the custody of an officer by virtue of an
order or process of a court held by him.

But nothing in this section shall be so construed as to prevent the court from issuing process to bring the
respondent into court, or from holding him in custody pending such proceedings.

The rule alerts us to three possible situations, wherein, in the context of the facts of these petitions,
contumacious behaviour could have been committed by public respondents. First, disobedience or
resistance to a lawful order of this Court under paragraph (b). Second, unlawful interference with the
proceedings of this Court under paragraph (c). Third, improper conduct tending, directly or indirectly, to
impeded, obstruct, or degrade the administration of justice by this Court under paragraph (d).

Jadewell, in G.R. Nos. 163052, 164107, 165564, 172216, 173043, and 174879, bases its charges of
indirect contempt against public respondents on a claim that any action that tends to stop the
implementation of the MOA is contumacious. Such actions include desistance orders to desist against
Jadewell itself, the second act of unilateral rescission of the MOA; orders to other public officers to
prevent Jadewell from exercising its authority under the MOA; and the official encouragement for
motorists to resist attempts of Jadewell to collect parking fees or clamp/tow vehicles that do not
observe the parking regulations.

We find scant jurisprudence to guide us on this matter. The closest situation is that presented in
Southern Broadcasting Network v. Davao Light and Power,162 penned by Justice Felix Makasiar. In that
case, petitioner’s representative, Carmen Pacquing, wrote a letter to President Marcos asking for his
intervention so that her Motion for Reconsideration (MR) of the resolution of this Court denying her
Petition could be favorably granted. Respondent Davao Light asked that petitioner Pacquing be cited for
contempt, arguing that her act in writing to the President asking him to intervene in the case showed
disrespect to and disregard for the authority of this Court as the final arbiter of all cases. We found
petitioner Pacquing guilty of contempt, thus:

x x x. WE hold that such actuation of herein petitioner’s representative only bespeaks more of her
contumacious attempt to trifle with the orderly administration of justice because if she know that this
Court will ultimately decide the case "regardless of the President’s intervention," then she should have
desisted from writing to the President.

In the light of the foregoing, there is no doubt that Mrs. Pacquing committed an "improper conduct
tending, directly or indirectly, to impede, obstruct, or degrade the administration of justice" (Section 3,
par. [d] Rule 71, Rules of Court) and impair the respect due to the courts of justice in general, and the
Supreme Court, in particular.

In the above case, respondent Carmen Pacquing was clearly asking the President to commit an improper
act – to influence the Supreme Court – that obstructs the orderly administration of justice, as the Court
is constitutionally required to act independently free from the promptings of the President. Pacquing
clearly violated both Sections (c) and (d) of Section 3, Rule 71.

No such similar situation occurred here. Public respondents never asked anyone to employ pressure or
influence on this Court for the former’s benefit.

Instead, the acts that have been allegedly committed by public respondents are acts done pursuant to
their belief that: (a) the MOA has been validly voided, and more importantly, (b) that Jadewell’s
personnel do not have the legal authority to perform the governmental function of administering the
regulation of on-street and off-street parking, of towing or clamping vehicles that violate such
regulation, and of collecting parking fees from motorists.

It is important to note that the Court never gave a mandatory injunction that is couched in a way that
requires public respondents to fully comply with the terms of the MOA. The writ of preliminary
mandatory injunction (WPMI) issued on 9 February 2005 is directed to Mayor Yaranon only, and it
directs him to perform only one specific act: to reopen, and maintain open, the street and premises then
being occupied and operated by Jadewell.

Mayor Yaranon did not immediately comply with this WPMI. Thus, this Court fined him ₱10,000 on 20
April 2005, and ordered the NBI to arrest him if he further failed to comply with the WPMI.
Subsequently, Mayor Yaranon paid the fine, and there is nothing on record to show that he has, since
April of 2005, further defied this Court on that score.

The Court did not issue a WPMI specifically ordering the parties to observe the terms of the MOA. Thus,
public respondents were not expressly prohibited to act on their beliefs regarding the validity or
invalidity of the MOA, or, the authority or lack of authority of Jadewell personnel to perform
governmental functions in the streets of Baguio.

This is an important result, because to hold otherwise is to effectively grant one of the parties a
mandatory injunction even without an express resolution to this effect from the Court. Without an
express order, the pendency of a suit before the Supreme Court is not a prima facie entitlement of
provisional relief to either party.

Public respondents therefore were, at liberty to question and inform the public of their belief regarding
the lack of authority of Jadewell and its personnel to regulate public parking in Baguio. They were
certainly free to formally write Jadewell on their beliefs and pass the corresponding resolutions to this
effect. The mayor was also not under legal compulsion to renew Jadewell’s business permit in view of
his opinion that Jadewell was exceeding its allowable area of operation, which Jadewell was not able to
fully disprove. This is especially true for two important reasons: (1) there is an uncontested cease and
desist order that was issued by the DOTC-CAR on 13 March 2002 which Jadewell defied well into 2005,
and (2) public respondents are city officials of Baguio who have the legal duty to ensure the laws are
being followed, including laws that define who may enforce regulations on public parking.
That Jadewell personnel do not have the legal authority to enforce regulations on public parking is
categorical from the Letter dated 1 February 2001 by the Regional Director of the DOTC-CAR denying
the request of Jadewell for the deputation of its personnel.163

We therefore do not find any of the public respondents who were then officials of the City of Baguio,
liable for indirect contempt, and thereby dismiss G.R. Nos. 163052, 164107, 165564, 173043 and
174879. In G.R. 174879, we have already pronounced that the Sanggunian was within its full right to
perform the second act of rescission, and thus, it is even with more reason, that its members and the
City Legal Officer cannot be held in contempt therefor. We deny the prayer in the petitions to disbar the
respondents therein who are lawyers.

We also do not find Judge Fernando Vil Pamintuan liable for contempt in G.R. No. 172216.

Jadewell wants this Court to cite Judge Pamintuan for contempt for issuing a writ of preliminary
prohibitory injunction ordering Jadewell to stop collecting parking fees; to refrain from supervising the
parking in Baguio City; as well as to hold in abeyance the implementation of the MOA and its enabling
ordinance.164

It was only on 5 June 2006 that this Court, in G.R. No. 172215, issued a Temporary Restraining Order
(TRO)165directing the trial court to discontinue the proceedings in Civil Case No. 6089-R. Upon receipt by
Judge Pamintuan of the TRO, he immediately ordered the cancellation of the 29 June 2006 hearing.166

We do not consider the promulgation of the assailed writ of preliminary prohibitory injunction against
Jadewell as a defiance of our writ issued on 9 February 2005, considering, it was directed against Mayor
Yaranon only. We have held in Leonidas v. Supnet that "a party cannot be held in indirect contempt for
disobeying a court order which is not addressed to him."167 We note that Judge Pamintuan observed
deference to the Orders of this Court when he immediately suspended the proceedings in Civil Case No.
6089-R upon receipt of the TRO.

G.R. No. 172215

In this Petition for certiorari, prohibition, and mandamus under Rule 65 of the Rules of Civil Procedure,
Jadewell assails the Orders of RTC-Branch 3 (Baguio City) denying its motion to dismiss and motion for
reconsideration in Civil Case No. 6089-R.

We deny the petition of Jadewell in this case.

In Manuel Camacho v. Atty. Jovito Coresis, Jr.,168 we described the nature of special civil action for
certiorari under Rule 65, as follows:

A special civil action for certiorari under Rule 65 of the Rules of Court is an extraordinary remedy for the
correction of errors of jurisdiction. To invoke the Court’s power of judicial review under this Rule, it must
first be shown that respondent tribunal, board or officer exercising judicial or quasi- judicial functions
has indeed acted without or in excess of its or his jurisdiction, and that there is no appeal, or any plain,
speedy and adequate remedy in the ordinary course of law. Conversely, absent a showing of lack or
excess of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, the acts of
the respondents may not be subjected to our review under Rule 65.

In Indiana Aerospace University v. Commission on Higher Education,169 this Court ruled thus:
An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a case is to
appeal after a decision has been rendered. A writ of certiorari is not intended to correct every
controversial interlocutory ruling; it is resorted to 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 court.

In East Asia Traders, Inc. v. Republic of the Philippines, et al.,170 we decreed:

The petition for certiorari and prohibition filed by petitioner with the Court of Appeals is not the proper
remedy to assail the denial by the RTC of the motion to dismiss. The Order of the RTC denying the
motion to dismiss is merely interlocutory. An interlocutory order does not terminate nor finally dispose
of the case, but leaves something to be done by the court before the case is finally decided on the
merits. It is always under the control of the court and may be modified or rescinded upon sufficient
grounds shown at any time before final judgment. This proceeds from the court’s inherent power to
control its process and orders so as to make them conformable to law and justice. The only limitation is
that the judge cannot act with grave abuse of discretion, or that no injustice results thereby.

East Asia Trader also reiterated our ruling in Indiana Aerospace. Further, in Bonifacio Construction
Management Corporation v. Hon. Perlas Bernabe,171 we reiterated our rulings in East Asia Traders and
Indiana Aerospace. We had ruled in these earlier cases that an order of the trial court denying a motion
to dismiss is an interlocutory order, and to use a writ of certiorari to assail it is improper.

The procedural policy in the cited cases was again referred to in Bernas v. Sovereign Ventures,
Inc.,172 highlighting the following:

Let it be stressed at this point the basic rule that when a motion to dismiss is denied by the trial court,
the remedy is not to file a petition for certiorari, but to appeal after a decision has been rendered.
(Emphasis supplied)

G.R. No. 181488

The question of law raised by petitioner Yaranon in this Petition for Review on Certiorari is whether the
CA correctly dismissed his appeal questioning the validity of his suspension from office as City Mayor, on
the ground that his suit had become moot and academic due to his non-re-election to office. The CA
cited Crespo v. Provincial Board of Nueva Ecija173 as basis for the dismissal.

For his part, Mayor Yaranon contends that the appellate court should have ruled on the validity of his
suspension from office despite his failure to get re-elected as City Mayor. He argues that he has the right
to know whether his suspension was valid or not and, in the event his suspension is declared invalid,
Mayor Yaranon believes he is entitled to the salaries and benefits accruing during the period he was
suspended.

We deny the Petition of Mayor Yaranon.

The appeal of Mayor Yaranon has been rendered moot and academic. We hold that the resolution of the
issue raised herein would serve no practical purpose.
In Miriam College v. Court of Appeals,174 we ruled that a case becomes moot and academic when there
is no more actual controversy between the parties, or when no useful purpose can be served in passing
upon the merits. Further, courts will not determine a moot question in which no practical relief can be
granted.175

Mayor Yaranon has already served his suspension. We find no practical value in remanding his case to
the appellate court for the determination of the factual basis and legal issues of his appeal pertaining to
the validity of his suspension as then City Mayor of Baguio City.

We have held in Nicart, Jr. v. Sandiganbayan (Third Division),176 that an issue becomes moot when a
petitioner is not entitled to substantial relief:

x x x [T]he propriety of the preventive suspension of petitioner effected through the assailed Resolution
of February 15, 2001 has become a moot issue, it appearing that he has already served his suspension.
An issue becomes moot and academic when it ceases to present a justifiable controversy so that a
determination thereof would be of no practical use and value. In such cases, there is no actual
substantial relief to which petitioner would be entitled to and which would be negated by the dismissal
of the petition.

We cannot sustain Mayor Yaranon’s argument that his appeal should not have been dismissed because,
in the event that the finding of the Office of the President to suspend him is reversed, he is still entitled
to the salaries accruing during the period he was suspended. We take note of the cases cited by Mayor
Yaranon such as Crespo v. Provincial Board of Nueva Ecija,177 Baquerfo v. Sanchez178 and Reyes v.
Cristi,179 among others. These cases involve substantial issues – such as denial of due process and
procedural irregularities – other than a mere claim for entitlement to salaries. The factual background
and the legal issues for resolution in the cases mentioned are not similar to the case at bar.

In Triste v. Leyte State College Board of Trustees180 the Court elucidated on the nature of the salary of a
public official:

Mechem states that "(l)ike the requirement of an oath, the fact of the payment of a salary and/or fees
may aid in determining the nature of a position, but it is not conclusive, for while a salary or fees are
usually annexed to the office, it is not necessarily so. As in the case of the oath, the salary or fees are
mere incidents and form no part of the office. Where a salary or fees are annexed, the office is often
said to be ‘coupled with an interest’; where neither is provided for it is a naked or honorary office, and is
supposed to be accepted merely for the public good." (Emphasis supplied)

Given the circumstances of this case, we find that Mayor Yaranon’s claim for unpaid salaries, in case of
exoneration, does not constitute such substantial relief that would justify the revival of his appeal. Even
if we did sustain his Petition, we nevertheless find that it has been mooted by our resolution in the main
petition.

WHEREFORE, we hereby rule as follows:

a.) In G.R. No. 160025, the Petition of the Sangguniang Panlungsod of Baguio City is DENIED. The CA
Decision dated 7 July 2003 in CA G.R. SP No. 74756 is hereby AFFIRMED with modification. There is not
enough evidence on record to conclude that Jadewell’s violations were sufficient to justify the unilateral
cancellation of the MOA by the Sangguniang Panlungsod of Baguio City; at the same time, neither the
RTC nor the CA provided a clear finding whether the breach of the MOA by Jadewell was substantial. We
affirm the CA as to the rest of its dispositions in its assailed Decision. Nevertheless, no award of damages
is hereby made in favour of Jadewell and neither is there any pronouncement as to costs.

b.) G.R. Nos. 163052, 164107, 165564, 172216, 173043 and 174879, the Petitions of Jadewell to cite
Mayor Braulio D. Yaranon, Mayor Bernardo M. Vergara, Acting City Mayor Reinaldo A. Bautista, Vice
Mayor Betty Lourdes F. Tabanda, the members of the Sangguniang Panlungsod of Baguio City namely:
Elmer O. Datuin, Antonio R. Tabora, Edilberto B. Tenefrancia, Federico J. Mandapat, Jr., Richard A.
Carino, Faustino A. Olowan, Rufino M. Panagan, Leonardo B. Yangot, Jr., Rocky Thomas A. Balisong, Galo
P. Weygan, Perlita L. Chan-Rondez, Jose M. Molintas, and Judge Fernando Vil Pamintuan for indirect
contempt and to disbar Sangguniang Panlungsod members Rocky Thomas A. Balisong, Edilberto B.
Tenefrancia, Faustino A. Olowan, Federico J. Mandapat, Perlita L. Chan-Rondez, Jose M. Molintas,
Melchor Carlos B. Rabanes and Mayor Braulio D. Yaranon are all hereby DISMISSED for lack of merit. No
pronouncement as to costs.

c.) We DENY the Petition of Jadewell for lack of merit in G.R. No. 172215. We likewise DENY its prayer
for the issuance of a temporary restraining order and/or writ of preliminary injunction for being moot
and academic. No pronouncement as to costs.

d.) We DENY the Petition of Mayor Braulio D. Yaranon in G.R. No. 181488, for lack of merit and AFFIRM
the CA Decision CA-G.R. SP No. 96116. No pronouncement as to costs.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Chief Justice, Chairperson

WE CONCUR:
SEMIRARA COAL CORPORATION (now SEMIRARA MINING CORPORATION), Petitioner, v. HGL
DEVELOPMENT CORPORATION and HON. ANTONIO BANTOLO, Presiding Judge, Branch 13, Regional
Trial Court, 6th Judicial Region, Culasi, Antique, Respondents.

DECISION

QUISUMBING, J.:

Before us is a Petition for Review on Certiorari assailing the Decision1 dated January 31, 2005, of the
Court of Appeals in CA G.R. CEB SP No. 00035 which affirmed the Resolution2 dated September 16, 2004
of the Regional Trial Court of Culasi, Antique, Branch 13.

The facts are as follows:

Petitioner Semirara Mining Corporation is a grantee by the Department of Energy (DOE) of a Coal
Operating Contract under Presidential Decree No. 9723 over the entire Island of Semirara, Antique,
which contains an area of 5,500 hectares more or less.4

Private respondent HGL Development Corporation is a grantee of Forest Land Grazing Lease Agreement
(FLGLA) No. 184 by the then Ministry of Environment and Natural Resources,5 over 367 hectares of land
located at the barrios of Bobog and Pontod, Semirara, Caluya, Antique. The FLGLA No. 184 was issued on
September 28, 19846 for a term of 25 years, to end on December 31, 2009. Since its grant, HGL has been
grazing cattle on the subject property.

Sometime in 1999, petitioner's representatives approached HGL and requested for permission to allow
petitioner's trucks and other equipment to pass through the property covered by the FLGLA. HGL
granted the request on condition that petitioner's use would not violate the FLGLA in any way.
Subsequently, however, petitioner erected several buildings for petitioner's administrative offices and
employees' residences without HGL's permission. Petitioner also conducted blasting and excavation;
constructed an access road to petitioner's minesite in the Panaan Coal Reserve, Semirara; and
maintained a stockyard for the coal it extracted from its mines. Thus, the land which had been used for
cattle grazing was greatly damaged, causing the decimation of HGL's cattle.

On September 22, 1999, HGL wrote petitioner demanding full disclosure of petitioner's activities on the
subject land as well as prohibiting petitioner from constructing any improvements without HGL's
permission. Petitioner ignored the demand and continued with its activities.

On December 6, 2000, the Department of Environment and Natural Resources (DENR) unilaterally
cancelled FLGLA No. 184 and ordered HGL to vacate the premises. The DENR found that HGL failed to
pay the annual rental and surcharges from 1986 to 1999 and to submit the required Grazing Reports
from 1985 to 1999 or pay the corresponding penalty for non-submission thereof.7

HGL contested the findings and filed a letter of reconsideration on January 12, 2001, which was denied
by DENR Secretary Heherson Alvarez in a letter-order dated December 9, 2002. The DENR stated that it
had coordinated with the DOE, which had jurisdiction over coal or coal deposits and coal-bearing lands,
and was informed that coal deposits were very likely to exist in Sitios Bobog and Pontod. Hence, unless
it could be proved that coal deposits were not present, HGL's request had to be denied.8
HGL sent a letter dated March 6, 2003 to DENR Secretary Alvarez seeking reconsideration. The DENR did
not act on the letter and HGL later withdrew this second letter of reconsideration in its letter of August
4, 2003.

On November 17, 2003, HGL filed a complaint against the DENR for specific performance and damages
with prayer for a temporary restraining order and/or writ of preliminary injunction, docketed as Civil
Case No. 20675 (2003) with the Regional Trial Court of Caloocan City. A writ of preliminary injunction
was issued by the Caloocan City RTC on December 22, 2003, enjoining the DENR from enforcing its
December 6, 2000 Order of Cancellation.

Meanwhile, HGL had also filed on November 17, 2003, a complaint against petitioner for Recovery of
Possession and Damages with Prayer for TRO and/or Writ of Preliminary Mandatory Injunction,
docketed as Civil Case No. C-146 with the Regional Trial Court of Culasi, Antique, Branch 13.9

On December 1, 2003, the Antique trial court heard the application for Writ of Preliminary Mandatory
Injunction in Civil Case No. C-146. Only HGL presented its evidence. Reception for petitioner's evidence
was set to March 23-24, 2004. Petitioner was notified. But, on March 19, 2004, petitioner's President
wrote the court asking for postponement since its counsel had suddenly resigned. The trial court refused
to take cognizance of the letter and treated it as a mere scrap of paper since it failed to comply with the
requisites for the filing of motions and since it was not shown that petitioner's President was authorized
to represent petitioner. Because of petitioner's failure to attend the two scheduled hearings, the trial
court, in an Order dated March 24, 2004, deemed the application for issuance of a Writ of Preliminary
Mandatory Injunction submitted for decision. Meanwhile, petitioner had filed its Answer dated February
26, 2004, raising among others the affirmative defense that HGL no longer had any right to possess the
subject property since its FLGLA has already been cancelled and said cancellation had already become
final.

On April 14, 2004, petitioner filed a verified Omnibus Motion praying that the trial court reconsider its
Order of March 24, 2004, since petitioner's failure to attend the hearing was due to an accident.
Petitioner also prayed that the trial court admit as part of petitioner's evidence in opposition to the
application for injunction, certified copies of the DENR Order of Cancellation dated December 6, 2000;
HGL's letter of reconsideration dated January 12, 2001; letter of DENR Secretary Alvarez dated
December 9, 2002 denying reconsideration of the order; and registry return receipt showing HGL's
receipt of the denial of reconsideration. In the alternative, petitioner prayed that the case be set for
preliminary hearing on its affirmative defense of lack of cause of action and forum-shopping.10 Public
respondent denied the Omnibus Motion in a Resolution dated June 21, 2004.

Petitioner filed a motion for reconsideration of the said resolution. Upon HGL's opposition, the motion
was declared submitted for resolution in accordance with the trial court's Order of August 5, 2004.11

On September 16, 2004, the trial court granted the prayer for issuance of a Writ of Preliminary
Mandatory Injunction.12 Petitioner did not move for reconsideration of the order. The Writ of
Preliminary Mandatory Injunction was accordingly issued by the trial court on October 6, 2004.13 The
writ restrained petitioner or its agents from encroaching on the subject land or conducting any activities
in it, and commanded petitioner to restore possession of the subject land to HGL or its agents.
Petitioner questioned the Resolution dated September 16, 2004, and the Writ of Preliminary Mandatory
Injunction dated October 6, 2004 before the Court of Appeals in a petition for certiorari, raising eight
issues. On January 31, 2005, however, the appellate court dismissed the petition. The Court of Appeals
in its decision by Justice Magpale ruled on the issues posed before the appellate court:

1. PRIVATE RESPONDENT HAS NO LEGAL RIGHT OR CAUSE OF ACTION UNDER THE PRINCIPAL ACTION OR
COMPLAINT, MUCH LESS, TO THE ANCILLARY REMEDY OF INJUNCTION;

2. PRIVATE RESPONDENT DID NOT COME TO COURT WITH "CLEAN HANDS";

3. RESPONDENT JUDGE UNJUSTIFIABLY AND ARBITRARILY DEPRIVED PETITIONER OF ITS FUNDAMENTAL

RIGHT TO DUE PROCESS BY NOT GIVING IT AN OPPORTUNITY TO PRESENT EVIDENCE IN OPPOSITION TO
THE MANDATORY INJUNCTION;

4. RESPONDENT JUDGE IMMEDIATELY GRANTED THE APPLICATION FOR THE ISSUANCE OF A WRIT OF
MANDATORY INJUNCTION WITHOUT FIRST RESOLVING THE PENDING MOTION FOR RECONSIDERATION
DATED JULY 12, 2004 OF PETITIONER;

5. RESPONDENT JUDGE DID NOT CONSIDER OR ADMIT THE CERTIFIED TRUE COPIES OF THE OFFICIAL
RECORDS OF THE DENR CANCELLING PRIVATE RESPONDENT'S FLGLA AS EVIDENCE AGAINST THE
MANDATORY INJUNCTION PRAYED FOR;

6. RESPONDENT JUDGE SHOULD HAVE GRANTED PETITIONER'S MOTION FOR PRELIMINARY HEARING ON
ITS AFFIRMATIVE DEFENSE THAT PRIVATE RESPONDENT UNDER ITS COMPLAINT HAS NO CAUSE OF
ACTION AGAINST PETITIONER;

7. RESPONDENT JUDGE SHOULD HAVE DISMISSED THE COMPLAINT OUTRIGHT FOR VIOLATION OF THE
RULES ON FORUM SHOPPING BY PRIVATE RESPONDENT;

8. THE MANDATORY INJUNCTION ISSUED IN THE INSTANT CASE IS VIOLATIVE OF THE PROVISIONS OF
PRESIDENTIAL DECREE 605.14

The Court of Appeals in the assailed Decision dated January 31, 2005, opined and ruled as follows (which
we quote verbatim):

Anent the first issue, WE rule against the petitioner.

Perusal of the allegations in the Complaint filed by the private respondent with the court a quo show
that its cause of action is mainly anchored on the Forest Land Grazing Lease Agreement ("FLGLA")
executed by and between said private respondent and the Department of Environment and Natural
Resources (DENR) which became effective on August 28, 1984 and to expire on December 31, 2009.

Under the said lease agreement, the private respondent was granted permission to use and possess the
subject land comprising of 367-hectares located at the barrios of Bobog and Pontod, Semirara Island,
Antique for cattle-grazing purposes.

However, petitioner avers that the "FLGLA" on which private respondent's cause of action is based was
already cancelled by the DENR by virtue of its Orders dated December 6, 2000 and December 9, 2002.
While it is true that the DENR issued the said Orders cancelling the "FLGLA", the same is not yet FINAL
since it is presently the subject of Civil Case No. 20675 pending in the Regional Trial Court (RTC) of
Caloocan City. Thus, for all intents and purposes, the "FLGLA" is still subsisting.

The construction of numerous buildings and the blasting activities thereon by the petitioner undertaken
without the consent of the private respondent blatantly violates the rights of the latter because it
reduced the area being used for cattle-grazing pursuant to the "FLGLA".

From the foregoing it is clear that the three (3) indispensable requisites of a cause of action, to wit: (a)
the right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (b)
an obligation on the part of the named defendant to respect or not to violate such right; (c) an act or
omission on the part of such defendant is violative of the right of plaintiff or constituting a breach of the
obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of
damages, are PRESENT.

Hence, having established that private respondent herein has a cause of action under the principal
action in Civil Case No. C-146, necessarily it also has a cause of action under the ancillary remedy of
injunction.

Anent the third issue, WE rule against the petitioner.

This Court finds that the petitioner was not deprived of due process.

It appears from the records of the instant case that the petitioner was given two (2) settings for the
reception of its evidence in support of its opposition to the prayer of herein private respondent for the
issuance of a writ of preliminary mandatory injunction. Unfortunately, on both occasions, petitioner did
not present its evidence.

Petitioner claims that its failure to attend the hearings for the reception of its evidence was excusable
due to the sudden resignation of its lawyer and as such, nobody can attend the hearings of the case.

WE are not persuaded.

Scrutiny of the pleadings submitted by both parties shows that petitioner's lawyer, Atty. Mary Catherine
P. Hilario, affiliates herself with the law firm of BERNAS SAN JUAN & ASSOCIATE LAW OFFICES with
address at 2nd Floor, DMCI Plaza 2281 Pasong Tamo Extension, Makati City, by signing on and in behalf of
the said law office. This Court takes judicial notice of the fact that law offices employ more than one (1)
associate attorney aside from the name partners. As such, it can easily assign the instant case to its
other lawyers who are more than capable to prepare the necessary "motion for postponement" or
personally appear to the court a quo to explain the situation.

Even assuming arguendo that Atty. Hilario is the only one who is knowledgeable of the facts of the case,
still, petitioners cannot claim that there was violation of due process because the "ESSENCE of due
process is reasonable opportunity to be heard x x x. What the law proscribed is lack of opportunity to be
heard." In the case at bar, petitioner was given two (2) settings to present its evidence but it opted not
to.
Lastly, a prayer for the issuance of a writ of preliminary mandatory injunction demands urgent attention
from the court and as such, delay/s is/are frowned upon due to the irreparable damage/s that can be
sustained by the movant.

Anent the fourth issue, WE rule against the petitioner.

Petitioner claims that the court a quo gravely erred when it issued the writ of preliminary injunction
without first resolving its Motion for Reconsideration dated July 12, 2004.

WE rule that the public respondent cannot be faulted for not resolving the Motion for Reconsideration
dated July 12, 2004 because the same partakes of the nature of a second motion for reconsideration of
the Order dated March 24, 2004.

Records readily disclose that a prior motion for reconsideration was filed by the petitioner herein
assailing the Order dated March 24, 2004. Although captioned as "Omnibus Motion" the same was
really a motion for reconsideration. Said "Omnibus Motion" was resolved by the court a quo in its Order
dated June 21, 2004.

Hence, the public respondent is no longer duty bound to resolve the subsequent, reiterative and second
motion for reconsideration.

Anent the fifth issue, WE rule against the petitioner.

The court a quo was correct in disregarding the documentary evidence submitted by the petitioner in
support of its opposition to the prayer for the issuance of a writ of preliminary mandatory injunction.

The documentary evidence submitted by the petitioner herein with the court a quo were merely
attached to an "Omnibus Motion" and was not properly identified, marked and formally offered as
evidence which is a blatant disregard and violation of the Rules on Evidence.

Considering the above discussions, this Court finds that the public respondent did not abuse his
discretion in issuing the assailed resolution.

Anent the eighth issue, WE likewise rule against the petitioner.

Presidential Decree (PD) 605 is the law "Banning the Issuance by Courts of Preliminary Injunctions in
Cases Involving Concessions, Licenses, and Other Permits Issued by Public Administrative Officials or
Bodies for the Exploitation of Natural Resources."

Section 1 thereof provides that "No court of the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction or preliminary mandatory injunction in any case involving or
growing out of the issuance, suspension, revocation, approval or disapproval of any concession, license,
permit, patent or public grant of any kind for the disposition, exploitation, utilization, exploration and
development of the natural resources of the country."

The instant case is not within the purview of the above-cited law because the issue/s raised herein does
not involve or arise out of petitioner's coal operation contract.

The case filed with the court a quo is principally based on the alleged encroachment by the petitioner of
the subject land over which private respondent claims it has authority to occupy or possess until
December 31, 2009 pursuant to FLGLA No. 184.
As such, the preliminary mandatory injunction issued by the court a quo did not in any way affect the
efficacy of the petitioner's coal concession or license.

WHEREFORE, the instant petition for certiorari is DENIED and consequently, the assailed Resolution is
hereby AFFIRMED.

SO ORDERED.15

Hence, this instant petition. On February 23, 2005, this Court issued a TRO enjoining the implementation
and enforcement of the Court of Appeals Decision dated January 31, 2005.16

Petitioner submits in the petition now the following grounds:

THE RESOLUTION DATED 16 SEPTEMBER 2004 AND THE WRIT OF PRELIMINARY MANDATORY
INJUNCTION DATED 6 OCTOBER 2004 ISSUED BY PUBLIC RESPONDENT ARE A PATENT NULLITY AS
PRIVATE RESPONDENT CLEARLY HAS NO LEGAL RIGHT OR CAUSE OF ACTION UNDER ITS PRINCIPAL
ACTION OR COMPLAINT, MUCH LESS, TO THE ANCILLARY REMEDY OF PRELIMINARY MANDATORY
INJUNCTION;

II

A WRIT OF PRELIMINARY MANDATORY INJUNCTION CANNOT BE USED TO TAKE PROPERTY OUT OF THE
POSSESSION OF ONE PARTY AND PLACE IT INTO THAT OF ANOTHER WHO HAS NO CLEAR LEGAL RIGHT
THERETO;

III

PRIVATE RESPONDENT'S COMPLAINT IN CIVIL CASE NO. C-146 IS IN THE NATURE OF AN ACCION
PUBLICIANA, NOT FORCIBLE ENTRY; HENCE, A WRIT OF PRELIMINARY MANDATORY INJUNCTION IS NOT
A PROPER REMEDY;

IV

PETITIONER WAS UNJUSTIFIABLY AND ARBITRARILY DEPRIVED OF ITS FUNDAMENTAL RIGHT TO DUE
PROCESS WHEN IT WAS DENIED THE RIGHT TO PRESENT EVIDENCE IN OPPOSITION TO THE APPLICATION
FOR PRELIMINARY MANDATORY INJUNCTION;

THE PUBLIC RESPONDENT DELIBERATELY WITHHELD THE RESOLUTION OF PETITIONER'S MOTION FOR
RECONSIDERATION DATED 12 JULY 2004 AND PROCEEDED TO PREMATURELY ISSUE THE PRELIMINARY
MANDATORY INJUNCTION IN VIOLATION OF PETITIONER'S RIGHT TO FAIR PLAY AND JUSTICE;

VI

PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION WHEN:

1) HE REFUSED OR FAILED TO ADMIT AND/OR CONSIDER THE CERTIFIED DENR RECORDS OF THE DENR
ORDER CANCELLING PRIVATE RESPONDENT'S FLGLA;
2) HE REFUSED OR FAILED TO CONDUCT A HEARING ON THESE CERTIFIED PUBLIC DOCUMENTS WHICH
CONCLUSIVELY PROVE PRIVATE RESPONDENT'S LACK OF CAUSE OF ACTION UNDER THE PRINCIPAL
ACTION; AND

3) HE REFUSED OR FAILED TO DISMISS THE COMPLAINT OUTRIGHT FOR VIOLATING THE RULES ON
FORUM SHOPPING BY PRIVATE RESPONDENT.17

Before this Court decides the substantive issues raised herein, certain procedural issues that were raised
by the parties must first be addressed.

Petitioner contends that it was improper for the Regional Trial Court of Antique to issue the writ of
preliminary mandatory injunction (and for the Court of Appeals to affirm the same) without giving it an
opportunity to present evidence and without first resolving the Motion for Reconsideration dated July
12, 2004. But as borne by the records of the case, it is evident that petitioner had the opportunity to
present evidence in its favor during the hearing for the application of the writ of preliminary mandatory
injunction before the lower court. However, petitioner's failure to present its evidence was brought by
its own failure to appear on the hearing dates scheduled by the trial court. Thus, petitioner cannot
complain of denial of due process when it was its own doing that prevented it from presenting its
evidence in opposition to the application for a writ of preliminary mandatory injunction. It must be
pointed out that the trial court correctly refused to take cognizance of the letter of petitioner's
President which prayed for the postponement of the scheduled hearings. Said letter was not a proper
motion that must be filed before the lower court for the stated purpose by its counsel of record.
Moreover, there was absolutely no proof given that the sender of the letter was the duly authorized
representative of petitioner.

Second, the filing of the motion for reconsideration dated July 12, 2004, which essentially reproduced
the arguments contained in the previously filed and denied Omnibus Motion dated April 14, 2004,
renders the said motion for reconsideration dated July 12, 2004, a mere pro forma motion. Moreover,
the motion for reconsideration dated June 12, 2004, being a second motion for reconsideration, the trial
court correctly denied it for being a prohibited motion.18

Third, it must be stated that the petition for certiorari before the Court of Appeals should not have
prospered because petitioner failed to file a motion for reconsideration from the assailed resolution of
the Regional Trial Court of Antique, granting the writ of preliminary mandatory injunction. Well settled
is the rule that before a party may resort to the extraordinary writ of certiorari, it must be shown that
there is no other plain, speedy and adequate remedy in the ordinary course of law. Thus, it has been
held by this Court that a motion for reconsideration is a condition sine qua non for the grant of the
extraordinary writ of certiorari .19 Here, a motion for reconsideration was an available plain, speedy and
adequate remedy in the ordinary course of law, designed to give the trial court the opportunity to
correct itself.

Now on the merits of the instant petition.

The pivotal issue confronting this Court is whether the Court of Appeals seriously erred or committed
grave abuse of discretion in affirming the September 16, 2004 Resolution of the Regional Trial Court of
Antique granting the writ of preliminary mandatory injunction.
Under Article 539 of the New Civil Code, a lawful possessor is entitled to be respected in his possession
and any disturbance of possession is a ground for the issuance of a writ of preliminary mandatory
injunction to restore the possession.20 Thus, petitioner's claim that the issuance of a writ of preliminary
mandatory injunction is improper because the instant case is allegedly one for accion
publiciana deserves no consideration. This Court has already ruled in Torre, et al. v. Hon. J. Querubin, et
al.21 that prior to the promulgation of the New Civil Code, it was deemed improper to issue a writ of
preliminary injunction where the party to be enjoined had already taken complete material possession
of the property involved. However, with the enactment of Article 539, the plaintiff is now allowed to
avail of a writ of preliminary mandatory injunction to restore him in his possession during the pendency
of his action to recover possession.22

It is likewise established that a writ of mandatory injunction is granted upon a showing that (a) the
invasion of the right is material and substantial; (b) the right of complainant is clear and unmistakable;
and (c) there is an urgent and permanent necessity for the writ to prevent serious damage.23

In the instant case, it is clear that as holder of a pasture lease agreement under FLGLA No. 184, HGL has
a clear and unmistakable right to the possession of the subject property. Recall that under the FLGLA,
HGL has the right to the lawful possession of the subject property for a period of 25 years or until 2009.
As lawful possessor, HGL is therefore entitled to protection of its possession of the subject property and
any disturbance of its possession is a valid ground for the issuance of a writ of preliminary mandatory
injunction in its favor. The right of HGL to the possession of the property is confirmed by petitioner itself
when it sought permission from HGL to use the subject property in 1999. In contrast to HGL's clear legal
right to use and possess the subject property, petitioner's possession was merely by tolerance of HGL
and only because HGL permitted petitioner to use a portion of the subject property so that the latter
could gain easier access to its mining area in the Panaan Coal Reserve.

The urgency and necessity for the issuance of a writ of mandatory injunction also cannot be denied,
considering that HGL stands to suffer material and substantial injury as a result of petitioner's
continuous intrusion into the subject property. Petitioner's continued occupation of the property not
only results in the deprivation of HGL of the use and possession of the subject property but likewise
affects HGL's business operations. It must be noted that petitioner occupied the property and prevented
HGL from conducting its business way back in 1999 when HGL still had the right to the use and
possession of the property for another 10 years or until 2009. At the very least, the failure of HGL to
operate its cattle-grazing business is perceived as an inability by HGL to comply with the demands of its
customers and sows doubts in HGL's capacity to continue doing business. This damage to HGL's business
standing is irreparable injury because no fair and reasonable redress can be had by HGL insofar as the
damage to its goodwill and business reputation is concerned.

Petitioner posits that FLGLA No. 184 had already been cancelled by the DENR in its order dated
December 6, 2000. But as rightly held by the Court of Appeals, the alleged cancellation of FLGLA No. 184
through a unilateral act of the DENR does not automatically render the FLGLA invalid since the unilateral
cancellation is subject of a separate case which is still pending before the Regional Trial Court of
Caloocan City. Notably, said court has issued a writ of preliminary injunction enjoining the DENR from
enforcing its order of cancellation of FLGLA No. 184.

The Court of Appeals found that the construction of numerous buildings and blasting activities by
petitioner were done without the consent of HGL, but in blatant violation of its rights as the lessee of
the subject property. It was likewise found that these unauthorized activities effectively deprived HGL of
its right to use the subject property for cattle-grazing pursuant to the FLGLA. It cannot be denied that
the continuance of petitioner's possession during the pendency of the case for recovery of possession
will not only be unfair but will undeniably work injustice to HGL. It would also cause continuing damage
and material injury to HGL. Thus, the Court of Appeals correctly upheld the issuance of the writ of
preliminary mandatory injunction in favor of HGL.

WHEREFORE, the instant petition is DENIED. The Decision dated January 31, 2005, of the Court of
Appeals in CA G.R. CEB SP No. 00035, which affirmed the Resolution dated September 16, 2004 of the
Regional Trial Court of Culasi, Antique, Branch 13, as well as the Writ of Preliminary Mandatory
Injunction dated October 6, 2004 issued pursuant to said Resolution, is AFFIRMED. The temporary
restraining order issued by this Court is hereby lifted. No pronouncement as to costs.

SO ORDERED.
 CHINA BANKING CORPORATION, SPOUSES JOEY G.R. No. 174569
& MARY JEANNIE CASTRO and SPOUSES
Present:
RICHARD & EDITHA NOGOY,
Petitioners, QUISUMBING, J., Chairperson,
- versus - CARPIO MORALES,
TINGA,
BENJAMIN CO, ENGR. DALE OLEA and THREE
VELASCO, JR., and
KINGS CONSTRUCTION & REALTY
BRION, JJ.
CORPORATION,
Respondents. Promulgated:
September 17, 2008

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

DECISION

CARPIO MORALES, J.:

Petitioner China Banking Corporation sold a lot located at St. Benedict Subdivision, Sindalan, San
Fernando, Pampanga, which was covered by Transfer Certificate of Title (TCT) No. 450216-R to
petitioner-spouses Joey and Mary Jeannie Castro (the Castro spouses). It sold two other lots also located
in the same place covered by TCT Nos. 450212-R and 450213-R to petitioner-spouses Richard and Editha
Nogoy (the Nogoy spouses).

The lots of the Castro spouses and the Nogoy spouses are commonly bound on their southeastern side
by Lot No. 3783-E, which is covered by TCT No. 269758-R in the name of respondent Benjamin Co (Co)
and his siblings.

Co and his siblings entered into a joint venture with respondent Three Kings Construction and Realty
Corporation for the development of the Northwoods Estates, a subdivision project covering Lot No.
3783-E and adjacent lots. For this purpose, they contracted the services of respondent, Engineer Dale
Olea.

In 2003, respondents started constructing a perimeter wall on Lot No. 3783-E.

On November 28, 2003, petitioners, through counsel, wrote respondents asking them to stop
constructing the wall, and remove all installed construction materials and restore the former condition
of Lot No. [3]783-E which they (petitioners) claimed to be a road lot.1 They also claimed that the
construction obstructed and closed the only means of ingress and egress of the Nogoy spouses and their
family, and at the same time, caved in and impeded the ventilation and clearance due the Castro
spouses’ residential house.2

Petitioners’ demand remained unheeded, prompting them to file before the Regional Trial Court (RTC)
of San Fernando, Pampanga a complaint,3 docketed as Civil Case No. 12834, for injunction, restoration
of road lot/right of way and damages with prayer for temporary restraining order and/or writ of
preliminary injunction.
Before respondents filed their Answer,4 petitioners filed an Amended Complaint,5 alleging that the
construction of the perimeter wall was almost finished and thus modifying their prayer for a writ of
preliminary injunction to a writ of preliminary mandatory injunction, viz:

WHEREFORE, it is respectfully prayed of this Honorable Court that:

A. Before trial on the merits, a temporary restraining order be issued immediately restraining the
defendants from doing further construction of the perimeter wall on the premises, and thereafter, a
writ of preliminary mandatory injunction be issued enjoining the defendants from perpetrating and
continuing with the said act and directing them jointly and severally, to restore the road lot, Lot 3783-E
to its previous condition.

x x x x 6 (Underscoring in the original; emphasis supplied)

After hearing petitioners’ application for a writ of preliminary mandatory injunction, Branch 44 of the
San Fernando, Pampanga RTC denied the same, without prejudice to its resolution after the trial of the
case on the merits, in light of the following considerations:

After a judicious evaluation of the evidence, the Commissioner’s Report on the Conduct of the Ocular
Inspection held on February 14, 2004, as well as the pleadings, the Court is of the opinion and so holds
that a writ of preliminary injunction should not be issued at this time. Plaintiffs have not clearly shown
that their rights have been violated and that they are entitled to the relief prayed for and that
irreparable damage would be suffered by them if an injunction is not issued. Whether lot 3783-E is a
road lot or not is a factual issue which should be resolved after the presentation of evidence. This Court
is not inclined to rely only on the subdivision plans presented by plaintiffs since, as correctly argued by
defendants, the subdivision plans do not refer to lot 3783-E hence are not conclusive as to the status or
classification of lot 3783-E. This court notes further that Subdivision Plan Psd-03-000577 of Lot 3783
from which the other subdivision plans originates [sic] does not indicate lot 3783-E as a road lot.

Even the physical evidence reveals that lot 3783-E is not a road lot. The Court noticed during the ocular
inspection on February 14, 2004, that there is a PLDT box almost in front of lot 3783-E. There is no
visible pathway either in the form of a beaten path or paved path on lot 3783-E. Visible to everyone
including this court are wild plants, grasses, and bushes of various kinds. Lot 3783-E could not have been
a road lot because Sps. Nogoy, one of the plaintiffs, even built a structure on lot 3783-E which they used
as a coffin factory.

Plaintiffs failed to prove that they will be prejudiced by the construction of the wall. The ocular
inspection showed that they will not lose access to their residences. As a matter of fact, lot 3783-E is not
being used as an access road to their residences and there is an existing secondary road within St.
Benedict Subdivision that serves as the main access road to the highway. With respect to the blocking of
ventilation and light of the residence of the Sps. Castro, suffice it to state that they are not deprived of
light and ventilation. The perimeter wall of the defendants is situated on the left side of the garage and
its front entrance is still open and freely accessible.

This is indeed an issue of fact which should be ventilated in a full blown trial, determinable through
further presentation of evidence by the parties. x x x

xxxx
WHEREFORE, premises considered, plaintiffs’ application for the issuance of a writ of preliminary
mandatory injunction is denied without prejudice to its resolution after the trial of the case on the
merits.7 (Underscoring supplied)

Their Motion for Reconsideration8 having been denied, petitioners filed a petition for certiorari9 before
the Court of Appeals which dismissed the same10 and denied their subsequent Motion for
Reconsideration.11

Hence, the petitioners filed the present petition,12 faulting the Court of Appeals in

I.

. . . DECID[ING] AND RESOLV[ING] A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE BASIC
GOVERNING LAW (PRESIDENTIAL DECREE NO. 1529) AND APPLICABLE DECISIONS OF THIS HONORABLE
COURT.

II.

. . . PROMOTING THE LOWER COURT’S RATIOCINATION THAT PETITIONERS ARE SEEKING THE
ESTABLISHMENT OF AN EASEMENT OF RIGHT OF WAY, WHEN THEY ARE CLAIMING THE ENFORCEMENT
OF THE STATUTORY PROHIBITION AGAINST CLOSURE OR DISPOSITION OF AN ESTABLISHED ROAD LOT.

III.

. . . SANCTION[ING] THE LOWER COURT’S PATENT GRAVE ABUSE OF DISCRETION IN PERFUNCTORILY

DENYING PETITIONERS’ APPLICATION FOR WRIT OF PRELIMINARY INJUNCTION.13

It is settled that the grant of a preliminary mandatory injunction rests on the sound discretion of the
court, and the exercise of sound judicial discretion by the lower court should not be interfered with
except in cases of manifest abuse.14

It is likewise settled that a court should avoid issuing a writ of preliminary mandatory injunction which
would effectively dispose of the main case without trial.15

In the case at bar, petitioners base their prayer for preliminary mandatory injunction on Section 44 of
Act No. 496 (as amended by Republic Act No. 440), Section 50 of Presidential Decree 1529, and their
claim that Lot No. 3783-E is a road lot.

To be entitled to a writ of preliminary injunction, however, the petitioners must establish the following
requisites: (a) the invasion of the right sought to be protected is material and substantial; (b) the right of
the complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the
writ to prevent serious damage.16

Since a preliminary mandatory injunction commands the performance of an act, it does not preserve the
status quo and is thus more cautiously regarded than a mere prohibitive injunction.17 Accordingly, the
issuance of a writ of preliminary mandatory injunction is justified only in a clear case, free from doubt or
dispute.18 When the complainant’s right is thus doubtful or disputed, he does not have a clear legal right
and, therefore, the issuance of injunctive relief is improper.

Section 44 of Act 496,19 which petitioners invoke, provides:

xxxx

Any owner subdividing a tract of registered land into lots shall file with the Chief of the General Land
Registration Office a subdivision plan of such land on which all boundaries, streets and passageways, if
any, shall be distinctly and accurately delineated. If no streets or passageways are indicated or no
alteration of the perimeter of the land is made, and it appears that the land as subdivided does not need
of them and that the plan has been approved by the Chief of the General Land Registration Office, or by
the Director of Lands as provided in section fifty-eight of this Act, the Register of Deeds may issue new
certificates of title for any lot in accordance with said subdivision plan. If there are streets and/or
passageways, no new certificates shall be issued until said plan has been approved by the Court of First
Instance of the province or city in which the land is situated. A petition for that purpose shall be filed by
the registered owner, and the court after notice and hearing, and after considering the report of the
Chief of the General Land Registration Office, may grant the petition, subject to the condition, which
shall be noted on the proper certificate, that no portion of any street or passageway so delineated on
the plan shall be closed or otherwise disposed of by the registered owner without approval of the court
first had, or may render such judgment as justice and equity may require.20 (Underscoring supplied by
the petitioners)

Section 50 of Presidential Decree No. 1529,21 which petitioners likewise invoke, provides:

SECTION 50. Subdivision and consolidation plans. – Any owner subdividing a tract of registered land into
lots which do not constitute a subdivision project as defined and provided for under P.D. No. 957, shall
file with the Commissioner of Land Registration or with the Bureau of Lands a subdivision plan of such
land on which all boundaries, streets, passageways and waterways, if any, shall be distinctly and
accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of Land Registration
or the Bureau of Lands together with the approved technical descriptions and the corresponding
owner's duplicate certificate of title is presented for registration, the Register of Deeds shall, without
requiring further court approval of said plan, register the same in accordance with the provisions of the
Land Registration Act, as amended: Provided, however, that the Register of Deeds shall annotate on the
new certificate of title covering the street, passageway or open space, a memorandum to the effect that
except by way of donation in favor of the national government, province, city or municipality, no portion
of any street, passageway, waterway or open space so delineated on the plan shall be closed or
otherwise disposed of by the registered owner without the approval of the Court of First Instance of the
province or city in which the land is situated. x x x22(Underscoring supplied by petitioner)

The best evidence thus that Lot No. 3783-E is a road lot would be a memorandum to that effect
annotated on the certificate of title covering it. Petitioners presented TCT No. 185702-R covering Lot No.
3783-E in the name of Sunny Acres Realty Management Corporation which states that the registration is
subject to "the restrictions imposed by Section 44 of Act 496, as amended by Rep. Act No. 440."23 The
annotation does not explicitly state, however, that Lot No. 3783-E is a road lot.1awphi1.net

In any event, TCT No. 185702-R had been cancelled and in its stead was issued TCT No. 247778-
R24 which, in turn, was cancelled by TCT No. 269758-R25 in the name of respondent Co and his siblings.
TCT No. 247778-R and respondent Co’s TCT No. 269758-R do not now contain the aforementioned
memorandum annotated on TCT No. 185702-R re the registration being "subject to restrictions imposed
by Section 44 of Act 496, as amended by Republic Act No. 440." Given the immediately foregoing
circumstances, there is doubt on whether Lot No. 3783-E is covered by a road lot.

While petitioners correctly argue that certain requirements must be observed before encumbrances, in
this case the condition of the lot’s registration as being subject to the law, may be discharged and before
road lots may be appropriated26 gratuity assuming that the lot in question was indeed one, TCT Nos.
247778-R and 269758-R enjoy the presumption of regularity27and the legal requirements for the
removal of the memorandum annotated on TCT No. 185702-R are presumed to have been followed.28

At all events, given the following factual observations of the trial court after conducting an ocular
inspection of Lot 3783-E, viz:

x x x The ocular inspection showed that [petitioners] will not lose access to their residences. As a matter
of fact, lot 3783-E is not being used as an access road to their residences and there is an existing
secondary road within St. Benedict Subdivision that serves as the main access road to the
highway.29 With respect to the blocking of ventilation and light of the residence of the Sps. Castro,
suffice it to state that they are not deprived of light and ventilation. The perimeter wall of the
defendants is situated on the left side of the garage and its front entrance is still open and freely
accessible,30

and the absence of a showing that petitioners have an urgent and paramount need for a writ of
preliminary mandatory injunction to prevent irreparable damage, they are not entitled to such writ.

WHEREFORE, the petition is DENIED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR
G.R. No. 161771 February 15, 2012

BANK OF THE PHILIPPINE ISLANDS, as successor-in-interest of Far East Bank and Trust
Company,Petitioner,
vs.
EDUARDO HONG, doing business under the name and style "SUPER LINE PRINTING PRESS" and the
COURT OF APPEALS, Respondents.

DECISION

VILLARAMA, JR., J.:

This petition for review on certiorari under Rule 45 assails the Decision1 dated September 27, 2002 and
Resolution2dated January 12, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 64166.

On September 16, 1997, the EYCO Group of Companies ("EYCO") filed a petition for suspension of
payments and rehabilitation before the Securities and Exchange Commission (SEC), docketed as SEC
Case No. 09-97-5764. A stay order was issued on September 19, 1997 enjoining the disposition in any
manner except in the ordinary course of business and payment outside of legitimate business expenses
during the pendency of the proceedings, and suspending all actions, claims and proceedings against
EYCO until further orders from the SEC.3 On December 18, 1998, the hearing panel approved the
proposed rehabilitation plan prepared by EYCO despite the recommendation of the management
committee for the adoption of the rehabilitation plan prepared and submitted by the steering
committee of the Consortium of Creditor Banks which appealed the order to the Commission.4 On
September 14, 1999, the SEC rendered its decision disapproving the petition for suspension of
payments, terminating EYCO’s proposed rehabilitation plan and ordering the dissolution and liquidation
of the petitioning corporation. The case was remanded to the hearing panel for liquidation
proceedings.5 On appeal by EYCO, (CA-G.R. SP No. 55208) the CA upheld the SEC ruling. EYCO then filed a
petition for certiorari before this Court, docketed as G.R. No. 145977,which case was eventually
dismissed under Resolution dated May 3, 2005 upon joint manifestation and motion to dismiss filed by
the parties.6 Said resolution had become final and executory on June 16, 2005.7

Sometime in November 2000 while the case was still pending with the CA, petitioner Bank of the
Philippine Islands (BPI), filed with the Office of the Clerk of Court, Regional Trial Court of Valenzuela City,
a petition for extra-judicial foreclosure of real properties mortgaged to it by Eyco Properties, Inc. and
Blue Star Mahogany, Inc. Public auction of the mortgaged properties was scheduled on December 19,
2000.8

Claiming that the foreclosure proceedings initiated by petitioner was illegal, respondent Eduardo Hong,
an unsecured creditor of Nikon Industrial Corporation, one of the companies of EYCO, filed an action for
injunction and damages against the petitioner in the same court (RTC of Valenzuela City). On its principal
cause of action, the complaint alleged that:

18. The ex-officio sheriff has no authority to sell the mortgaged properties. Upon his appointment as
liquidator, Edgardo Tarriela was empowered by the SEC to receive and preserve all assets, and cause
their valuation (SEC Rules on Corporate Recovery, Rule VI, Section 6-4). Therefore, the SEC retains
jurisdiction over the mortgaged properties of EYCO Properties, Inc. To allow the ex-officio sheriff to take
possession of the mortgaged properties and sell the same in a foreclosure sale would be in derogation
of said jurisdiction.

19. All the assets of the EYCO Group should thus be surrendered for collation to the liquidator and all
claims against the EYCO Group should be filed with the liquidator in the liquidation proceedings with the
SEC. The SEC, at which the liquidation is pending, has jurisdiction over the mortgaged properties to the
exclusion of any other court. Consequently, the ex-officio sheriff has absolutely no jurisdiction to issue
the notice of sheriff’s sale and to sell the mortgaged properties on 19 December 2000.

20. Moreover, the sale of the mortgaged properties on 19 December 2000 would give undue preference
to defendant FEBTC to the detriment of other creditors, particularly plaintiff. This was specifically
proscribed by the Supreme Court stating in the case of Bank of the Philippine Islands v. Court of Appeals
that whenever a distressed corporation asks SEC for rehabilitation and suspension of
payments, preferred creditors may no longer assert such preference, but shall stand on equal footing
with other creditors. Consequently, foreclosure should be disallowed so as not to prejudice other
creditors or cause discrimination among them.9 (Emphasis supplied.)

After hearing, the trial court issued a temporary restraining order (TRO). Petitioner filed a motion to
dismiss10 arguing that by plaintiff’s own allegations in the complaint, jurisdiction over the reliefs prayed
for belongs to the SEC, and that plaintiff is actually resorting to forum shopping since he has filed a claim
with the SEC and the designated Liquidator in the ongoing liquidation of the EYCO Group of Companies.
In his Opposition,11 plaintiff (respondent) asserted that the RTC has jurisdiction on the issue of propriety
and validity of the foreclosure by petitioner, in accordance with Section 1, Rule 4 of the 1997 Rules of
Civil Procedure, as amended, the suit being in the nature of a real action.

On January 17, 2001, the trial court denied the motion to dismiss.12 Petitioner’s motion for
reconsideration was likewise denied.13 Petitioner challenged the validity of the trial court’s ruling before
the CA via a petition for certiorari under Rule 65.

The CA affirmed the trial court’s denial of petitioner’s motion to dismiss. It held that questions relating
to the validity or legality of the foreclosure proceedings, including an action to enjoin the same, must
necessarily be cognizable by the RTC, notwithstanding that the SEC likewise possesses the power to
issue injunction in all cases in which it has jurisdiction as provided in Sec. 6 (a) of Presidential Decree
(P.D.) No. 902-A. Further, the CA stated that an action for foreclosure of mortgage and all incidents
relative thereto including its validity or invalidity is within the jurisdiction of the RTC and is not among
those cases over which the SEC exercises exclusive and original jurisdiction under Sec. 5 of P.D. No. 902-
A. Consequently, no grave abuse of discretion was committed by the trial court in issuing the assailed
orders.

With the CA’s denial of its motion for reconsideration, petitioner is now before this Court raising the
sole issue of whether the RTC can take cognizance of the injunction suit despite the pendency of SEC
Case No. 09-97-5764.

The petition has no merit.

Jurisdiction is defined as the power and authority of a court to hear and decide a case.14 A court’s
jurisdiction over the subject matter of the action is conferred only by the Constitution or by
statute.15 The nature of an action and the subject matter thereof, as well as which court or agency of the
government has jurisdiction over the same, are determined by the material allegations of the complaint
in relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs.16 And jurisdiction being a matter of
substantive law, the established rule is that the statute in force at the time of the commencement of the
action determines the jurisdiction of the court.17

Perusal of the complaint reveals that respondent does not ask the trial court to rule on its interest or
claim -- as an unsecured creditor of two companies under EYCO -- against the latter’s properties
mortgaged to petitioner. The complaint principally seeks to enjoin the foreclosure proceedings initiated
by petitioner over those properties on the ground that such properties are held in trust and placed
under the jurisdiction of the appointed Liquidator in SEC Case No. 09-97-5764. Thus, Civil Case No. 349-
V-00 is one for injunction with prayer for damages.

An action for injunction is a suit which has for its purpose the enjoinment of the defendant, perpetually
or for a particular time, from the commission or continuance of a specific act, or his compulsion to
continue performance of a particular act. It has an independent existence, and is distinct from the
ancillary remedy of preliminary injunction which cannot exist except only as a part or an incident of an
independent action or proceeding. In an action for injunction, the auxiliary remedy of preliminary
injunction, prohibitory or mandatory, may issue.18

As a rule, actions for injunction and damages lie within the jurisdiction of the RTC pursuant to Section 19
of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980," as
amended by Republic Act (R.A.) No. 7691.

Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of the litigations is incapable of pecuniary estimation;

xxxx

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising x x x
judicial or quasi-judicial functions;

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney’s
fees, litigation expenses, and costs or the value of the property in controversy exceeds Three hundred
thousand pesos (₱300,000.00) or, in such other cases in Metro Manila, where the demand exclusive of
the above-mentioned items exceeds Four hundred thousand pesos (₱400,000.00). (Italics supplied.)

On the other hand, Sec. 6 (a) of P.D. No. 902-A empowered the SEC to "issue preliminary or permanent
injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction." Such cases in
which the SEC exercises original and exclusive jurisdiction are the following:

(a) Devices or schemes employed by or any acts, of the board of directors, business associates, its
officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the
interest of the public and/or of the stockholder, partners, members of associations or organizations
registered with the Commission;
(b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns their individual franchise or
right to exist as such entity; and

(c) Controversies in the election or appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations.19

Previously, under the Rules of Procedure on Corporate Recovery, the SEC upon termination of cases
involving petitions for suspension of payments or rehabilitation may, motu proprio, or on motion by any
interested party, or on the basis of the findings and recommendation of the Management Committee
that the continuance in business of the debtor is no longer feasible or profitable, or no longer works to
the best interest of the stockholders, parties-litigants, creditors, or the general public, order the
dissolution of the debtor and the liquidation of its remaining assets appointing a Liquidator for the
purpose.20 The debtor’s properties are then deemed to have been conveyed to the Liquidator in trust for
the benefit of creditors, stockholders and other persons in interest. This notwithstanding, any lien or
preference to any property shall be recognized by the Liquidator in favor of the security or lienholder, to
the extent allowed by law, in the implementation of the liquidation plan.21

However, R.A. No. 8799, which took effect on August 8, 2000, transferred to the appropriate regional
trial courts the SEC’s jurisdiction over those cases enumerated in Sec. 5 of P.D. No. 902-A. Section 5.2 of
R.A. No. 8799 provides:

SEC. 5.2 The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree
No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial
Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction
over pending cases involving intra-corporate disputes submitted for final resolution which should be
resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction
over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed. (Emphasis supplied.)

Upon the effectivity of R.A. No. 8799, SEC Case No. 09-97-5764 was no longer pending.1âwphi1 The SEC
finally disposed of said case when it rendered on September 14, 1999 the decision disapproving the
petition for suspension of payments, terminating the proposed rehabilitation plan, and ordering the
dissolution and liquidation of the petitioning corporation. With the enactment of the new law,
jurisdiction over the liquidation proceedings ordered in SEC Case No. 09-97-5764 was transferred to the
RTC branch designated by the Supreme Court to exercise jurisdiction over cases formerly cognizable by
the SEC. As this Court held in Consuelo Metal Corporation v. Planters Development Bank22 :

The SEC assumed jurisdiction over CMC’s petition for suspension of payment and issued a suspension
order on 2 April 1996 after it found CMC’s petition to be sufficient in form and substance. While CMC’s
petition was still pending with the SEC as of 30 June 2000, it was finally disposed of on 29 November
2000 when the SEC issued its Omnibus Order directing the dissolution of CMC and the transfer of the
liquidation proceedings before the appropriate trial court. The SEC finally disposed of CMC’s petition for
suspension of payment when it determined that CMC could no longer be successfully rehabilitated.
However, the SEC’s jurisdiction does not extend to the liquidation of a corporation. While the SEC has
jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the corporation
now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its 29 November
2000 Omnibus Order, directed that "the proceedings on and implementation of the order of liquidation
be commenced at the Regional Trial Court to which this case shall be transferred." This is the correct
procedure because the liquidation of a corporation requires the settlement of claims for and against the
corporation, which clearly falls under the jurisdiction of the regular courts. The trial court is in the best
position to convene all the creditors of the corporation, ascertain their claims, and determine their
preferences.23 (Emphasis supplied.)

There is no showing in the records that SEC Case No. 09-97-5764 had been transferred to the
appropriate RTC designated as Special Commercial Court at the time of the commencement of the
injunction suit on December 18, 2000. Given the urgency of the situation and the proximity of the
scheduled public auction of the mortgaged properties as per the Notice of Sheriff’s Sale, respondent was
constrained to seek relief from the same court having jurisdiction over the foreclosure proceedings –
RTC of Valenzuela City. Respondent thus filed Civil Case No. 349-V-00 in the RTC of Valenzuela City on
December 18, 2000 questioning the validity of and enjoining the extrajudicial foreclosure initiated by
petitioner. Pursuant to its original jurisdiction over suits for injunction and damages, the RTC of
Valenzuela City, Branch 75 properly took cognizance of the injunction case filed by the respondent. No
reversible error was therefore committed by the CA when it ruled that the RTC of Valenzuela City,
Branch 75 had jurisdiction to hear and decide respondent’s complaint for injunction and damages.

Lastly, it may be mentioned that while the Consortium of Creditor Banks had agreed to end their
opposition to the liquidation proceedings upon the execution of the Agreement24 dated February 10,
2003, on the basis of which the parties moved for the dismissal of G.R. No. 145977, it is to be noted that
petitioner is not a party to the said agreement. Thus, even assuming that the SEC retained jurisdiction
over SEC Case No. 09-97-5764, petitioner was not bound by the terms and conditions of the Agreement
relative to the foreclosure of those mortgaged properties belonging to EYCO and/or other
accommodation mortgagors.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated September 27, 2002
and Resolution dated January 12, 2004 of the Court of Appeals in CA-G.R. SP No. 64166 are AFFIRMED.

With costs against the petitioner.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:
G.R. No. L-4891 March 23, 1909

SOFIA DEVESA, plaintiff-appellee,

vs.
CRISPIN ARBES, defendant-appellant.

Leocadio Joaquin for appellant.

Sofia Devesa on her own behalf.

CARSON, J.:

Plaintiff alleging that the defendant, acting as administrator of the estate of Gregoria Arbes, deceased,
had unlawfully taken possession of certain rice lands and cocoanut groves, the property of the plaintiff,
prayed for an injunction restraining defendant from continuing in possession and enjoying the fruits of
the land in question until and unless he obtained a final judgment in a proper action declaring these
lands to be the property of the estate of which he is administrator, and prayed further that a preliminary
injunction be issued restraining defendant from continuing in possession or enjoying the fruits of the
land in question pending the trial of the cause.

The complaint alleges that the property in question was assigned to plaintiff's deceased husband under
the terms of an extra judicial partition contract executed in the year 1887 by the heirs of Gregoria Arbes,
plaintiff's husband's first wife, and that ever since that date until the defendant took possession of this
land, plaintiff and her husband had continued in the quiet, peaceable, and exclusive possession thereof.
The trial court, apparently without giving the defendant an opportunity to be heard, granted the
preliminary injunction prayed for, conditioned upon the execution of a bond for costs and damages,
whereupon the defendant presented a motion which though irregular in form may fairly be regarded as
a demurrer to the complaint on the ground that the facts alleged do not constitute a cause of action,
and prayed that the preliminary injunction be dissolved.

The trial court overruled the demurrer and declined to dissolve the preliminary injunction, and
defendant without excepting to the ruling of the court withdrew his motion and filed his answer. In this
answer defendant admitted having taken possession of the land in question, as alleged by the plaintiff,
but denied plaintiff's allegation that she and her husband had been in the exclusive possession thereof,
and alleged that the land in question was the property of Gregoria Arbes, deceased, of whose estate he
is the administrator, and that after the death of Gregoria Arbes, it passed pro indiviso to her heirs, who
from the time of her death continued in joint possession thereof, until he took possession upon his
appointment as administrator; he also alleged that one of the heirs, Vicente Sola, widower of Gregoria
Arbes, deceased, married the plaintiff; that plaintiff's claim to an interest in the property in question is
or should be strictly limited to the interest which she is entitled to take from her husband, since
deceased; and that while it is true that she and her husband exercised certain rights of possession of the
land in question, they never had exclusive possession, and such rights of possession as they did exercise
were exercised not only on their behalf but on behalf of all the heirs of Gregoria Arbes.

Upon these pleadings the parties went to trial, and plaintiff introduced evidence tending to prove that
the land in question was originally the property of her husband, Vicente Sola, acquired by him, not from
his wife, Gregoria Arbes, but by purchase, in part prior to, and in part after his marriage with his first
wife; she also introduced in evidence a document, dated January 31, 1887, purporting to be a partition
agreement between her husband Sola, and the other heirs of Gregoria Arbes who died a short time prior
to the execution of the instrument, whereby the land in question was assigned to Sola as his property.
Plaintiff further introduced testimony which clearly established her allegation that from the date of that
instrument until the time when defendant took possession of the land, she and her husband had had
the exclusive possession thereof.

Defendant did not deny the execution of the partition agreement, and wholly failed to proved that the
land in question was or is a part of the estate of Gregoria Arbes, deceased, or to establish his allegation
that plaintiff and her husband were not in the exclusive possession of the land in question from the date
of its execution to the time when he took possession as administrator, or that they held possession
thereof jointly with the other heirs of Gregoria Arbes. He insisted, however, that the agreement was not
binding upon the heirs of Gregoria Arbes, because at the date of its execution two of them, a niece and
a nephew, were minors and incapable of executing such a document, although it appears that they were
represented upon that occasion by their respective fathers who married sisters of Gregoria Arbes, and
signed the instrument as the legal representatives of these minor heirs.

The trial court on the pleadings and proof submitted at the trial found that the plaintiff was entitled to
the possession of the land in question, and rendered final judgment in accordance with the prayer of the
complaint, granting a final injunction perpetually restraining the defendant administrator from
continuing in possession of the land in question or enjoying the fruits thereof.

We are in entire accord with the trial judge as to his findings of fact, and agree with him that the
evidence of record establishes plaintiff's right of possession in and to the lands in question: for without
deciding whether the extrajudicial partition agreement between the heirs of Gregoria Arbes, deceased,
executed in 1887, conveyed to plaintiff's deceased husband the absolute right of ownership in the land
assigned to him thereby; or whether that agreement, which was executed before the present Code of
Civil Procedure went into effect, can be successfully attacked at this time by the minor heirs, because of
the apparent lack of judicial approbation of the action of their legal representatives; it is sufficient, for
the purposes of this decision, to point out that plaintiff, and her husband having been in exclusive
possession of this land, under a claim based on the partition agreement, for more than fifteen years, the
defendant, in his capacity of administrator, had no lawful authority to take possession thereof without
plaintiff's consent, in the absence of a final judgment of a competent court securing to him his alleged
right of possession; and that defendant having failed to prove that the estate of which he is
administrator is the true owner of all any part of the land in question, the plaintiff is entitled to be
replaced in possession.

We are of opinion, however, that the remedy by injunction sought by the plaintiff and allowed the trial
court was not the proper remedy for the cause of action set out in the pleadings and established by the
evidence, and that, in accordance with the provisions of section 126 of the Code of Civil Procedure, the
court should have granted "relief consistent with the case made by the complaint and supported by the
evidence and embraced within the issue," and to that end should have required an amendment of the
complaint by striking out the prayer for an injunction and substituting therefor a prayer for a judgment
for possession of the land described in the complaint, and upon the complaint thus amended, judgment
should have been rendered in favor of the plaintiff.

Both the parties to this action appear to have labored under a misapprehension as to the purpose,
scope, and limitations of the special remedy, known as an injunction, and defined in section 162 of the
Code of Civil Procedure. The records in many cases in this court disclose a considerable degree of doubt
and uncertainty in the minds of counsel as to the function of this remedy, and in some cases a wholly
erroneous concept of the purpose and object for which it is provided. This erroneous concept may,
perhaps, be due to the fact that in the Spanish version of the new Code of Civil Procedure, the term
injunction is translated interdicto prohibitorio, which may thus have given rise to the impression that the
remedy by injunction is similar in character to the summary interdictal actions of the Spanish procedural
law; but while the injunction resembles in many respects the interdicto of the Roman law, especially the
decretal (decretale, quod praetor re nata implorantibus decrevit), and while it also resembles to a
certain degree in its operation and effect, the interdictos de adquirir, de retener, and de recobrar or de
despojo of the Spanish procedural law; nevertheless, it is wholly distinct therefrom, and, as a rule, the
circumstances under which, in accordance with the former procedural law, these interdictos properly
issued, would not justify nor sustain the issuance of an injunction, as defined and provided in the new
Code of Civil Procedure. An injunction is a "special remedy" adopted in that code from American
practice, and originally borrowed from English legal procedure, which was there issued by the authority
and under the seal of a court of equity, and limited, as in other cases where equitable relief is sought, to
cases where there is no "plain, adequate, and complete remedy at law" (30 Barb., 549; 5 R. I., 472; 121
N. Y., 46; 31 Pa., 387; 32 Ala., N. S., 723; 37 N. H., 254; 61 Hun., 140; 145 U. S., 459; 141 Ill., 572; 49 Fed.
Rep., 517; 37 id., 357; 129 Md., 464; 109 N. C., 21; 83 Wis., 426; 115 Mo., 613), which "will not be
granted while the rights between the parties are undetermined, except in extraordinary cases where
material and irreparable injury will done," which can not be compensated in damages, and where there
will be no adequate remedy (3 Bosw., 607; 1 Beasl., 247, 542; 15 Md., 22; 13 Cal., 156, 190; 6 Wis., 680;
16 Tex., 410; 28 Mo., 210; 24 Fla., 542; 39 N. H., 182; 12 Cush., 410; 27 Ga., 499; 1 McAll., 271; 54 Fed.
Rep., 1005; 64 Vt., 643), and which will not, as a rule, be granted, to take property out of the possession
of one party and put it into that of another whose title has not been established by law. (144 U. S., 119;
40 W. N. C. Pa., 121.)

This court has frequently held, when treating of the special remedies by injunction, mandamus and
prohibition, which are provided in the new Code of Procedure in Civil Cases, that the accepted American
doctrine limiting the use of these remedies to cases where there is no other adequate remedy, and
otherwise controlling the issuance of these writs, and must be deemed to limit their use in like manner
in this jurisdiction, when not otherwise provided by law: to hold otherwise would be to render
practically of no effect the various provisions of the code touching many if not most of the ordinary
actions, and the enforcement of judgment in such actions; for it may well be supposed that if a
complainant could secure relief by injunction in every case where "the defendant is doing or threatens
or is about to do, or is procuring or suffering to be done, some act probably in violation of the plaintiff's
rights" and could enforce the judgment granting the injunction by the summary contempt proceedings
authorized in section 172 of the code to punish violations of injunctions, he would seldom elect to
enforce his rights in such cases by the ordinary remedies, involving as they do the difficult and ofttimes
fruitless labor of enforcing judgments obtained therein by execution. But so many cases have come
before us where preliminary injunctions have been issued apparently without regard to this rule, that
we are satisfied that the erroneous impression still prevails, in some quarters, that a preliminary
injunction must issue where a prima facie showing is made of the existence of the circumstances under
which such injunctions may be granted as set out in section 164 of the Code of Civil Procedure, without
keeping in mind the fact that applications for injunctions are made to the sound discretion of the court,
and the exercise of that discretion is controlled by the accepted doctrines touching the granting of
injunctions in such cases; and we may add that the records also disclose a dangerous tendency to grant
permanent injunctions on insufficient grounds, as a result of a similar erroneous construction of the
provisions of the code in that regard.

No brief was filed by plaintiff on appeal, and the contentions of the parties in the court below are not
very clearly set out in the very short brief of the defendant and appellant. It appears, however, that
defendant challenged the jurisdiction of the trial court, on the ground that the summary interdictal
actions of the Spanish procedural law have been done away with by the provisions of the new Code of
Procedure in Civil Cases, the interdicto de recobrar or de despojo having been expressly displaced by the
summary remedies prescribed in section 80 of the new code, for the recovery of lands or buildings of
which one is deprived by force, intimidation, fraud, or strategy within a year prior to the institution of
the action; and defendant insists that the action instituted by plaintiff, while in form a proceeding
praying for an injunction under the new code, assimilated to the former proceeding praying for
an interdicto de recobrar or de despojo, is in fact an action which could only be maintained under the
provisions of section 80 of the new code, of which original jurisdiction is conferred upon the courts of
the justice of the peace, exclusive of the Court of First Instance. Plaintiff and appellee on the other hand
seems to have insisted that the injunction proceedings instituted by her were assimilated rather to the
summary action known as the interdicto de retener and that the facts alleged and proven establishing
her right to an interdicto de retener, under the old law, she is entitled to an injunction under the new
code, that remedy being the equivalent provided by the new code for the interdicto of the old law.

But while we agree with defendant and appellant that the summary remedies provided in section 80
may be said to replace and perhaps abrogate the old interdicto de recobrar or de despojo, and that if the
facts alleged and proven made out a cause of action under that section and, therefore, within the
exclusive jurisdiction of the court of the justice of the peace, it would be necessary to hold that the trial
court was wholly without original jurisdiction; and while we can not agree with the plaintiff and appellee
that the facts set out in the pleadings and evidence would support the issuance of an interdicto de
retener, even under the former procedure, because possession of the land and buildings had been
actually lost to plaintiff when the action was instituted, nor can we agree with her that even if a proper
case for the granting of an interdicto de retener under the old procedure had been established, it
necessarily follows that an injunction should issue under the new procedure; and without deciding
whether all the summary interdictal remedies of the Spanish law have been wholly and in all cases
abolished under the provisions of the new code, it is sufficient for the purpose of this decision to hold
that since there is nothing in the allegations or proof to show that defendant obtained possession of the
land in question by force, intimidation, fraud, or strategy, the action is not in the nature of the summary
remedy known to the old law as an interdicto de recobrar or de despojo, nor is it the summary remedy of
forcible entry and wrongful detainer provided in section 80 of the new code, and therefore it does not
fall within the exclusive jurisdiction of the court of the justice of the peace, to the exclusion of the Court
of First Instance, which tried the case.

What has been said disposes of all the errors assigned by appellant, except his assignment of error
based on his contention that the administrator having taken possession as an officer of the court
wherein the estate was being administered, his conduct in that regard should not be questioned, except
in the course of the administration proceedings.
We have frequently held that a contested claim of an administrator that certain rights of possession and
ownership are the property of the estate which he represents must be determined in a separate action,
and not in the course of the administration proceedings; and it should be necessary to add that the
mere fact that an administrator holds letters of appointment from some court, in nowise authorizes him
to take possession of property held by another under a claim of a right to possession until and unless he
successfully establishes his right to possession of such property in a proper proceeding in a competent
court.

Ten days from the date of this decision let judgment be entered, reversing the judgment of the trial
court and dissolving the preliminary and permanent injunctions issued therein, without costs either
party in this instance, and ten days thereafter let the record be returned to the court below where, upon
the amendment of the complaint along the lines therein indicated, judgment will be rendered in favor of
the plaintiff for the possession of the lands described in the complaint, together with the costs in the
Court of First Instance, but without damages, which were not satisfactorily established by the evidence
of record. So ordered
G.R. No. 158141 July 11, 2006

FAUSTO R. PREYSLER, JR., petitioner,

vs.
COURT OF APPEALS and FAR EAST ENTERPRISES, INC., respondents.

DECISION

QUISUMBING, J.:

This petition for review assails the Decision1 dated January 20, 2003 and Resolution2 dated May 20, 2003
of the Court of Appeals in CA-G.R. SP No. 52946. The Court of Appeals lifted the amended writ of
preliminary injunction dated December 29, 1998 issued by the Regional Trial Court, Branch 14 of
Nasugbu, Batangas in Civil Case No. 345 and reinstated the original writ dated December 12, 1996.

The antecedent facts are as follows:

Private respondent Far East Enterprises, Inc., owns Tali Beach Subdivision. Petitioner Fausto Preysler, Jr.
and his wife owned lots therein and also two parcels of land adjacent to the subdivision. These two
parcels were bounded on the North and West by the China Sea and on the East and South by the
subdivision. To gain access to the two parcels petitioner has to pass through private respondent's
subdivision. Petitioner offered P10,000 for the easement of right of way but private respondent refused
it for being grossly inadequate. Private respondent then barricaded the front gate of petitioner's
property to prevent petitioner and his family from using the subdivision roads to access said parcels.

The petitioner filed, with the Regional Trial Court of Nasugbu, Batangas, a Complaint for Right of Way
with prayer for preliminary prohibitive injunction against private respondent. After due hearing, the trial
court, in an Order dated November 5, 1996, held that barricading the property to prevent the petitioner
from entering it deprived him of his ownership rights and caused irreparable damage and injuries. It
ordered herein private respondent:

1) To remove or cause or allow the removal of the barricade (six concrete posts) installed by it on the
front gate of the plaintiffs' properties fronting Sea Cliff Drive;

2) To cease, desist and refrain from obstructing or hindering plaintiffs' entry into and exit from their
subject properties and/or their free passage over Sea Cliff Drive from and to the public highway near the
gate of the Tali Beach Subdivision pending termination of this litigation on the merits and/or unless a
contrary order is issued henceforth.3

Accordingly, the writ of preliminary injunction was issued on December 12, 1996.

On July 8, 1998, petitioner used the subdivision road to transport heavy equipment and construction
materials to develop his property. Consequently, private respondent moved to dissolve the writ claiming
that the petitioner violated its right to peaceful possession and occupation of Tali Beach Subdivision
when petitioner brought in heavy equipment and construction materials. Private respondent
maintained that the damages that may be caused to it far outweigh the alleged damages sought to be
prevented by the petitioner. It alleged that there is an alternate route available to petitioner,
particularly the barangay road leading to Balaytigue and the Calabarzon Road.
For his part, the petitioner moved to clarify the December 12, 1996 writ and asked the court to clearly
define the action required of private respondent to avert further damage and inconvenience to
petitioner. Petitioner prayed that his contractors, visitors, and other representatives be allowed access
and persons he has authorized be allowed to install power lines over private respondent's property.

On December 29, 1998, the trial court issued a Joint Resolution amending the order in the original writ
to read as follows:

1. To remove or cause or allow the removal of the barricade (six concrete posts) installed by it on the
front gate of the plaintiffs' properties fronting Sea Cliff Drive.

2. To cease, desist and refrain from obstructing or hindering plaintiffs' (including plaintiffs' visitors,
guests, contractors, and other persons authorized by or acting for and/or under said plaintiffs) entry into
and exit from their subject properties and/or their free passage over Sea Cliff Drive and other
connecting subdivision roads, from and to the public highway near the gate of the Tali Beach
Subdivision, pending the termination of this litigation on the merits and/or unless a contrary order is
issued henceforth.

3. To cease, desist and refrain from hindering or obstructing plaintiffs' contractors, guests, visitors and
other authorized persons to bring along with them their motor vehicles, equipments, materials,
supplies, machineries and other items necessary for the needs of the plaintiffs' properties.

4. To cease, desist and refrain from hindering or obstructing the plaintiffs and/or persons authorized by
them, to install electric power lines over the Tali Beach Subdivision for plaintiffs' electric power
requirements.4

Private respondent filed a petition for certiorari with the Court of Appeals, which set aside the amended
writ dated December 29, 1998 and reinstated the original writ dated December 12, 1996 with
modification as to the amount of the bond. The petitioner moved for reconsideration, but the same was
denied.

Petitioner now comes before us claiming that the Court of Appeals:

… [GRAVELY] ERRED IN FINDING AND CONCLUDING THAT THE TRIAL COURT COMMITTED GRAVE ABUSE
OF DISCRETION IN ISSUING: (1) THE JOINT RESOLUTION DATED 29 DECEMBER 1998, … (2) THE
AMENDED WRIT OF PRELIMINARY INJUNCTION (MANDATORY AND PROHIBITORY) OF EVEN DATE … AND
(3) THE ORDER DATED 8 MARCH 1999 DENYING THE MOTION FOR RECONSIDERATION TO RECONSIDER
AND SET ASIDE THE JOINT RESOLUTION.…

II

… OVERSTEPPED THE BOUNDARY OF ITS AUTHORITY AND JURISDICTION IN RESOLVING FACTUAL

MATTERS, HOWEVER, ERRONEOUS, COULD NOT BE REVIEWED UNDER THE EXTRAORDINARY WRIT OF
CERTIORARI BUT BY ORDINARY APPEAL, INSTEAD OF CONFINING ITSELF TO DETERMINE WHETHER OR
NOT THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN ISSUING THE JOINT RESOLUTION,
… THE AMENDED WRIT OF PRELIMINARY INJUNCTION (MANDATORY AND PROHIBITORY), … AND THE
ORDER DATED 6 MARCH 1996 DENYING THE MOTION TO RECONSIDER THE JOINT RESOLUTION….
III

… EXCEEDED ITS JURISDICTION AND AUTHORITY IN SETTING ASIDE THE JOINT RESOLUTION, … LIFTING
THE AMENDED WRIT OF PRELIMINARY INJUNCTION DATED 29 DECEMBER 1998, … AND RESTRICTING OR
LIMITING PASSAGE OVER THE TALI BEACH SUBDIVISION ROADS TO INGRESS AND EGRESS OF PETITIONER
AND MEMBERS OF THE LATTER'S HOUSEHOLD IN UTTER VIOLATION OF THE LAW ON EASEMENT, IN
GENERAL, AND LEGAL EASEMENT OF RIGHT OF WAY IN PARTICULAR.5

Simply, the issue is whether there was a legal basis for the issuance of the amended writ of injunction.
Likewise, we need to resolve whether the right of passage allowed in the uncontested original writ
applies not only to the petitioner and his household, but also to his visitors, contractors, construction
workers, authorized persons, heavy equipment machinery, and construction materials as well as the
installation of power lines.

Petitioner contends that inherent in the right of way under Article 6496 of the New Civil Code is the right
to cultivate and develop the property, which is an attribute of ownership provided under Article
428.7 According to petitioner, the passage of heavy equipment and construction materials through the
subdivision is granted by Article 656.8Petitioner adds that he was not seeking the right of way only for
occasional visits to his property but also to develop, use and enjoy it.

Private respondent claims that what was granted in the original writ was not the easement of right of
way but only the maintenance of the status quo. It maintains that from the very beginning, petitioner
and his household were allowed into the subdivision only because petitioner owned several lots in the
subdivision. Hence, according to private respondent, the Court of Appeals properly dissolved the
amended writ as the status quo protected by the original writ did not include the passage of
construction workers in petitioner's property outside the subdivision. Private respondent stresses that
at the time the original writ was applied for there was no construction work yet.

Private respondent argues that its recognition of the original writ should not be construed as admitting
that petitioner had a right of way; and with no easement of right of way, petitioner cannot claim other
rights under the law on easement. It further contends that acts prohibited and allowed under the
amended writ amounted to a premature adjudication on the merits of the main case on whether or not
petitioner has a right of way, which is still pending before the trial court.

Prefatorily, we note that what was granted by the trial court was the preliminary injunction, and that
the main case for right of way has not yet been settled. We have in previous cases9 said that the
objective of a writ of preliminary injunction is to preserve the status quo until the merits of the case can
be fully heard. Status quo is the last actual, peaceable and uncontested situation which precedes a
controversy.10 The Court of Appeals was correct in its findings that the last actual, peaceful and
uncontested situation that preceded the controversy was solely the access of petitioner and his
household to his property outside the subdivision for visits and inspections. At the time the writ was
applied for in 1995, there was still no construction going on in the property. It was merely raw land. The
use of the subdivision roads for ingress and egress of construction workers, heavy equipment, delivery
of construction materials, and installation of power lines, are clearly not part of the status quo in the
original writ. Along this line, the Court of Appeals properly set aside the amended writ and reinstated
the original writ.
However, under Article 656 of the New Civil Code, if the right of way is indispensable for the
construction, repair, improvement, alteration or beautification of a building, a temporary easement is
granted after payment of indemnity for the damage caused to the servient estate. In our view, however,
"indispensable" in this instance is not to be construed literally. Great inconvenience is sufficient.11 In the
present case, the trial court found that irrespective of which route petitioner used in gaining access to
his property, he has to pass private respondent's subdivision. Thus we agree that petitioner may be
granted a temporary easement. This temporary easement in the original writ differs from the
permanent easement of right of way now being tried in the main case.

The law provides that temporary easement is allowed only after the payment of the proper indemnity.
As there are neither sufficient allegations nor established facts in the record to help this Court
determine the proper amount of indemnity, it is best to remand the case to the trial court for such
determination.

Additionally, we find that the installation of electric power lines is a permanent easement not covered
by Article 656. Article 656 deals only with the temporary easement of passage. Neither can installation
of electric power lines be subject to a preliminary injunction for it is not part of the status quo. Besides,
more damage would be done to both parties if the power lines are installed only to be removed later
upon a contrary judgment of the court in the main case.

WHEREFORE, the petition is PARTIALLY GRANTED.

We hereby order (a) private respondent to allow the right of passage thru the subdivision by the
petitioner's visitors and guests, contractors, construction workers, heavy equipment vehicles, and
delivery construction materials; and (b) petitioner to pay private respondent the indemnity therefor to
be determined by the trial court. The case is hereby REMANDED to the trial court for the determination
of the proper amount of indemnity for the temporary easement under Article 649.

No pronouncement as to costs.

SO ORDERED.
G.R. No. L-5734 August 17, 1911

MARCELO MANTILE, ET AL., plaintiffs-appellees,

vs.
ALEJANDRO CAJUCOM, ET AL., defendants-appellants.

Ramon Diokno for appellants.

Allen A. Garner for appellees.

TORRES, J.:

This is an appeal by the defendants from the judgment rendered in the matter of the principal issue, and
in the incidental one of contempt of court.

THE INCIDENTAL ISSUE OF CONTEMPT

On June 22, 1908, the attorneys for the plaintiffs Marcelo Mantile, Sebastian Bancod, Adriano Español,
Gregorio Corpus, Claudio Angeles, Doroteo Dacuno, Fernando Polintan, Maximino Fajardo, Catalino
Rubio, Alejandro Caisip, Diego Santiago, Eugenio Ronquillo, Raymundo Santiago, Simon de la Cruz,
Anacleto de los Reyes, Rafael Mendoza, Marcelino Fajardo, Tomas Marcelo, Inocencio Santiago, Eugenio
Angeles, Segundo Ramos, and Geronimo Rojas, filed a written complaint against Alejandro Cajucom and
Timoteo Cajucom wherein they prayed for the issuance of writ of preliminary injunction to restrain the
defendants from continuing to close the canal or esterocalled Paligui ng Buquid Puntang Piniping, in the
barrio of Biga of the pueblo of Bongabon, and through which the water ran that irrigated the
sementeras, or rice fields of which the plaintiffs were the owners, and from obstructing the course of
such water, and furthermore that, after the hearing of the case, a writ of perpetual injunction be issued
against the said defendants, and that the latter be sentenced to pay to each of the twenty-two plaintiffs
the amount of the losses and damages caused him, and the costs.

The plaintiffs having furnished bond, the court, by order of July 26, 1908, directed that preliminary
injunction issue against the said defendants, their agents and representatives, restraining them from
performing any act whatever that might tend to close or obstruct the canal or estero called Paligui ng
Buquid Puntang Piniping, in the barrio and pueblo before-mentioned, of the Province of Nueva Ecija,
and to refrain from hindering the passage of the water that flowed through the said canal. The
defendants were notified of this writ and it was served upon them on the 29th of the same month.

By a petition of July 6, 1908, counsel for the plaintiffs set forth under oath that, according to information
he had received, the defendants were continuing to obstruct and hinder the passage of the water, in
disobedience to the judicial order, and prayed that the said defendants be notified to appear and state
their reasons, if any they had, why they should not be punished for contempt of court for disobedience
to the writ of preliminary injunction issued. This petition was granted and the defendants having been
notified, they alleged in writing, on the 14th of the same month, that they had been notified on the 3rd
of July of the said writ by the sheriff of Nueva Ecija and since then had complied with the order of the
court, but called attention to the fact that the stream had been closed by two tenants of the defendant,
Alejandro Cajucom, on the 1st of the preceding month of July, since which date neither they, the
defendants, nor any other person in their representation, had done anything whatever to the stream or
ditch in question; wherefore they prayed that the two men who closed the said stream be examined,
and that, in view of such facts, the charge of contempt of court be dismissed, and the plaintiffs be
sentenced to pay the costs, and the damages occasioned.

The court, after the witnesses summoned had been examined, decided, on August 20, 1908, that the
defendants had committed contempt of court and imposed upon each of them a fine of P200, and
imprisonment until they should duly comply with the writ of injunction, and sentenced each of them to
pay one-half of the costs.

Defendants excepted to this judgment and, the required bill of exceptions having been submitted, the
Supreme Court, in its decision of January 11, [31] 1910,1 dismissed the appeal on the ground that the
said bill of exceptions had been improperly admitted, inasmuch as the order issued in connection with
the incidental question of contempt of court, could be reviewed only after the rendition of judgment on
the main issue, and not until then could the said incident of contempt be, by means of a bill of
exceptions, submitted to this court; therefore the records in the case were remanded to the court
below, later to be transmitted to the clerk of this court upon the filing of the main record with the bill of
exceptions.

By the writ of preliminary injunction issued on June 26, 1908, the original of which is on file, page 7 of
the main record, the defendants Alejandro and Timoteo Cajucom, their attorneys, representatives and
agents, were enjoined from performing any act whatever that might tend to close and obstruct the
canal, a branch, called Paligui ng Buquid Puntang Piniping, of an estero situated in the barrio of Biga of
the pueblo of Bongabon, Nueva Ecija, and to cease to obstruct or hinder the course of the water that
should flow through the said branch.

In the written complaint presented on June 22, 1908, it is averred that the said canal or estero was
closed by the representatives of the defendants, on the 1st of June of the year therein stated, and that
since then the water which it ordinarily carried had ceased to flow through it, the plaintiff's lands
thereby being deprived of irrigation. So that when the writ of injunction was issued on the 26th of the
said month, it was taken for granted that the estero or canal in question was closed and that the water
did not run through it, as occurred prior to the said 1st of June; and counsel for the plaintiffs, in
charging, by a writing of July 6, 1908, that contempt of court was committed, stated that the
defendants, according to the information he had, were still obstructing and hindering the passage of the
water, in disobedience of the writ of injunction.

The defendants having been notified to show cause why they should not be punished for contempt of
court and disobedience of the preliminary injunction issued by the court, answered that since the 3rd of
July, the date when they were notified by the deputy sheriff, they had complied with the prohibitory
order and had not done anything whatever, by themselves or through others in their representation, to
the stream or ditch in question, which was closed by two tenants of one of the defendants, Alejandro
Cajucom, on June 1, 1908; as acknowledged by said tenants.

The writ issued by the court contained no order instructing the defendants to raise or remove the
obstructions that prevented the water from flowing through the said canal or ditch.

The canal was obstructed and closed on June 1st, and when the persons who closed it were notified on
July 3 that they should abstain from performing any act whatever tending to obstruct and prevent the
flow of water, the canal or ditch still remained closed, and the record shows no proof that it was
afterwards opened to the passage of water, nor that, after the defendants had been notified of the
injunction, they again closed it. The fact that the latter failed to remove the obstruction they had placed
in the said canal or estero for the purpose of preventing the passage of the water, since they were not
ordered so to do by the judicial writ, is not sufficient to make them liable for contempt of court.

The act of the closing of the canal occurred prior to the issuance of the writ, and, since a thing that has
already been done can not be prohibited, by the mere fact of there not having been done what was not
ordered in the writ it can not be held that a judicial order was disobeyed and willfully disregarded.

Section 162 of the Code of Civil Procedure prescribes:

An injunction is a writ or order requiring a person to refrain from particular act.

The said writ prohibited the performance of any act that would obstruct, close, or hinder the course of
the water through the Piniping canal or creek, when it was already obstructed and closed; and as the
removal of the impediment or obstruction was not ordered, the defendants were not obliged to
perform any particular act, and their inaction in leaving the canal closed does not constitute contempt
of court, as they did not violate any judicial prohibition.

The record shows that the prohibition was issued after the closing of the canal; hence, if the defendants
did not remove the obstruction, they disobeyed no order. In the syllabus of decision No. 1697, Municipal
council of Santa Rosa vs. Provincial Board of La Laguna (3 Phil. Rep., 206), the rule was laid down that
the commission of an act already done can not be enjoined. To say that it could, would be nonsense.

THE MAIN ISSUE

On January 28, 1909, the plaintiffs filed an amended complaint, with the permission of the court,
wherein they alleged that certain of them named Maria Marcelo, Crisanto Rubio, Alipio Español or
Estañol, Marcelo Mantile, Adriano Español or Estañol, Sebastian Bancod, Claudio Angeles, Diego
Santiago, Raymundo Santiago, Anacleto de los Reyes, Rafael Mendoza, Clemente Alivia, Marcelino
Fajardo, and Segundo Ramos had been, on or about June 1, 1908, and were at the time, the proprietors
and owners of rice lands situated in the barrio of Biga of the pueblo of Bongabon, and that the other
plaintiffs were planters and cultivators of some portions of the said islands; that (following the
statement in the complaint as to the boundaries or adjacent lands of each of their respective properties)
the said Paligui ng Buquid Puntang Piniping estero or creek existed and had always existed in the afore-
mentioned barrio; that water flowed through it on or about June 1, 1908, and the plaintiffs used that
water in the cultivation of their above-mentioned lands; that, on or about the date aforesaid, the
defendants, by themselves and through their agents and representatives, obstructed and closed the
mouth of the estero in such manner that the lands described were deprived of the water that had
flowed and should flow through the said estero; that, on or about the 4th of October of the same year
before mentioned, the continual heavy rains and high floods carried away the obstruction in the said
Paligui ng Buquid Puntang Piniping estero; that, in view of the statements made by the defendants, they
believed that the latter would again close the estero in order to obstruct the passage of the water to
their (the plaintiffs') properties; and that the plaintiffs, through the closing of the said estero or creek,
suffered losses and damages in the following amounts: Maria Marcelo, P1,500; Crisanto Rubio, P250;
Alipio Español, P75; Marcelo Mantile, P2,500; Adriano Español, P75; Sebastian Bancod, P400; Gregorio
Corpus, P150; Claudio Angeles, P250; Doroteo Dacuno, P250; Fernando Polintan, P250; Maximino
Fajardo, P200; Catalino Rubio, P300; Alejandro Caisip, P270; Diego Santiago, P800; Eugenio Ronquillo,
P486; Raymundo Santiago, P650; Simeon [Simon] de la Cruz, P480; Anacleto de los Reyes, P180; Rafael
Mendoza, P300; Marcelino Fajardo, P340; Tomas Marcelo, P270; Inocencio Santiago, P375; Eugenio
Angeles, P375; Geronimo Rojas, P135; Segundo Ramos, P390, and Clemente Alivia, P219; and the
complaint concluded by asking the court to render judgment against the defendants, and, at the
termination of the trial, to issue a perpetual injunction enjoining them from closing the said estero or
creek, or in any manner obstructing the course of the water therein, and furthermore, to sentence them
to pay to the plaintiffs the losses and damages suffered by them, and the costs of the suit.

On February 11, 1909, the defendants' counsel, answering the amended complaint, made a general
denial of each and all the allegations of the said complaint and alleged, as a special defense, that the
irrigation canal in question belonged to the defendants; that the mouth of the said Paligui ng Buquid
Puntang Piniping canal did not previously exist and was opened only at the request of Marcelo Mantile;
and that the plaintiff's lands were provided with another irrigation ditch independent of the one herein
concerned. Said counsel therefore prayed that his clients be absolved from the complaint, that the
irrigation canal in question be declared to belong to the defendants, and that the plaintiffs be sentenced
to pay the costs.

On April 26, 1909, the case came up for hearing, testimony was adduced by both parties and the court,
after consideration of the evidence, rendered judgment on July 26,1909, enjoining the defendant
Alejandro Cajucom from closing the Paligui ng Buquid Puntang Piniping estero or creek, or in any
manner obstructing the course of the water running therein. the preliminary injunction issued against
the defendant, his agents and representatives, by the Hon. Judge Estanislao Yusay, was thus rendered
perpetual, and the said defendant was sentenced to pay the following sums, for losses and damages; To
Maria Marcelo, P196.50; Crisanto Rubio, P139.50; Alipio Español, P75; Marcelo Mantile P800.25;
Adriano Español, P75; Sebastian Bancod, P142.50; Gregorio Corpus, P90.12; Claudio Angeles, P97.87;
Doroteo Dacumo, P90.37; Fernando Polintan, P80.87; Maximino Fajardo, P75.37; Alejandro Caisip, P75;
Catalino Rubio, P84; Diego Santiago, P131.25; Eugenio Ronquillo, P131.25; Raymundo Santiago, P540;
Simon de la Cruz, P135; Anacleto de los Reyes, P90; Rafael Mendoza, P195; Marcelino Fajardo, P180;
Geronimo Rojas, P90; Segundo Ramos, P210; Clemente Alivia, P109.50, and to Tomas Marcelo,
Inocencio Santiago, and Angeles, tenants-on- shares of Maria Marcelo, the sum of P196.50. Counsel for
the defendant, Alejandro Cajucom, excepted to this judgment and prayed for a new trial on the grounds
that the said judgment was not sufficiently supported by the weight of the evidence and was contrary to
law. This motion was overruled by an order of September 2, and exception thereto was taken by the
appellant who duly filed the proper bill of exceptions, which was certified to and forwarded to the clerk
of this court.

Counsel for the appellants having been authorized, by an order of February 12, 1910, to present the
facts relative to the charge of contempt of court, as an incident of the main issue, and upon his petition,
the Supreme Court ruled that the bill of exceptions relative to the matter of the contempt of court,
together with the evidence therewith submitted should be held to be an integral part of the said main
issue with the bill of exceptions thereto pertaining.

With regard to main issues of this suit, the object of the plaintiffs is to obtain from the court an order
decreeing the former preliminary injunction to be perpetual. This claim, which is opposed by the
defendants, presupposes a right on the part of the plaintiffs to use and profit by the water that runs
through the Piniping estero or creek, to the benefit of their respective agricultural lands.

The law applicable to the present contention is found in articles 407 to 425 of the Civil Code, in the last
of which it is provided:

In all that is not expressly determined by the provisions of this chapter, the special law of waters shall be
observed.

This law is that of August 3, 1866, which was extended to the Philippine Islands by the royal decree of
the 8th of the same month and year and published with the Decreto de cumplase of the Gobierno
General of September 21, 1871, in the Official Gazette of the 24th of the same month and year, on
account of the subsequent law of June 13, 1879, in force in Spain, not having been promulgated in these
Islands. It contains, among others, the provisions found in articles 30 to 65 applicable to the case at bar.

The scant data and the insufficiency of the evidence offered by the record, preclude this court's
deciding, in accordance with the law, upon the pleadings and the proofs submitted by the parties, the
several issues raised in the course of this litigation, and for this reason we esteem it proper that the case
be reopened for the conduct of the following proceedings:

1. An ocular inspection shall be made by the justice or auxiliary justice of the peace, attended by expert
surveyors — one of which latter to be appointed by each of the parties to the suit — for the purpose of
determining whether the water from the estero named Sapang Cabasan issues from a spring called
Sibul; whether this spring and the said estero are upon the land owned by the defendants, and, if not,
who is the owner of the land on which they are located, and whether he is a third person who is not a
party to this suit.

2. Whether the creek, estero, or ditch, named Paligui Puntang Piniping, is connected or united with the
Sapang Cabasan estero, and whether the said Puntang Piniping creek or canal crosses the lands of
defendants or those of the plaintiffs.

3. To ascertain at what point or place either of the said Cabasan or Piniping canals was closed; whether
the closure was made on the lands of defendants or on that of the plaintiffs, and whether, on account of
such closure, the course of the water was completely obstructed and prevented from entering the lands
of the plaintiffs.

4. Whether the Paligui Puntang Piniping creek, canal, or estero passes through the sitio called
Pinagtubuhan, or receives water from some other spring, creek, or canal, stating the name of the same
and whether it is distinct and separate from the Sapang Cabasan estero.

A rough sketch must be drawn that shall show the location of the lands of the defendants and those of
the plaintiffs; the points where the said two esteros and the Sibul Spring are situated; the exact point
where the closure of the canal was effected; which of the lands are situated in high places and which in
low places; and in what direction the water flows after arising from the Sibul Spring and entering into
the Sapang Cabasan estero.

5. An investigation and report shall be made as to whether the Puntang Piniping canal or estero is of
recent formation and was excavated but a short time ago, or whether, by the signs observed on its
banks, it appears that it was opened many years ago, stating since when it has been opened.
6. Investigation and report shall be made as to whether the plaintiffs' lands receive irrigation water from
any spring, estero, or creek, other than those before mentioned, and, if so, their names and the
distances between them, and the latter shall be noted on the rough sketch drawn by the surveyors.

From the result obtained from the proceedings, and the rough sketch drawn by the experts, we shall
easily be able to arrive at a conclusion as to whether the defendants had or had not a right to close the
Cabasan or Puntang Piniping creek, thus depriving the plaintiffs' sementeras of the water flowing
through it, or whether, on the other hand, the plaintiff had a right to the enjoyment and use of such
water for the irrigation of their lands, and whether, through the want of the same, they suffered losses
and damages by fault of the said defendants.

For the foregoing reasons, justice demands, in our opinion, that we find that the defendants Alejandro
and Timoteo Cajucom did not commit any act whatever constituting contempt of a judicial order. The
order of August 20, 1908 is reversed. No special findings is made as to the costs of the incidental
proceedings.

The judgment appealed from, of July 26, 1909, is set aside, and the record of the case shall be
remanded, with a certified copy of this decision, to the court below in order that the judge may proceed
with a rehearing and conduct the proceedings hereinbefore specified, and in due season render
judgment wherein he shall take into account the evidence already contained in the record, together
with such new evidence as may be admitted, in accordance with this decision and in harmony with the
law. So ordered.

Mapa, Johnson, Carson, and Moreland, JJ., concur.

G.R. No. L-5656 March 24, 1954

JUAN G. FELICIANO, ET AL., petitioners-appellants,

vs.
MARIANO ALIPIO, ET AL., respondents-appellee.

K.V. Faylona for appellants.

Office of the Solicitor General Juan R. Liwag and Solicitor Felix V. Makasiar for appellees.

JUGO, J.:

On September 21, 1951, the Director of Public Schools issued Circular No. 20, series of 1951, which
reads as follows:

PUBLIC SCHOOL PUPILS AND STUDENTS MAY BE REQUIRED TO SALUTE THE FLAG

To Division Superintendents:

1. Quoted in the inclosure to this Circular for the information and guidance of school officials and
teachers, is Opinion No. 370, series of 1951, of the Honorable, the Secretary of Justice, "regarding the
power of the Director of Public Schools to require all pupils and students in public schools to salute the
flag, on pain of being barred from admission to, or expelled from, such schools."

This Circular revokes Circular No. 33, series of 1948.

(Sgd.) BENITO PANGILINAN

Director of Public Schools

The petitioners filed before the Court of First Instance of Tarlac a petition for declaratory relief and
mandatory injunction, praying that the above circular be declared null and void, that preliminary
injunction be issued prohibiting the respondents Mariano Alipio and other teachers of the Malacampa
Elementary School, and the Director of Public Schools, from carrying out the provisions of said circular,
and that, after trial, the preliminary injunction be made permanent.

The Provincial Fiscal of Tarlac filed a motion to dismiss the petition on the ground that under section 2,
Rule 66, it was not a case in which a declaratory judgment could be rendered. The court dismissed the
case. Hence, the petitioners have appealed to this Court.

It is not necessary to decide whether the petition for declaratory judgment be granted in this case,
because in the petition presented in the court below, in addition to the declaratory judgment, the
petitioners prayed for the issuance of a permanent injunction, which is equivalent to an action for
prohibition against public officers, and as such we consider it, without passing at this stage of the
proceedings on the merits of said action.

In the present case, we cannot consider the question as to the constitutionality of the circular as this will
be decided after the regular hearing.

In view of the foregoing, the order of the court dismissing the petition is reversed, and the case returned
to the Court of First Instance of Tarlac for further proceedings as in an action for prohibition, without
costs. So ordered.
G.R. No. 168008 : August 17, 2011]

PETRONILO J. BARAYUGA, PETITIONER, VS. ADVENTIST UNIVERSITY OF THE PHILIPPINES, THROUGH

ITS BOARD OF TRUSTEES, REPRESENTED BY ITS CHAIRMAN, NESTOR D. DAYSON, RESPONDENTS.

DECISION

BERSAMIN, J.:

The injunctive relief protects only a right in esse. Where the plaintiff does not demonstrate that he has
an existing right to be protected by injunction, his suit for injunction must be dismissed for lack of a
cause of action.

The dispute centers on whether the removal of the petitioner as President of respondent Adventist
University of the Philippines (AUP) was valid, and whether his term in that office was five years, as he
insists, or only two years, as AUP insists.

We hereby review the decision promulgated on August 5, 2004,[1] by which the Court of Appeals (CA)
nullified and set aside the writ of preliminary injunction issued by the Regional Trial Court (RTC), Branch
21, in Imus, Cavite to prevent AUP from removing the petitioner.

Antecedents

AUP, a non-stock and non-profit domestic educational institution incorporated under Philippine laws on
March 3, 1932, was directly under the North Philippine Union Mission (NPUM) of the Southern Asia
Pacific Division of the Seventh Day Adventists. During the 3rd Quinquennial Session of the General
Conference of Seventh Day Adventists held from November 27, 2000 to December 1, 2000, the NPUM
Executive Committee elected the members of the Board of Trustees of AUP, including the Chairman and
the Secretary. Respondent Nestor D. Dayson was elected Chairman while the petitioner was chosen
Secretary.

On January 23, 2001, almost two months following the conclusion of the 3rd Quinquennial Session, the
Board of Trustees appointed the petitioner President of AUP.[2] During his tenure, or from November 11
to November 13, 2002, a group from the NPUM conducted an external performance audit. The audit
revealed the petitioner's autocratic management style, like making major decisions without the approval
or recommendation of the proper committees, including the Finance Committee; and that he had
himself done the canvassing and purchasing of materials and made withdrawals and reimbursements for
expenses without valid supporting receipts and without the approval of the Finance Committee. The
audit concluded that he had

committed serious violations of fundamental rules and procedure in the disbursement and use of funds.
The NPUM Executive Committee and the Board of Trustees decided to immediately request the services
of the General Conference Auditing Service (GCAS) to determine the veracity of the audit findings.
Accordingly, GCAS auditors worked in the campus from December 4 to December 20, 2002 to review the
petitioner's transactions during the period from April 2002 to October 2002. On December 20, 2002,
CGAS auditors reported the results of their review, and submitted their observations and
recommendations to the Board of Trustees.

Upon receipt of the CGAS report that confirmed the initial findings of the auditors on January 8, 2003,
the NPUM informed the petitioner of the findings and required him to explain.

On January 15, 2003, Chairman Dayson and the NPUM Treasurer likewise informed the petitioner inside
the NPUM office on the findings of the auditors in the presence of the AUP Vice-President for Financial
Affairs, and reminded him of the possible consequences should he fail to satisfactorily explain the
irregularities cited in the report. He replied that he had already prepared his written explanation.

The Board of Trustees set a special meeting at 2 p.m. on January 22, 2003. Being the Secretary, the
petitioner himself prepared the agenda and included an item on his case. In that meeting, he provided
copies of the auditors' report and his answers to the members of the Board of Trustees. After hearing
his explanations and oral answers to the questions raised on issues arising from the report, the
members of the Board of Trustees requested him to leave to allow them to analyze and evaluate the
report and his answers. Despite a long and careful deliberation, however, the members of the Board of
Trustees decided to adjourn that night and to set another meeting in the following week considering
that the meeting had not been specifically called for the purpose of deciding his case. The adjournment
would also allow the Board of Trustees more time to ponder on the commensurate disciplinary measure
to be meted on him.

On January 23, 2003, Chairman Dayson notified the petitioner in writing that the Board of Trustees
would hold in abeyance its deliberation on his answer to the auditors' report and would meet again at
10:00 a.m. on January 27, 2003. Chairman Dayson indicated that some sectors in the campus had not
been properly represented in the January 22, 2003 special meeting, and requested the petitioner as
Secretary to ensure that all sectors are duly represented in the next meeting of the Board of Trustees.[3]

In the January 27, 2003 special meeting, the petitioner sent a letter to the Board of Trustees. The
members, by secret ballot, voted to remove him as President because of his serious violations of
fundamental rules and procedures in the disbursement and use of funds as revealed by the special
audit; to appoint an interim committee consisting of three members to assume the powers and
functions of the President; and to recommend him to the NPUM for consideration as Associate Director
for Secondary Education.[4]

On January 28, 2003, the petitioner was handed inside the NPUM office a letter, together with a copy of
the minutes of the special meeting held the previous day. In turn, he handed to Chairman Dayson a
letter requesting two weeks within which to seek a reconsideration, stating that he needed time to
obtain supporting documents because he was then attending to his dying mother.[5]
In the evening of January 28, 2003, the Board of Trustees, most of whose members had not yet left
Cavite, reconvened to consider and decide the petitioner's request for reconsideration. During the
meeting, he made an emotional appeal to allow him to continue as President, promising to immediately
vacate his office should he again commit any of the irregularities cited in the auditors' report. He added
that should the Board of Trustees not favor his appeal, he would settle for a retirement package for him
and his wife and would leave the church.

The Board of Trustees denied the petitioner's request for reconsideration because his reasons were not
meritorious. Board Member Elizabeth Role served the notice of the denial on him the next day, but he
refused to receive the notice, simply saying Alam ko na yan.[6]

The petitioner later obtained a copy of the inter-school memorandum dated January 31, 2003 informing
AUP students, staff, and faculty members about his relief as President and the appointment of an
interim committee to assume the powers and duties of the President.

On February 4, 2003, the petitioner brought his suit for injunction and damages in the RTC, with prayer
for the issuance of a temporary restraining order (TRO), impleading AUP and its Board of Trustees,
represented by Chairman Dayson, and the interim committee. His complaint alleged that the Board of
Trustees had relieved him as President without valid grounds despite his five-year term; that the Board
of Trustees had thereby acted in bad faith; and that his being denied ample and reasonable time to
present his evidence deprived him of his right to due process.[7]

The suit being intra-corporate and summary in nature, the application for TRO was heard by means of
affidavits. In the hearing of February 7, 2003, the parties agreed not to harass each other. The RTC used
the mutual agreement as its basis to issue a status quo order on February 11, 2003.[8]

In their answer with counterclaim, the respondents denied the allegations of the petitioner, and averred
that he had been validly removed for cause; and that he had been granted ample opportunity to be
heard in his defense.[9]

Order of the RTC

On March 21, 2003, after summary hearing, the RTC issued the TRO enjoining the respondents and
persons acting for and in their behalf from implementing the resolution removing him as President
issued by the Board of Trustees during the January 27, 2003 special meeting, and enjoining the interim
committee from performing the functions of President of AUP. The RTC did not require a bond.[10]

After further hearing, the RTC issued on April 25, 2003 its controversial order,[11] granting the
petitioner's application for a writ of preliminary injunction. It thereby resolved three issues, namely: (a)
whether the special board meetings were valid; (b) whether the conflict-of-interest provision in the By-
Laws and Working Policy was violated; and (c) whether the petitioner was denied due process. It found
for the petitioner upon all the issues. On the first issue, it held that there was neither a written request
made by any two members of the Board of Trustees nor proper notices sent
to the members as required by AUP's By-Laws, which omissions, being patent defects, tainted the
special board meetings with nullity. Anent the second issue, it ruled that the purchase of coco lumber
from his balae (i.e., mother-in-law of his son) was not covered by the conflict-of-interest provision, for
AUP's Model Statement of Acceptance form mentioned only the members of the immediate family and
did not extend to the relationship between him and his balae. On the third issue, it concluded that he
was deprived of due process when the Board of Trustees refused to grant his motion for reconsideration
and his request for additional time to produce his evidence, and instead immediately implemented its
decision by relieving him from his position without according him the treatment befitting a university
President.

Proceedings in the CA

With the Interim Rules for Intra-Corporate Controversies prohibiting a motion for reconsideration, the
respondents forthwith filed a petition for certiorari in the CA,[12] contending that the petitioner's
complaint did not meet the requirement that an injunctive writ should be anchored on a legal right; and
that he had been merely appointed, not elected, as President for a term of office of only two years, not
five years, based on AUP's amended By-Laws.

In the meanwhile, on September 17, 2003, the petitioner filed a supplemental petition in the
CA,[13]alleging that after the commencement of his action, he filed in the RTC an urgent motion for the
issuance of a second TRO to enjoin the holding of an AUP membership meeting and the election of a
new Board of Trustees, capitalizing on the admission in the respondents' answer that he had been
elected in 2001 to a five-year term of office. He argued that the admission estopped the respondents
from insisting to the contrary.

The respondents filed in the CA a verified urgent motion for a TRO and to set a hearing on the
application for preliminary injunction to enjoin the RTC from implementing the assailed order granting a
writ of preliminary injunction and from further proceeding in the case. The petitioner opposed the
motion for TRO, but did not object to the scheduling of preliminary injunctive hearings.

On February 24, 2004, the CA issued a TRO to enjoin the RTC from proceeding for a period of 60 days,
and declared that the prayer for injunctive relief would be resolved along with the merits of the main
case.

The petitioner sought a clarification of the TRO issued by the CA, considering that his cause of action in
his petitions to cite the respondents in indirect contempt dated March 5, 2004 and March 16, 2004 filed
in the RTC involved the election of a certain Robin Saban as the new President of AUP in blatant and
malicious violation of the writ of preliminary injunction issued by the RTC. In clarifying the TRO, the CA
explained that it did not go beyond the reliefs prayed for in the respondents' motion for TRO and
preliminary injunctive hearings.

On August 5, 2004, the CA rendered its decision nullifying the RTC's writ of preliminary injunction. It
rejected the petitioner's argument that Article IV, Section 3 of AUP's Constitution and By-Laws and
Working Policy of the Conference provided a five-year term for him, because the provision was
inexistent. It ruled that the petitioner's term of office had expired on January 22, 2003, or two years
from his appointment, based on AUP's amended By-Laws; that, consequently, he had been a mere de
facto officer appointed by the members of the Board of Trustees; and that he held no legal right
warranting the issuance of the writ of preliminary injunction.

The CA declared that the rule on judicial admissions admitted of exceptions, as held in National Power
Corporation v. Court of Appeals,[14] where the Court held that admissions were not evidence that
prevailed over documentary proof; that the petitioner's being able to answer the results of the special
audit point-by-point belied his allegation of denial of due process; that AUP was the party that stood to
be injured by the issuance of the injunctive writ in the form of a "demoralized administration, studentry,
faculty and staff, sullied reputation, and dishonest leadership;" and that the assailed RTC order sowed
confusion and chaos because the RTC thereby chose to subordinate the interest of the entire AUP
community to that of the petitioner who had been deemed not to have satisfied the highest ideals
required of his office.

Issues

Undeterred, the petitioner has appealed, contending that:

I.

THE COURT OF APPPEALS HAS DECIDED CONTRARY TO LAW AND JURISPRUDENCE WHEN IT RULED THAT
THE EXTRAORDINARY WRIT OF CERTIORARI APPLIED IN THE CASE AT BAR.

II.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE
ESTABLISHED LAW AND JURISPRUDENCE THAT "ADMISSIONS, VERBAL OR WRITTEN, MADE BY A PARTY
IN THE COURSE OF THE PROCEEDINGS IN THE SAME CASE, DOES NOT REQUIRE PROOF," BY REQUIRING
PETITIONER BARAYUGA TO PRESENT EVIDENCE THAT HIS TERM AS PRESIDENT OF AUP IS FOR FIVE (5)
YEARS.

III.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW
AND ESTABLISHED FACTS WHEN IT RULED THAT PETITIONER BARAYUGA HAS ONLY A TERM OF TWO (2)
YEARS INSTEAD OF FIVE (5) YEARS AS CLEARLY ADMITTED BY PRIVATE RESPONDENT AUP IN ITS
ANSWER.

IV.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW
AND JURISPRUDENCE BY SOLELY RELYING ON THE CASE OF NATIONAL POWER CORPORATION v. COURT
OF APPEALS, WHICH INVOLVE FACTS DIFFERENT FROM THE PRESENT CASE.
V.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW
AND ESTABLISHED FACTS WHEN IT UNJUSTIFIABLY ALLOWED THE WAIVER OF NOTICE FOR THE SPECIAL
MEETING OF THE BOARD OF TRUSTEES.

VI.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW
AND ESTABLISHED FACTS WHEN IT ERRONEOUSLY CONCLUDED THAT PETITIONER BARAYUGA WAS
MERELY OCCUPYING THE POSITION OF AUP PRESIDENT IN A HOLD-OVER CAPACITY.

The petitioner argues that the assailed RTC order, being supported by substantial evidence, accorded
with law and jurisprudence; that his tenure as President under the Constitution, By-Laws and the
Working Policy of the Conference was for five years, contrary to the CA's findings that he held the
position in a hold-over capacity; that instead, the CA should have applied the rule on judicial admission,
because the holding in National Power Corporation v. Court of Appeals, cited by the CA, did not apply,
due to AUP not having presented competent evidence to prove that he had not been elected by the
Board of Trustees as President of AUP; and that his removal during the special board meeting that was
invalidly held for lack of notice denied him due process.

AUP counters that:

PETITIONER IS NOT AN ELECTED TRUSTEE OF THE AUP BOARD, NOR WAS (HE) ELECTED AS PRESIDENT,
AND AS SUCH, HE CAN CLAIM NO RIGHT TO THE AUP PRESIDENCY, BEING TWICE DISQUALIFIED BY LAW,
WHICH RENDERS MOOT AND ACAMEDIC ALL OF THE ARGUMENTS IN THIS PETITION.

II

EVEN IF WE FALSELY ASSUME EX GRATIA THAT PETITIONER IS AN ELECTED TRUSTEE AND ELECTED
PRESIDENT, THE TWO (2) YEAR TERM PROVIDED IN AUP'S BY-LAWS - REQUIRED BY THE CORPORATION
CODE AND APPROVED BY THE SEC - IS WHAT GOVERNS THE INTRA-CORPORATE CONTROVERSY, THE
AUP'S ADMISSION IN ITS ANSWER THAT HE HAS A FIVE (5) YEAR TERM BASED ON HIS INVOKED SAMPLE
CONSTITUTION, BY-LAWS AND POLICY OF THE SEVENTH DAY ADVENTIST NOTWITHSTANDING.

III

PURSUANT TO THE RULES AND SETTLED JURISPRUDENCE, THE ADMISSION IN THE ANSWER IS NOT EVEN
PREJUDICIAL AT ALL.

IV
EVEN IF WE FALSELY ASSUME, JUST FOR THE SAKE OF ARGUMENT, THAT THE PETITIONER HAD A FIVE (5)
YEAR TERM AS UNIVERSITY PRESIDENT, HE WAS NONETHELESS VALIDLY TERMINATED FOR LOSS OF
CONFIDENCE, GIVEN THE NUMEROUS ADMITTED ANOMALIES HE COMMITTED.

PETITIONER CANNOT COMPLAIN THAT NOTICES OF THE BOARD MEETING WERE NOT SENT TO ALL "THE
TWENTY FIVE (25) TRUSTEES OF THE AUP BOARD", SINCE: [1] AS THE AUP SECRETARY, IT WAS HE WHO
HAD THE DUTY TO SEND THE NOTICES; [2] WORSE, HE ATTENDED AND EXHAUSTIVELY DEFENDED HIS
WRITTEN ANSWER IN THE AUP BOARD OF TRUSTEES MEETING, THUS, WAIVING ANY "NOTICE
OBJECTION"; [3] WORST OF ALL, HIS AFTERTHOUGHT OBJECTION IS DECEPTIVELY FALSE IN FACT.

The decisive question is whether the CA correctly ruled that the petitioner had no legal right to the
position of President of AUP that could be protected by the injunctive writ issued by the RTC.

Ruling

We deny the petition for review for lack of merit.

1.
Petition is already moot

The injunctive writ issued by the RTC was meant to protect the petitioner's right to stay in office as
President. Given that the lifetime of the writ of preliminary injunction was co-extensive with the
duration of the act sought to be prohibited,[15] this injunctive relief already became moot in the face of
the admission by the petitioner himself, through his affidavit,[16] that his term of office premised on his
alleged five-year tenure as President had lasted only until December 2005. In short, the injunctive writ
granted by the RTC had expired upon the end of the term of office (as posited by him).

The mootness of the petition warranted its denial. When the resolution of the issue submitted in a case
has become moot and academic, and the prayer of the complaint or petition, even if granted, has
become impossible of enforcement - for there is nothing more to enjoin - the case should be
dismissed.[17] No useful purpose would then be served by passing on the merits of the petition, because
any ruling could hardly be of any practical or useful purpose in the premises. It is a settled rule that a
court will not determine a moot question or an abstract proposition, nor express an opinion in a case in
which no practical relief can be granted.[18] Indeed, moot and academic cases cease to present any
justiciable controversies by virtue of supervening events,[19] and the courts of law will not determine
moot questions,[20] for the courts should not engage in academic declarations and determine a moot
question.[21]

2.
RTC acted in patently grave abuse of discretion
in issuing the TRO and writ of injunction
Nonetheless, the aspect of the case concerning the petitioner's claim for damages has still to be
decided. It is for this reason that we have to resolve whether or not the petitioner had a right to the TRO
and the injunctive writ issued by the RTC.

A valid writ of preliminary injunction rests on the weight of evidence submitted by the plaintiff
establishing: (a) a present and unmistakable right to be protected; (b) the acts against which the
injunction is directed violate such right; and (c) a special and paramount necessity for the writ to
prevent serious damages.[22] In the absence of a clear legal right, the issuance of the injunctive writ
constitutes grave abuse of discretion[23] and will result to nullification thereof. Where the complainant's
right is doubtful or disputed, injunction is not proper. The possibility of irreparable damage sans proof of
an actual existing right is not a ground for a preliminary injunction.[24]

It is clear to us, based on the foregoing principles guiding the issuance of the TRO and the writ of
injunction, that the issuance of the assailed order constituted patently grave abuse of discretion on the
part of the RTC, and that the CA rightly set aside the order of the RTC.

To begin with, the petitioner rested his claim for injunction mainly upon his representation that he was
entitled to serve for five years as President of AUP under the Constitution, By-Laws and Working Policy
of the General Conference of the Seventh Day Adventists (otherwise called the Bluebook). All that he
presented in that regard, however, were mere photocopies of pages 225-226 of the Bluebook, which
read:

Article IV-Board of Directors

Sec. 1. This school operated by the _____________ Union Conference/Mission of Seventh-Day

Adventists shall be under the direct control of a board of directors, elected by the constituency in its
quinquennial sessions. The board of directors shall consist of 15 to 21 members, depending on the size
of the institution. Ex officio members shall be the union president as chairperson, the head of the school
as secretary, the union secretary, the union treasurer, the union director of education, the presidents of
the conferences/missions within the union. xxx.

Sec. 2. The term of office of members of the board of directors shall be five years to coincide with the
______________ Union Conference/Mission quinquennial period.

Sec. 3. The duties of the board of directors shall be to elect quinquenially the president, xxx.

Yet, the document had no evidentiary value. It had not been officially adopted for submission to and
approval of the Securities and Exchange Commission. It was nothing but an unfilled model form. As
such, it was, at best, only a private document that could not be admitted as evidence in judicial
proceedings until it was first properly authenticated in court.

Section 20, Rule 132 of the Rules of Court requires authentication as a condition for the admissibility of a
private document, to wit:
Section 20. Proof of private document. - Before any private document offered as authentic is received in
evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which it is claimed to be. (21 a)

For the RTC to base its issuance of the writ of preliminary injunction on the mere photocopies of the
document, especially that such document was designed to play a crucial part in the resolution of the
decisive issue on the length of the term of office of the petitioner, was gross error.

Secondly, even assuming that the petitioner had properly authenticated the photocopies of
the Bluebook, the provisions contained therein did not vest the right to an office in him. An unfilled
model form creates or establishes no rights in favor of anyone.

Thirdly, the petitioner's assertion of a five-year duration for his term of office lacked legal basis.

Section 108 of the Corporation Code determines the membership and number of trustees in an
educational corporation, viz:

Section 108. Board of trustees. - Trustees of educational institutions organized as educational

corporations shall not be less than five (5) nor more than fifteen (15): Provided, however, That the
number of trustees shall be in multiples of five (5).

Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of
incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number shall expire every year. Trustees
thereafter elected to fill vacancies, occurring before the expiration of a particular term, shall hold
office only for the unexpired period. Trustees elected thereafter to fill vacancies caused by expiration
of term shall hold office for five (5) years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall be defined in the by-laws.

For institutions organized as stock corporations, the number and term of directors shall be governed by
the provisions on stock corporations.

The second paragraph of the provision, although setting the term of the members of the Board of
Trustees at five years, contains a proviso expressly subjecting the duration to what is otherwise
providedin the articles of incorporation or by-laws of the educational corporation. That contrary
provision controls on the term of office.[25]

In AUP's case, its amended By-Laws provided the term of the members of the Board of Trustees, and the
period within which to elect the officers, thusly:
Article I
Board of Trustees

Section 1. At the first meeting of the members of the corporation, and thereafter every two years, a
Board of Trustees shall be elected. It shall be composed of fifteen members in good and regular standing
in the Seventh-day Adventist denomination, each of whom shall hold his office for a term of two years,
or until his successor has been elected and qualified. If a trustee ceases at any time to be a member in
good and regular standing in the Seventh-day Adventist denomination, he shall thereby cease to be a
trustee.

xxxx

Article IV
Officers

Section 1. Election of officers. - At their organization meeting, the members of the Board of Trustees
shall elect from among themselves a Chairman, a Vice-Chairman, a President, a Secretary, a Business
Manager, and a Treasurer. The same persons may hold and perform the duties of more than one office,
provided they are not incompatible with each other.[26]

In light of foregoing, the members of the Board of Trustees were to serve a term of office of only two
years; and the officers, who included the President, were to be elected from among the members of the
Board of Trustees during their organizational meeting, which was held during the election of the Board
of Trustees every two years. Naturally, the officers, including the President, were to exercise the powers
vested by Section 2 of the amended By-Laws for a term of only two years, not five years.

Ineluctably, the petitioner, having assumed as President of AUP on January 23, 2001, could serve for
only two years, or until January 22, 2003. By the time of his removal for cause as President on January
27, 2003, he was already occupying the office in a hold-over capacity, and could be removed at any
time, without cause, upon the election or appointment of his successor. His insistence on holding on to
the office was untenable, therefore, and with more reason when one considers that his removal was
due to the loss of confidence on the part of the Board of Trustees.

4.
Petitioner was not denied due process

The petitioner complains that he was denied due process because he was deprived of the right to be
heard and to seek reconsideration; and that the proceedings of the Board of Trustees were illegal due to
its members not being properly notified of the meeting.

Still, the petitioner fails to convince us.

The requirements of due process in an administrative context are satisfied when the parties are
afforded fair and reasonable opportunity to explain their respective sides of the controversy,[27] for the
essence of due process is an opportunity to be heard.[28] Here, the petitioner was accorded the full
opportunity to be heard, as borne by the fact that he was granted the opportunity to refute the
adverse findings contained in the GCAS audit report and that the Board of Trustees first heard his side
during the board meetings before his removal. After having voluntarily offered his refutations in the
proceedings before the Board of Trustees, he should not now be permitted to denounce the
proceedings and to plead the denial of due process after the decision of the Board of Trustees was
adverse to him.

Nor can his urging that the proceedings were illegal for lack of prior notification be plausible in light of
the fact that he willingly participated therein without raising the objection of lack of notification.
Thereby, he effectively waived his right to object to the validity of the proceedings based on lack of due
notice.[29]

5.
Conclusion

The removal of the petitioner as President of AUP, being made in accordance with the AUP Amended
By-Laws, was valid. With that, our going into the other issues becomes unnecessary. We conclude that
the order of the RTC granting his application for the writ of preliminary injunction was tainted with
manifestly grave abuse of discretion; that the CA correctly nullified and set aside the order; and that his
claim for damages, being bereft of factual and legal warrant, should be dismissed.

WHEREFORE, we DENY the petition for review on certiorari for lack of merit, and hereby DISMISS SEC
Case No. 028-03 entitled Dr. Petronilo Barayuga v. Nelson D. Dayson, et al.

The petitioner shall pay the cost of suit.

SO ORDERED.
G. R. No. 183367 March 14, 2012

AUSTRALIAN PROFESSIONAL REALTY, INC., JESUS GARCIA, and LYDIA MARCIANO, Petitioners,
vs.
MUNICIPALITY OF PADRE GARCIA BATANGAS PROVINCE, Respondent.

DECISION

SERENO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to annul the Court
of Appeals (CA) Resolutions in CA-G.R. SP No. 102540 dated 26 March 20081 and 16 June 2008, which
denied petitioners’ Motion for the issuance of a status quo order and Motion for issuance of a
temporary restraining order (TRO) and/or writ of preliminary injunction.

Statement of the Facts and the Case

In 1993, fire razed to the ground the old public market of respondent Municipality of Padre Garcia,
Batangas. The municipal government, through its then Municipal Mayor Eugenio Gutierrez, invited
petitioner Australian Professional Realty, Inc. (APRI) to rebuild the public market and construct a
shopping center.

On 19 January 1995, a Memorandum of Agreement (MOA)2 was executed between petitioner APRI and
respondent, represented by Mayor Gutierrez and the members of the Sangguniang Bayan. Under the
MOA, APRI undertook to construct a shopping complex in the 5,000-square-meter area. In return, APRI
acquired the exclusive right to operate, manage, and lease stall spaces for a period of 25 years.

In May 1995, Victor Reyes was elected as municipal mayor of respondent. On 6 February 2003,
respondent, through Mayor Reyes, initiated a Complaint for Declaration of Nullity of Memorandum of
Agreement with Damages before the Regional Trial Court (RTC) of Rosario, Batangas, Fourth Judicial
Region, Branch 87. The Complaint was docketed as Civil Case No. 03-004.

On 12 February 2003, the RTC issued summons to petitioners, requiring them to file their Answer to the
Complaint. However, the summons was returned unserved, as petitioners were no longer holding office
in the given address.

On 2 April 2003, a Motion for Leave of Court to Effect Service by Publication was filed by respondent
before the RTC and subsequently granted by the trial court.

On 24 November 2003, the RTC issued an Order declaring petitioners in default and allowing respondent
to present evidence ex parte.

On 6 October 2004, a Decision was rendered by the RTC, which, after narrating the testimonial evidence
for respondent, stated:

After the completion of the testimony of Victor M. Reyes, counsel for the petitioner manifested that he
will file the formal offer of evidence in writing.

On July 19, 2004, counsel for the petitioner filed before this Court his Formal Offer of Documentary
Exhibits consisting of Exhibits "A" to "H", inclusive of submarkings.
On August 18, 2004 an order was issued by the Court admitting all the exhibits formally offered by the
petitioner thru counsel and this case was ordered submitted for resolution of the Court.

There is no opposition in the instant petition.

WHEREFORE, in view thereof, and finding the petition to be sufficient in form and substance, it being
supported by sufficient evidence, judgement (sic) is hereby rendered in favor of the plaintiff as against
the respondents as follows:

(a) The Memorandum of Agreement is hereby declared null and void for being contrary to law and
public policy, particularly R.A. 6957 and R.A. 7718;

(b) The respondents are hereby ordered to pay the amount of FIVE MILLION PESOS (₱5,000,000.00) in
favor of the plaintiff for damages caused to the latter;

(c) The structures found within the unfinished PADRE GARCIA SHOPPING CENTER are hereby declared
forfeited in favor of the Municipality of Padre Garcia.

SO ORDERED.3

There having been no timely appeal made, respondent filed a Motion for Execution of Judgment, which
was granted by the RTC. A Writ of Execution was thus issued on 15 July 2005.

After learning of the adverse judgment, petitioners filed a Petition for Relief from Judgment dated 18
July 2005. This Petition was denied by the RTC in an Order dated 15 June 2006. In another Order dated
14 February 2008, the trial court denied the Motion for Reconsideration.

Petitioners later filed before the CA a Petition for Certiorari and Prohibition dated 28 February 2008,
docketed as CA-G.R. SP No. 102540. On 7 March 2008, petitioners filed before the CA a Motion for the
Issuance of Status Quo Order and Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction.4 The motion prayed for an order to restrain the RTC from "further proceeding
and issuing any further Order, Resolution, Writ of Execution, and any other court processes"5 in the case
before it.

On 26 March 2008, the CA issued a Resolution denying the said motion, stating thus:

After a careful evaluation of petitioners’ Motion for Issuance of Status Quo Order and Motion for
Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction, We find that the matter
is not of extreme urgency and that there is no clear and irreparable injury that would be suffered by the
petitioners if the prayer for the issuance of a Status Quo Order, Temporary Restraining Order (TRO)
and/or Writ of Preliminary Injunction is not granted. In Ong Ching Kian Chuan v. Court of Appeals, it was
held that, to be entitled to injunctive relief, the petitioner must show, inter alia, the existence of a clear
and unmistakable right and an urgent and paramount necessity for the writ to prevent serious damage.

WHEREFORE, petitioners’ prayer for the issuance of a Status Quo Order, Temporary Restraining Order
and/or Writ of Preliminary Injunction is hereby DENIED for lack of merit.6

On 17 June 2008, the CA denied the Motion for Reconsideration of the 26 March 2008 Resolution,
stating that the mere preservation of the status quo is not sufficient to justify the issuance of an
injunction.
On 8 July 2008, petitioners filed the instant Petition for Review on Certiorari dated 6 July 2008.

Petitioners claim that the amount of APRI’s investment in the Padre Garcia Shopping Center is estimated
at ₱30,000,000, the entirety of which the RTC declared forfeited to respondent without just
compensation. At the time of the filing of the Petition, APRI had 47 existing tenants and lessees and was
deriving an average monthly rental income of ₱100,000. The Decision of the RTC was allegedly arrived at
without first obtaining jurisdiction over the persons of petitioners. The execution of the allegedly void
judgment of the RTC during the pendency of the Petition before the CA would probably work injustice to
the applicant, as the execution would result in an arbitrary declaration of nullity of the MOA without
due process of law.

Petitioners further allege that respondent did not exercise reasonable diligence in inquiring into the
former’s address in the case before the RTC. The Process Server Return, with respect to the unserved
summons, did not indicate the impossibility of a service of summons within a reasonable time, the
efforts exerted to locate APRI, or any inquiry as to the whereabouts of the said petitioner.

On 6 August 2008, this Court required respondent to file its Comment. On 13 February 2009, the
Comment was filed, alleging among others that despite the RTC’s issuance of a Writ of Execution,
respondent did not move to implement the said writ out of administrative comity and fair play. Even if
the writ were implemented, petitioners failed to state in categorical terms the serious injury they would
sustain.

Respondent further argues that it is now in possession of the contracts that the lessees of the Padre
Garcia Shopping Center executed with APRI. Thus, there are "actions [that militate] against the
preservation of the present state of things,"7 as sought to be achieved with the issuance of a status quo
order.

On 2 June 2009, petitioners filed their Reply to respondent’s Comment.

On 3 March 2010, this Court issued a Resolution requiring the parties to inform the Court of the present
status of CA-G.R. SP No. 102540. On 15 April 2010, respondent manifested that after the parties filed
their respective Memoranda, the CA considered the case submitted for decision. On 12 May 2010,
petitioners filed their Compliance, stating that the appellate court, per its Resolution dated 7 August
2008, held in abeyance the resolution of CA-G.R. SP No. 102540, pending resolution of the instant
Petition.

The Court’s Ruling

The Petition is denied for failure to show any grave abuse of discretion on the part of the CA.

Procedural Issue: Propriety of a Petition for Review under Rule 45

Before proceeding to the substantive issues raised, we note that petitioners resorted to an improper
remedy before this Court. They filed a Petition for Review on Certiorari under Rule 45 of the Rules of
Court to question the denial of their Motion for the issuance of an injunctive relief.

Under Section 1 (c) of Rule 41 of the Rules of Court, no appeal may be taken from an interlocutory
order. An interlocutory order is one that does not dispose of the case completely but leaves something
to be decided upon.8An order granting or denying an application for preliminary injunction is
interlocutory in nature and, hence, not appealable.9 Instead, the proper remedy is to file a Petition for
Certiorari and/or Prohibition under Rule 65.10

While the Court may dismiss a petition outright for being an improper remedy, it may in certain
instances proceed to review the substance of the petition.11 Thus, this Court will treat this Petition as if it
were filed under Rule 65.

Substantive Issue: Grave abuse of discretion on the part of the CA

The issue that must be resolved by this Court is whether the CA committed grave abuse of discretion in
denying petitioners’ Motion for the Issuance of Status Quo Order and Motion for Issuance of Temporary
Restraining Order and/or Writ of Preliminary Injunction (Motion for Injunction).

A writ of preliminary injunction and a TRO are injunctive reliefs and preservative remedies for the
protection of substantive rights and interests.12 An application for the issuance of a writ of preliminary
injunction and/or TRO may be granted upon the filing of a verified application showing facts entitling the
applicant to the relief demanded.

Essential to granting the injunctive relief is the existence of an urgent necessity for the writ in order to
prevent serious damage. A TRO issues only if the matter is of such extreme urgency that grave injustice
and irreparable injury would arise unless it is issued immediately.13 Under Section 5, Rule 58 of the Rule
of Court,14 a TRO may be issued only if it appears from the facts shown by affidavits or by the verified
application that great or irreparable injury would be inflicted on the applicant before the writ of
preliminary injunction could be heard.

Thus, to be entitled to the injunctive writ, petitioners must show that (1) there exists a clear and
unmistakable right to be protected; (2) this right is directly threatened by an act sought to be enjoined;
(3) the invasion of the right is material and substantial; and (4) there is an urgent and paramount
necessity for the writ to prevent serious and irreparable damage.15

The grant or denial of a writ of preliminary injunction in a pending case rests on the sound discretion of
the court taking cognizance of the case, since the assessment and evaluation of evidence towards that
end involves findings of fact left to the said court for its conclusive determination.16 Hence, the exercise
of judicial discretion by a court in injunctive matters must not be interfered with, except when there is
grave abuse of discretion.17

Grave abuse of discretion in the issuance of writs of preliminary injunction implies a capricious and
whimsical exercise of judgment equivalent to lack of jurisdiction; or the exercise of power in an arbitrary
or despotic manner by reason of passion, prejudice or personal aversion amounting to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of
law.18 The burden is thus on petitioner to show in his application that there is meritorious ground for the
issuance of a TRO in his favor.19

In this case, no grave abuse of discretion can be imputed to the CA. It did not exercise judgment in a
capricious and whimsical manner or exercise power in an arbitrary or despotic manner.

No clear legal right

A clear legal right means one clearly founded in or granted by law or is enforceable as a matter of
law.20 In the absence of a clear legal right, the issuance of the writ constitutes grave abuse of
discretion.21 The possibility of irreparable damage without proof of an actual existing right is not a
ground for injunction.22

A perusal of the Motion for Injunction and its accompanying Affidavit filed before the CA shows that
petitioners rely on their alleged right to the full and faithful execution of the MOA. However, while the
enforcement of the Writ of Execution, which would nullify the implementation of the MOA, is manifestly
prejudicial to petitioners’ interests, they have failed to establish in their Petition that they possess a
clear legal right that merits the issuance of a writ of preliminary injunction. Their rights under the MOA
have already been declared inferior or inexistent in relation to respondent in the RTC case, under a
judgment that has become final and executory.23 At the very least, their rights under the MOA are
precisely disputed by respondent. Hence, there can be no "clear and unmistakable" right in favor of
petitioners to warrant the issuance of a writ of injunction. Where the complainant’s right or title is
doubtful or disputed, injunction is not proper.24

The general rule is that after a judgment has gained finality, it becomes the ministerial duty of the court
to order its execution. No court should interfere, by injunction or otherwise, to restrain such
execution.25 The rule, however, admits of exceptions, such as the following: (1) when facts and
circumstances later transpire that would render execution inequitable or unjust; or (2) when there is a
change in the situation of the parties that may warrant an injunctive relief.26 In this case, after the
finality of the RTC Decision, there were no supervening events or changes in the situation of the parties
that would entail the injunction of the Writ of Execution.

No irreparable injury

Damages are irreparable where there is no standard by which their amount can be measured with
reasonable accuracy.27 In this case, petitioners have alleged that the loss of the public market entails
costs of about ₱30,000,000 in investments, ₱100,000 monthly revenue in rentals, and amounts as yet
unquantified – but not unquantifiable – in terms of the alleged loss of jobs of APRI’s employees and
potential suits that may be filed by the leaseholders of the public market for breach of contract. Clearly,
the injuries alleged by petitioners are capable of pecuniary estimation. Any loss petitioners may suffer is
easily subject to mathematical computation and, if proven, is fully compensable by damages. Thus, a
preliminary injunction is not warranted.28 With respect to the allegations of loss of employment and
potential suits, these are speculative at best, with no proof adduced to substantiate them.

The foregoing considered, the CA did not commit grave abuse of discretion in denying the Motion for
Injunction.1âwphi1 In any case, petitioners may still seek recourse in their pending Petition before the
Court of Appeals.

WHEREFORE, the Petition is DENIED. The Court of Appeals Resolutions dated 26 March 2008 and 16
June 2008 in CA-G.R. SP No. 102540 are AFFIRMED. The Court of Appeals is directed to proceed with
dispatch to dispose of the case before it.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate JusticeWE CONCUR:
G.R. No. 153852 October 24, 2012

SPOUSES HUMBERTO P. DELOSSANTOS AND CARMENCITA M. DELOS SANTOS, Petitioners,

vs.
METROPOLITAN BANK AND TRUST COMPANY, Respondent.

DECISION

BERSAMIN, J.:

A writ of preliminary injunction to enjoin an impending extrajudicial foreclosure sale is issued only upon
a clear showing of a violation of the mortgagor's unmistakable right.1

This appeal is taken by the petitioners to review and reverse the decision promulgated on February 19,
2002,2whereby the Court of Appeals (CA) dismissed their petition for certiorari that assailed the denial
by the Regional Trial Court in Davao City (RTC) of their application for the issuance of a writ of
preliminary injunction to prevent the extrajudicial foreclosure sale of their mortgaged asset initiated by
their mortgagee, respondent Metropolitan Bank and Trust Company (Metrobank).

Antecedents

From December 9, 1996 until March 20, 1998, the petitioners took out several loans totaling
P12,000,000.00 from Metrobank, Davao City Branch, the proceeds of which they would use in
constructing a hotel on their 305-square-meter parcel of land located in Davao City and covered by
Transfer Certificate of Title No. I-218079 of the Registry of Deeds of Davao City. They executed various
promissory notes covering the loans, and constituted a mortgage over their parcel of land to secure the
performance of their obligation. The stipulated interest rates were 15.75% per annum for the long term
loans (maturing on December 9, 2006) and 22.204% per annum for a short term loan of P4,400,000.00
(maturing on March 12, 1999).3 The interest rates were fixed for the first year, subject to escalation or
de-escalation in certain events without advance notice to them. The loan agreements further stipulated
that the entire amount of the loans would become due and demandable upon default in the payment of
any installment, interest or other charges.4

On December 27, 1999, Metrobank sought the extrajudicial foreclosure of the real estate
mortgage5 after the petitioners defaulted in their installment payments. The petitioners were notified of
the foreclosure and of the forced sale being scheduled on March 7, 2000. The notice of the sale stated
that the total amount of the obligation was P16,414,801.36 as of October 26, 1999.6

On April 4, 2000, prior to the scheduled foreclosure sale (i.e., the original date of March 7, 2000 having
been meanwhile reset to April 6, 2000), the petitioners filed in the RTC a complaint (later amended) for
damages, fixing of interest rate, and application of excess payments (with prayer for a writ of
preliminary injunction). They alleged therein that Metrobank had no right to foreclose the mortgage
because they were not in default of their obligations; that Metrobank had imposed interest rates (i.e.,
15.75% per annum for two long-term loans and 22.204% per annum for the short term loan) on three of
their loans that were different from the rate of 14.75% per annum agreed upon; that Metrobank had
increased the interest rates on some of their loans without any basis by invoking the escalation clause
written in the loan agreement; that they had paid P2,561,557.87 instead of only P1,802,867.00 based on
the stipulated interest rates, resulting in their excess payment of P758,690.87 as interest, which should
then be applied to their accrued obligation; that they had requested the reduction of the escalated
interest rates on several occasions because of its damaging effect on their hotel business, but
Metrobank had denied their request; and that they were not yet in default because the long-term loans
would become due and demandable on December 9, 2006 yet and they had been paying interest on the
short-term loan in advance.

The complaint prayed that a writ of preliminary injunction to enjoin the scheduled foreclosure sale be
issued. They further prayed for a judgment making the injunction permanent, and directing Metrobank,
namely: (a) to apply the excess payment of P758,690.87 to the accrued interest; (b) to pay P150,000.00
for the losses suffered in their hotel business; (c) to fix the interest rates of the loans; and (d) to pay
moral and exemplary damages plus attorney’s fees.7

In its answer, Metrobank stated that the increase in the interest rates had been made pursuant to the
escalation clause stipulated in the loan agreements; and that not all of the payments by the petitioners
had been applied to the loans covered by the real estate mortgage, because some had been applied to
another loan of theirs amounting to P500,000.00 that had not been secured by the mortgage.

In the meantime, the RTC issued a temporary restraining order to enjoin the foreclosure sale.8 After
hearing on notice, the RTC issued its order dated May 2, 2000,9 granting the petitioners’ application for a
writ of preliminary injunction.

Metrobank moved for reconsideration.10 The petitioners did not file any opposition to Metrobank’s
motion for reconsideration; also, they did not attend the scheduled hearing of the motion for
reconsideration.

On May 19, 2000, the RTC granted Metrobank’s motion for reconsideration, holding in part,11 as follows:

xxx In the motion at bench as well as at the hearing this morning defendant Metro Bank pointed out
that in all the promissory notes executed by the plaintiffs there is typewritten inside a box immediately
following the first paragraph the following:

"At the effective rate of 15.75% for the first year subject to upward/downward adjustments for the next
year thereafter."

Moreover, in the form of the same promissory notes, there is the additional stipulation which reads:

"The rate of interest and/or bank charges herein-stipulated, during the term of this Promissory Note, its
extension, renewals or other modifications, may be increased, decreased, or otherwise changed from
time to time by the bank without advance notice to me/us in the event of changes in the interest rates
prescribed by law of the Monetary Board of the Central Bank of the Philippines, in the rediscount rate of
member banks with the Central Bank of the Philippines, in the interest rates on savings and time
deposits, in the interest rates on the Bank’s borrowings, in the reserve requirements, or in the overall
costs of funding or money;"

There being no opposition to the motion despite receipt of a copy thereof by the plaintiffs through
counsel and finding merit to the motion for reconsideration, this Court resolves to reconsider and set
aside the Order of this Court dated May 2, 2000.

xxxx
SO ORDERED.

The petitioners sought the reconsideration of the order, for which the RTC required the parties to
submit their respective memoranda. In their memorandum, the petitioners insisted that they had an
excess payment sufficient to cover the amounts due on the principal.

Nonetheless, on June 8, 2001, the RTC denied the petitioners’ motion for reconsideration,12 to wit:

The record does not show that plaintiffs have updated their installment payments by depositing the
same with this Court, with the interest thereon at the rate they contend to be the true and correct rate
agreed upon by the parties.

Hence, even if their contention with respect to the rates of interest is true and correct, they are in
default just the same in the payment of their principal obligation.

WHEREFORE, the MOTION FOR RECONSIDERATION is denied.

Ruling of the CA

Aggrieved, the petitioners commenced a special civil action for certiorari in the CA, ascribing grave
abuse of discretion to the RTC when it issued the orders dated May 19, 2000 and June 8, 2001.

On February 19, 2002, the CA rendered the assailed decision dismissing the petition for certiorari for
lack of merit, and affirming the assailed orders,13 stating:

Petitioners aver that the respondent Court gravely abused its discretion in finding that petitioners are in
default in the payment of their obligation to the private respondent.

We disagree.

The Court below did not excessively exercise its judicial authority not only in setting aside the May 2,
2000 Order, but also in denying petitioners’ motion for reconsideration due to the faults attributable to
them.

When private respondent Metrobank moved for the reconsideration of the Order of May 2, 2000 which
granted the issuance of the writ of preliminary injunction, petitioners failed to oppose the same despite
receipt of said motion for reconsideration. The public respondent Court said –

"For resolution is the Motion for Reconsideration filed by the defendant Metropolitan Bank and Trust
Company, dated May 12, 2000, a copy of which was received by Atty. Philip Pantojan for the plaintiffs on
May 16, 2000. There is no opposition nor appearance for the plaintiffs this morning at the scheduled
hearing of said motion x x x".

Corollarily, the issuance of the Order of June 8, 2001 was xxx based on petitioners’ being remiss in their
obligation to update their installment payments.

The Supreme Court ruled in this wise:

To justify the issuance of the writ of certiorari, the abuse of discretion on the part of the tribunal or
officer must be grave, as when the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility.
Petitioners likewise discussed at length the issue of whether or not the private respondent has collected
the right interest rate on the loans they obtained from the private respondent, as well as the propriety
of the application of escalated interest rate which was applied to their loans by the latter. In the instant
petition, questions of fact are not generally permitted, the inquiry being limited essentially to whether
the public respondent acted without or in excess of its jurisdiction or with grave abuse of discretion in
issuing the questioned Orders, neither is the instant petition available to correct mistakes in the judge’s
findings and conclusions, nor to cure erroneous conclusions of law and fact, if there be any.

Certiorari will issue only to correct errors of jurisdiction, not errors of procedure or mistakes in the
findings or conclusions of the lower court.

A review of facts and evidence is not the province of the extraordinary remedy of certiorari.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Orders of the respondent Court are
AFFIRMED.

SO ORDERED.

The petitioners moved for reconsideration of the decision, but the CA denied the motion for lack of
merit on May 7, 2002.14

Hence, this appeal.

Issues

The petitioners pose the following issues, namely:

1. Whether or not the Presiding Judge in issuing the 08 June 2001 Order, finding the petitioners in
default of their obligation with the Bank, has committed grave abuse of discretion amounting to excess
or lack of jurisdiction as the same run counter against the legal principle enunciated in the Almeda Case;

2. Assuming that the Presiding Judge did not excessively exercise his judicial authority in the issuance of
the assailed orders, notwithstanding their consistency with the legal principle enunciated in the Almeda
Case, whether or not the petitioners can avail of the remedy under Rule 65, taking into consideration
the sense of urgency involved in the resolution of the issue raised;

3. Whether or not the Petition lodged before the Court of Appeals presented a question of fact, and
hence not within the province of the extraordinary remedy of certiorari.15

The petitioners argue that the foreclosure of their mortgage was premature; that they could not yet be
considered in default under the ruling in Almeda v. Court of Appeals,16 because the trial court was still to
determine with certainty the exact amount of their obligation to Metrobank; that they would likely
prevail in their action because Metrobank had altered the terms of the loan agreement by increasing the
interest rates without their prior assent; and that unless the foreclosure sale was restrained their action
would be rendered moot. They urge that despite finding no grave abuse of discretion on the part of the
RTC in denying their application for preliminary injunction, the CA should have nonetheless issued a writ
of certiorari considering that they had no other plain and speedy remedy.

Metrobank counters that Almeda v. Court of Appeals was not applicable because that ruling
presupposed the existence of the following conditions, to wit: (a) the escalation and de-escalation of the
interest rate were subject to the agreement of the parties; (b) the petitioners as obligors must have
protested the highly escalated interest rates prior to the application for foreclosure; (c) they must not be
in default in their obligations; (d) they must have tendered payment to Metrobank equivalent to the
principal and accrued interest calculated at the originally stipulated rate; and (e) upon refusal of
Metrobank to receive payment, they should have consigned the tendered amount in court.17 It asserts
that the petitioners’ loans, unlike the obligation involved in Almeda v. Court of Appeals, had already
matured prior to the filing of the case, and that they had not tendered or consigned in court the amount
of the principal and the accrued interest at the rate they claimed to be the correct one.18

Based on the foregoing, the issues to be settled are, firstly, whether the petitioners had a cause of
action for the grant of the extraordinary writ of certiorari; and, secondly, whether the petitioners were
entitled to the writ of preliminary injunction in light of the ruling in Almeda v. Court of Appeals.

Ruling

The appeal has no merit.

To begin with, the petitioners’ resort to the special civil action of certiorari to assail the May 19, 2000
order of the RTC (reconsidering and setting aside its order dated May 2, 2000 issuing the temporary
restraining order against Metrobank to stop the foreclosure sale) was improper. They thereby
apparently misapprehended the true nature and function of a writ of certiorari. It is clear to us,
therefore, that the CA justly and properly dismissed their petition for the writ of certiorari.

We remind that the writ of certiorari – being a remedy narrow in scope and inflexible in character,
whose purpose is to keep an inferior court within the bounds of its jurisdiction, or to prevent an inferior
court from committing such grave abuse of discretion amounting to excess of jurisdiction, or to relieve
parties from arbitrary acts of courts (i.e., acts that courts have no power or authority in law to perform)
– is not a general utility tool in the legal workshop,19and cannot be issued to correct every error
committed by a lower court.

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of
Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the record
of a cause pending before them, so as to give the party more sure and speedy justice, for the writ would
enable the superior court to determine from an inspection of the record whether the inferior court’s
judgment was rendered without authority.20The errors were of such a nature that, if allowed to stand,
they would result in a substantial injury to the petitioner to whom no other remedy was available.21 If
the inferior court acted without authority, the record was then revised and corrected in matters of
law.22 The writ of certiorari was limited to cases in which the inferior court was said to be exceeding its
jurisdiction or was not proceeding according to essential requirements of law and would lie only to
review judicial or quasi-judicial acts.23

The concept of the remedy of certiorari in our judicial system remains much the same as it has been in
the common law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari is
largely regulated by laying down the instances or situations in the Rules of Court in which a superior
court may issue the writ of certiorari to an inferior court or officer. Section 1, Rule 65 of the Rules of
Court compellingly provides the requirements for that purpose, viz:
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.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification
of non-forum shopping as provided in the third paragraph of section 3, Rule 46.

(1a)

Pursuant to Section 1, supra, the petitioner must show that, one, the tribunal, board or officer exercising
judicial or quasi-judicial functions acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and, two, there is neither an appeal nor any plain,
speedy and adequate remedy in the ordinary course of law for the purpose of amending or nullifying the
proceeding.

Considering that the requisites must concurrently be attendant, the herein petitioners’ stance that a
writ of certiorari should have been issued even if the CA found no showing of grave abuse of discretion
is absurd. The commission of grave abuse of discretion was a fundamental requisite for the writ of
certiorari to issue against the RTC. Without their strong showing either of the RTC’s lack or excess of
jurisdiction, or of grave abuse of discretion by the RTC amounting to lack or excess of jurisdiction, the
writ of certiorari would not issue for being bereft of legal and factual bases. We need to emphasize, too,
that with certiorari being an extraordinary remedy, they must strictly observe the rules laid down by law
for granting the relief sought.24

The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of discretion must be grave,
which means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of
law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction.

Secondly, the Court must find that the petitioners were not entitled to enjoin or prevent the
extrajudicial foreclosure of their mortgage by Metrobank. They were undeniably already in default of
their obligations the performance of which the mortgage had precisely secured. Hence, Metrobank had
the unassailable right to the foreclosure. In contrast, their right to prevent the foreclosure did not exist.
Hence, they could not be validly granted the injunction they sought.

The foreclosure of a mortgage is but a necessary consequence of the non-payment of an obligation

secured by the mortgage. Where the parties have stipulated in their agreement, mortgage contract and
promissory note that the mortgagee is authorized to foreclose the mortgage upon the mortgagor’s
default, the mortgagee has a clear right to the foreclosure in case of the mortgagor’s default. Thereby,
the issuance of a writ of preliminary injunction upon the application of the mortgagor will be
improper.25 Mindful that an injunction would be a limitation upon the freedom of action of Metrobank,
the RTC justifiably refused to grant the petitioners’ application for the writ of preliminary injunction. We
underscore that the writ could be granted only if the RTC was fully satisfied that the law permitted it and
the emergency demanded it.26 That, needless to state, was not true herein.

In City Government of Butuan v. Consolidated Broadcasting System (CBS), Inc.,27 the Court restated the
nature and concept of a writ of preliminary injunction in the following manner, to wit:

A preliminary injunction is an order granted at any stage of an action or proceeding prior to the
judgment or final order requiring a party or a court, an agency, or a person to refrain from a particular
act or acts. It may also require the performance of a particular act or acts, in which case it is known as a
preliminary mandatory injunction. Thus, a prohibitory injunction is one that commands a party to refrain
from doing a particular act, while a mandatory injunction commands the performance of some positive
act to correct a wrong in the past.1âwphi1

As with all equitable remedies, injunction must be issued only at the instance of a party who possesses
sufficient interest in or title to the right or the property sought to be protected. It is proper only when
the applicant appears to be entitled to the relief demanded in the complaint, which must aver the
existence of the right and the violation of the right, or whose averments must in the minimum
constitute a prima facie showing of a right to the final relief sought. Accordingly, the conditions for the
issuance of the injunctive writ are: (a) that the right to be protected exists prima facie; (b) that the act
sought to be enjoined is violative of that right; and (c) that there is an urgent and paramount necessity
for the writ to prevent serious damage. An injunction will not issue to protect a right not in esse, or a
right which is merely contingent and may never arise; or to restrain an act which does not give rise to a
cause of action; or to prevent the perpetration of an act prohibited by statute. Indeed, a right, to be
protected by injunction, means a right clearly founded on or granted by law or is enforceable as a
matter of law. (Bold emphasis supplied)

Thirdly, the petitioners allege that: (a) Metrobank had increased the interest rates without their assent
and without any basis; and (b) they had an excess payment sufficient to cover the amounts due. In
support of their allegation, they submitted a table of the interest payments, wherein they projected
what they had actually paid to Metrobank and contrasted the payments to what they claimed to have
been the correct amounts of interest, resulting in an excess payment of P605,557.81.

The petitioners fail to convince.

We consider to be unsubstantiated the petitioners’ claim of their lack of consent to the escalation
clauses. They did not adduce evidence to show that they did not assent to the increases in the interest
rates. The records reveal instead that they requested only the reduction of the interest rate or the
restructuring of their loans.28 Moreover, the mere averment that the excess payments were sufficient to
cover their accrued obligation computed on the basis of the stipulated interest rate cannot be readily
accepted. Their computation, as their memorandum submitted to the RTC would explain,29 was too
simplistic, for it factored only the principal due but not the accrued interests and penalty charges that
were also stipulated in the loan agreements.
It is relevant to observe in this connection that escalation clauses like those affecting the petitioners
were not void per se, and that an increase in the interest rate pursuant to such clauses were not
necessarily void. In Philippine National Bank v. Rocamora,30 the Court has said:

Escalation clauses are valid and do not contravene public policy. These clauses are common in credit
agreements as means of maintaining fiscal stability and retaining the value of money on long-term
contracts. To avoid any resulting one-sided situation that escalation clauses may bring, we required in
Banco Filipino the inclusion in the parties’ agreement of a de-escalation clause that would authorize a
reduction in the interest rates corresponding to downward changes made by law or by the Monetary
Board.

The validity of escalation clauses notwithstanding, we cautioned that these clauses do not give creditors
the unbridled right to adjust interest rates unilaterally. As we said in the same Banco Filipino case, any
increase in the rate of interest made pursuant to an escalation clause must be the result of an
agreement between the parties. The minds of all the parties must meet on the proposed modification as
this modification affects an important aspect of the agreement. There can be no contract in the true
sense in the absence of the element of an agreement, i.e., the parties’ mutual consent. Thus, any change
must be mutually agreed upon, otherwise, the change carries no binding effect. A stipulation on the
validity or compliance with the contract that is left solely to the will of one of the parties is void; the
stipulation goes against the principle of mutuality of contract under Article 1308 of the Civil Code.

We reiterate that injunction will not protect contingent, abstract or future rights whose existence is
doubtful or disputed.31 Indeed, there must exist an actual right,32 because injunction will not be issued to
protect a right not in esse and which may never arise, or to restrain an act which does not give rise to a
cause of action. At any rate, an application for injunctive relief is strictly construed against the pleader.33

Nor do we discern any substantial controversy that had any real bearing on Metrobank’s right to
foreclose the mortgage. The mere possibility that the RTC would rule in the end in the petitioners’ favor
by lowering the interest rates and directing the application of the excess payments to the accrued
principal and interest did not diminish the fact that when Metrobank filed its application for extrajudicial
foreclosure they were already in default as to their obligations and that their short-term loan of
P4,400,000.00 had already matured. Under such circumstances, their application for the writ of
preliminary injunction could not but be viewed as a futile attempt to deter or delay the forced sale of
their property.

Lastly, citing the ruling in Almeda v. Court of Appeals, to the effect that the issuance of a preliminary
injunction pending the resolution of the issue on the correct interest rate would be justified, the
petitioners submit that they could be rightly considered in default only after they had failed to settle the
exact amount of their obligation as determined by the trial court in the main case.

The petitioners’ reliance on the ruling in Almeda v. Court of Appeals was misplaced.

Although it is true that the ruling in Almeda v. Court of Appeals sustained the issuance of the preliminary
injunction pending the determination of the issue on the interest rates, with the Court stating:

In the first place, because of the dispute regarding the interest rate increases, an issue which was never
settled on merit in the courts below, the exact amount of petitioners’ obligations could not be
determined. Thus, the foreclosure provisions of P.D. 385 could be validly invoked by respondent bank
only after settlement of the question involving the interest rate on the loan, and only after the spouses
refused to meet their obligations following such determination.34 x x x.

Almeda v. Court of Appeals involved circumstances that were far from identical with those obtaining
herein. To start with, Almeda v. Court of Appeals involved the mandatory foreclosure of a mortgage by a
government financial institution pursuant to Presidential Decree No. 38535 should the arrears reach 20%
of the total outstanding obligation. On the other hand, Metrobank is not a government financial
institution. Secondly, the petitioners in Almeda v. Court of Appeals were not yet in default at the time
they brought the action questioning the propriety of the interest rate increases, hut the herein
petitioners were already in default and the mortgage had already been foreclosed when they assailed
the interest rates in court. Thirdly, the Court found in Almeda v. Court of Appeals that the increases in
the interest rates had been made without the prior assent of the borrowers, who had even consistently
protested the increases in the stipulated interest rate. In contrast, the Court cannot make the same
conclusion herein for lack of basis. Fourthly, the interest rates in Almeda v. Court of Appeals were raised
to such a very high level that the borrowers were practically enslaved and their assets depleted, with the
interest rate even reaching at one point a high of 68% per annum. Here, however, the increases reached
a high of only 31% per annum, according to the petitioners themselves. Lastly, the Court in Almeda v.
Court of Appeals attributed good faith to the petitioners by their act of consigning in court the amounts
of what they believed to be their remaining obligation. No similar tender or consignation of the amount
claimed by the petitioners herein to be their correct outstanding obligation was made by them.

In fine, the petitioners in Almeda v. Court o{Appeals had the existing right to a writ of preliminary
injunction pending the resolution of the main case, but the herein petitioners did not. Stated otherwise,
no writ of preliminary injunction to enjoin an impending extrajudicial foreclosure sale should issue
except upon a clear showing of a violation of the mortgagors' unmistakable right to the injunction.

WHEREFORE, the Court UENIES the petition for review on certiorari; AFFIRMS the decision promulgated
on February 19, 2002; and ORDERS the petitioners to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:
G.R. No. 188768 : January 7, 2013

TML GASKET INDUSTRIES, INC., Petitioner, v. BPI FAMILY SAVINGS BANK, INC., Respondents.

RESOLUTION

PEREZ, J.:

We are urged in this petition for review on certiorari to reverse and set aside the Decision1 of the Court
of Appeals in CA-G.R. SP No. 81932 which, in turn, reversed the Orders,2 respectively dated 22 August
2003 and 27 November 2003, of the Regional Trial Court (RTC), Branch 104, Parañaque City in Civil Case
No. 02-0504. The assailed Orders issued a writ of preliminary injunction in favor of petitioner TML
Gasket Industries, Inc. (TML), enjoining respondent BPI Family Savings Bank, Inc.'s (BPI's) extra-judicial
foreclosure of TMLs mortgaged properties, and denied TMLs motion for reconsideration thereof.

The facts are not in dispute.

Sometime in September 1996, TML obtained a loan from the Bank of Southeast Asia, Inc. (BSA), which
TML can avail via a credit facility of P85,000,000.00. As security for the loan, TML executed a real estate
mortgage over commercial and industrial lots located at Dr. A. Santos Avenue, Parañaque City covered
by Transfer Certificate of Title (TCT) Nos. 81278 and 81303 of the Registry of Deeds of Parañaque City.
For additional security, BSA required TML to execute a promissory note for each availment from the
credit facility.

On different dates from September 1996 to 31 July 1997, TML executed several promissory notes (PN),
which provided in pertinent part:cralawlibrary

Since time is of the essence hereof, TML is in default under this Note, without need for notice, demand,
presentment or any other act or deed in any of the following events: a) TML fails to pay when due,
totally or partially, the principal, interest and other charges under this Note x x x.3?r?l1

During the period of the loan, BSA changed its corporate name to DBS Bank Phils. (DBS), which
eventually merged with BPI under the latters corporate name.

TML defaulted in the payment of its loan leading BPI to extra-judicially foreclose the mortgaged
properties. As of 25 June 2002, TMLs indebtedness to BPI amounted to P71,877,930.56, excluding
penalties, charges, attorneys fees and other expenses of foreclosure.

On 24 October 2002, the Ex-Officio Sheriff of RTC, Parañaque City issued a Notice of Extra-judicial
Foreclosure Sale of the mortgaged properties.

Because of the imminent foreclosure sale of its mortgaged properties, TML, on 21 November 2002, filed
a "Complaint for Declaratory Relief, Accounting, Declaration of Nullity of Notice of Extra-Judicial Sale,
Increased (sic) in Interest Rates, Penalty Charges Plus, (sic) Damages, with Prayer for the Issuance of
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction" against BPI and DBS before
the RTC, Branch 194, Parañaque City.

The complaint highlighted the following clause in the PNs signed by TML, to wit:cralawlibrary

If changes in the conditions and/or circumstances occur which, directly or indirectly, increase the overall
costs of money to the Lender, such as but not limited to the following: (i) any change in the laws or
regulations, including any amendments, modifications, interpretations, administrative implementation
or repeal thereof affecting the Lender or its business such as reserve or similar requirement, tax on
income, gross receipts, or the imposition of any levy, fees or other taxes; or (ii) changes in the interest
rate of forbearance of money whether in the prevailing market rates or such other guiding or reference
rates as may be adopted, determined and/or authorized by the CB; (iii) extraordinary inflation or there is
an increase of fifteen percent (15%) in the consumer price index as announced by the CB or the National
Economic Development Authority reckoned from the date of the granting of the loan or the credit line;
or (iv) devaluation, revaluation, or depreciation in real value or purchasing power of the Philippine Peso,
that is, when there has been an adverse change of at least fifteen percent (15%), in the CB Reference
Exchange Rate for the Philippine Peso to the US Dollar and/or such other foreign currencies adopted by
the Philippine Government or its instrumentalities or agencies, as forming part of its international
reserves, reckoned from the date of granting of the loan or credit line; (v) any change in the reserve or
similar requirements as a necessary consequence of obtaining a unibanking license on the part of the
Lender, then the Lender may, at its sole option, correspondingly adjust the interest rate in all
outstanding loans(s) and other obligations under this Note/s and such other documents that may be
thereafter be executed. The adjustment in interest rate shall take effect three (3) days after receipt by
TML of the notice of adjustment.4?r?l1

TML asseverated that BSA made it understand that the stipulation meant that TMLs loan would be
subject to only a 16% interest rate per annum. TML alleged that "despite the odds and difficulties it
encountered, aggravated by the global economic crisis, it tried hard to religiously pay its x x x obligation
to BPI x x x." However, contrary to their actual understanding, BSA "unreasonably, unconscionably and
unilaterally" imposed a 33% interest rate per annum, and ultimately, a penalty of 36% interest on past
due principal and corresponding interest thereon.

TML likewise pointed out that it had demanded an independent accounting and liquidation of its loan
account, which went unheeded. Ultimately, for TML, it cannot be considered in default of an obligation
with an undetermined and unascertained amount. In that regard, TML argued that the intended
foreclosure of TMLs mortgaged properties is unwarranted for being illegal; thus, the foreclosure ought
to be enjoined to prevent TML from suffering grave and irreparable damage, especially since TMLs office
and factory are located at the mortgaged properties.

Refuting TMLs allegations, BPI maintained that the interest rates on TMLs loan obligation were mutually
and voluntarily agreed upon. On TMLs application for the issuance of a writ of preliminary injunction,
BPI countered that it has the absolute right to foreclose the mortgage constituted over TMLs properties
given that TML defaulted on its loan obligation, which had already become due and demandable.

In an Order dated 20 June 2003, the trial court denied TMLs application for the issuance of a preliminary
injunction, ratiocinating thus:cralawlibrary

In resolving whether or not to grant the injunctive writ, this Court is guided by the requisites thereof, as
repeatedly (sic) enunciated by the Supreme Court, to wit: (1) the invasion of a right is material and
substantial; (2) the right of complainant is clear and unmistakable; and (3) there is an urgent and
paramount necessity for the writ to prevent serious damage. x x x.

From the testimony of TMLs witness, Lyman Lozada, it was established that TML is indeed indebted to
BPI and has become delinquent in the payment of the loan obligation; that TML is willing to let go off
(sic) the collaterals, the properties subject matter hereof, by way of dacion en pago. Apparently, the
only concern of TML is the fact that it will be ousted from the properties after the period of redemption
shall have lapsed.

The foregoing testimony of TML casts doubt on its right over the property. The aforementioned
requisites are not obtaining in favor of TML. Moreover, as held by the Supreme Court, "where the
complainants right or title is doubtful or disputed, injunction is not proper. x x x.

Furthermore, TML has in its favor the right of redemption.5?r?l1

On motion for reconsideration, the trial court made a complete turn-around. It ordered the issuance of
the writ in favor of TML, subject to the posting of a bond in the amount of P300,000.00, to
wit:cralawlibrary

While it is admitted that TML has defaulted in the payment of its loan obligation, which thus conferred
upon BPI the right of foreclosure, the Court, after a contemplation of the logical consequence of the
denial of the injunctive writ, is convinced that great and irreparable damages may be caused TML. As
pointed out by TML, it might lead to an absurd scenario of TML winning the case but losing its property
in BPIs favor or in an even worse scenario, in favor of third parties. This is because of the short period
within which TML could exercise its redemption right under the General Banking Act.6?r?l1

BPI moved for reconsideration of the order. However, the trial court maintained its ruling:cralawlibrary

Admittedly, TML has incurred in default in the payment of its obligation but the amount has yet to be
determined, the determination thereof being one of the provinces of the instant complaint, and
considering the brief redemption period under the General Banking Act,the redemption is next to
impossible. Thus, the injury to TML would be very grave if not irreparable.7?r?l1

Posthaste, BPI filed a petition for certiorari under Rule 65 of the Rules of Court before the Court of
Appeals, seeking to annul and set aside the twin Orders of the trial court respectively dated 22 August
2003 and 27 November 2003 which granted the writ of preliminary injunction in favor of

TML and enjoined the foreclosure sale of the mortgaged properties.

The appellate court found grave abuse of discretion in the trial courts issuance of the orders as
demonstrated by the following:cralawlibrary

1. TML signed the PNs which stipulated that TML, as the Borrower, is considered in default when it "fails
to pay, when due, totally or partially, the principal, interest and other charges
thereunder."???ñr?bl?š ??r†??l l?? l?br?rÿ

2. Consistent therewith, the Real Estate Mortgage signed by TML provides that one of the effects of
default of the mortgagor (TML) includes the right of the mortgagee (BPI) to immediately foreclose the
mortgage, which foreclosure may be undertaken judicially or extra-judicially, at the discretion of the
mortgagee (BPI).

3. TML itself admitted in its complaint that it has failed to pay its outstanding loan to BPI.

4. From all three points, BPI has the right to extra-judicially foreclose the mortgaged properties.

5. TML did not demonstrate an actual existing right to be protected.

6. Corollary thereto, there is no threatened or actual violation of TMLs doubtful right to the mortgaged
properties. ???ñr?bl?š ??r†??l l?? l?br?rÿ

The dispositive portion of the appellate courts decision reads, thus:cralawlibrary

WHEREFORE, the Petition is GRANTED. The twin Order(s), dated August 22, 2003 and November 27,
2003, of the Regional Trial Court of Parañaque City, Branch 164 (sic) in Civil Case No. 02-0504, are
hereby REVERSED and SET ASIDE. Accordingly, the writ of preliminary injunction granted in favor of TML
is hereby LIFTED.8?r?l1

TML filed a motion for reconsideration. While the resolution thereof was pending, TML filed a
Supplemental Motion for Reconsideration arguing that BPIs petition for certiorari has become moot and
academic because BPI had supposedly filed an Amended Petition for Extra-judicial Foreclosure of Real
Estate Mortgage under Act No. 3135 before the trial court. For TML, that effectively changed the
amount of its obligation to BPI, which, in turn, rendered BPIs original petition for extra-judicial
foreclosure of mortgage moot and academic.

The appellate court denied the motions and affirmed its original decision:cralawlibrary

WHEREFORE, the instant motion for reconsideration and supplemental motion for reconsideration are
hereby DENIED. Accordingly, Our Decision, dated August 19, 2008, STANDS.9?r?l1

Hence, this petition for review on certiorari positing that the appellate court erred when it reversed and
set aside the twin Orders of the trial court and lifted the injunctive writ.

We subscribe to the appellate courts ruling.

Section 3, Rule 58 of the Rules of Court lists the grounds for the issuance of a writ of preliminary
injunction:cralawlibrary

SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it
is established:cralawlibrary

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment
ineffectual. ???ñr?bl?š ??r†??l l?? l?br?rÿ

As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing
right to be protected during the pendency of the principal action. The requisites of a valid injunction are
the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ,
the right to be protected and the violation against that right must be shown.10?r?l1
In this case, TML anchors its right to the mortgaged properties on its claim that it cannot be considered
in default of its loan obligation to BPI. Consequently, the mortgaged properties cannot be foreclosed.
TML claims it had been religiously paying its loan; however, BPIs unilateral increase of the rate of
interest to 33% prevented TML from further paying the loan. Thus, for TML, while an accounting and
liquidation of the actual amount of its obligation to BPI remains undetermined, it cannot be considered
in default. Ultimately, TML avers that the threatened foreclosure and auction sale of its mortgaged
properties while its loan with BPI subsists is a violation of its right.

We note that TML categorically admitted that it has an existing loan with BPI, secured by a real estate
mortgage and several promissory notes, and that it stopped paying for one reason or another. On that
point, we affirm the appellate courts findings:cralawlibrary

It is settled rule of law that foreclosure is proper when the debtors are in default of the payment of their
obligation. On this note, it must be recalled that the promissory notes executed by TML in favor of BPI
states that the Borrower - in this case, TML is considered in default when it fails to pay when due, totally
or partially, the principal, interest and other charges under the promissory note(s). In conjunction
therewith, the real estate mortgage executed by the parties stipulates, among others, that:cralawlibrary

Sec. 6. Effects of Default by the Mortgagor. xxx

a) The MORTGAGEE shall have the right to immediately foreclose on this Mortgage in accordance with
Sec. 7, hereof;

xxx

Sec. 7. Foreclosure. Foreclosure shall, at the sole discretion of the MORTGAGEE, be either judicial or
extrajudicial, xxx xxx.

In its Complaint, TML admitted that it has not paid its obligation with BPI by reason of the exorbitant
rates of interest unilaterally imposed by the latter. However, regardless of TMLs defenses, the fact that
it has an outstanding obligation with BPI which it failed to pay despite demand remains undisputed.
Verily, TMLs failure to comply with the terms and conditions of its credit agreement with BPI, as
embodied in the real estate mortgage and the promissory notes it issued in favor of the latter, entitles
BPI to extrajudicially foreclose the mortgaged properties.

xxx

To our mind, the grounds relied upon by the trial court, do not justify the issuance of a writ of
preliminary injunction in favor of TML. Under the factual setting of this case, TML has no right to be
protected from the impending foreclosure of its properties. Certainly, the said foreclosure is authorized
under the real estate mortgage and the promissory notes voluntarily executed by TML in favor of BPI.
Needless to say, BPIs exercise of its right to foreclose the subject properties does not, in any way,
constitute a violation of TMLs property rights. On the contrary, the foreclosure of the mortgage is to
enforce the contractual obligation of BPI.11?r?l1

The issuance of a preliminary injunction rests entirely within the discretion of the court taking
cognizance of the case and is generally not interfered with except in cases of manifest abuse. For the
issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the
right sought to be protected is material and substantial, that the right of complainant is clear and
unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious
damage.12 In the absence of a clear legal right, the issuance of a writ of injunction constitutes grave
abuse of discretion.

From the foregoing, it is apparent that the trial court committed grave abuse of discretion when it
revoked its previous order and subsequently issued a writ of preliminary injunction simply on the
following grounds: "(a) that TMLs mortgage debt is unliquidated; (b) that TML stands to suffer great and
irreparable damages if it wins the case but, in the process, loses its mortgaged properties to BPI, or even
worse, to third parties; and, (c) that, considering, the brief redemption period under the General
Banking Act, TMLs chance to redeem its properties would be next to
impossible."???ñr?bl?š ??r†??l l?? l?br?rÿ

In Selegna Management and Development Corporation v. United Coconut Planters Bank,13 we ruled that
the debt is considered liquidated despite the alleged lack of accounting:cralawlibrary

A debt is liquidated when the amount is known or is determinable by inspection of the terms and
conditions of the relevant promissory notes and related documentation. Failure to furnish a debtor a
detailed statement of account does not ipso facto result in an unliquidated obligation.

Petitioners executed a Promissory Note, in which they stated that their principal obligation was in the
amount of P103,909,710.82, subject to an interest rate of 21.75 percent per annum.

Pursuant to the parties' Credit Agreement, petitioners likewise know that any delay in the payment of
the principal obligation will subject them to a penalty charge of one percent per month, computed from
the due date until the obligation is paid in full.

It is in fact clear from the agreement of the parties that when the payment is accelerated due to an
event of default, the penalty charge shall be based on the total principal amount outstanding, to be
computed from the date of acceleration until the obligation is paid in full. Their Credit

Agreement even provides for the application of payments. It appears from the agreements that the
amount of total obligation is known or, at the very least, determinable.

Moreover, when they made their partial payment, petitioners did not question the principal, interest or
penalties demanded from them. They only sought additional time to update their interest payments or
to negotiate a possible restructuring of their account. Hence, there is no basis for their allegation that a
statement of account was necessary for them to know their obligation. We cannot impair respondent's
right to foreclose the properties on the basis of their unsubstantiated allegation of a violation of due
process.14?r?l1

Clearly, the possibility of irreparable damage without proof of actual existing right is no ground for an
injunction. Once again, our holding in Selegna is relevant and sound:cralawlibrary

x x x Injunction is not designed to protect contingent or future rights. It is not proper when the
complainant's right is doubtful or disputed.

xxx

Petitioners do not have any clear right to be protected. As shown in our earlier findings, they failed to
substantiate their allegations that their right to due process had been violated and the maturity of their
obligation forestalled. Since they indisputably failed to meet their obligations in spite of repeated
demands, we hold that there is no legal justification to enjoin respondent from enforcing its undeniable
right to foreclose the mortgaged properties.

In any case, petitioners will not be deprived outrightly of their property. Pursuant to Section 47 of the
General Banking Law of 2000, mortgagors who have judicially or extrajudicially sold their real property
for the full or partial payment of their obligation have the right to redeem the property within one year
after the sale. They can redeem their real estate by paying the amount due, with interest rate specified,
under the mortgage deed; as well as all the costs and expenses incurred by the bank.15?r?l1

Lastly, as the Court of Appeals had done, we clarify that our disposition in this case pertains only to the
propriety of the trial courts Orders issuing a writ of preliminary injunction in favor of TML to enjoin the
foreclosure of TMLs mortgaged properties. We do not dispose herein of the main case pending before
the RTC, Branch 194, Parañaque City docketed as Civil Case No. 02-0504.

All told, there is no reversible error in the appellate courts decision, reversing and setting aside the
Orders dated 22 August 2003 and 27 November 2003 of the trial court and lifting the writ of preliminary
injunction issued in favor of TML.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 81932 is
AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 168584 October 15, 2007

REPUBLIC OF THE PHILIPPINES, represented by THE HONORABLE SECRETARY OF FINANCE, THE

HONORABLE COMMISSIONER OF BUREAU OF INTERNAL REVENUE, THE HONORABLE COMMISSIONER
OF CUSTOMS, and THE COLLECTOR OF CUSTOMS OF THE PORT OF SUBIC, petitioners,
vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, RTC, Third Judicial Region, Olongapo City,
INDIGO DISTRIBUTION CORP., herein represented by ARIEL G. CONSOLACION, W STAR TRADING AND
WAREHOUSING CORP., herein represented by HIERYN R. ECLARINAL, FREEDOM BRANDS PHILS.,
CORP., herein represented by ANA LISA RAMAT, BRANDED WAREHOUSE, INC., herein represented by
MARY AILEEN S. GOZUN, ALTASIA INC., herein represented by ALAN HARROW, TAINAN TRADE
(TAIWAN), INC., herein represented by ELENA RANULLO, SUBIC PARK N’ SHOP, herein represented by
NORMA MANGALINO DIZON, TRADING GATEWAYS INTERNATIONAL PHILS., herein represented by
MA. CHARINA FE C. RODOLFO, DUTY FREE SUPERSTORE (DFS), herein represented by RAJESH R.
SADHWANI, CHJIMES TRADING INC., herein represented by ANGELO MARK M. PICARDAL, PREMIER
FREEPORT, INC., herein represented by ROMMEL P. GABALDON, FUTURE TRADE SUBIC FREEPORT,
INC., herein represented by WILLIE S. VERIDIANO, GRAND COMTRADE INTERNATIONAL CORP., herein
represented by JULIUS MOLINDA, and FIRST PLATINUM INTERNATIONAL, INC., herein represented by
ISIDRO M. MUÑOZ,respondents.

DECISION

CARPIO MORALES, J.:

Petitioners seek via petition for certiorari and prohibition to annul (1) the May 4, 2005 Order1 issued by
public respondent Judge Ramon S. Caguioa of the Regional Trial Court (RTC), Branch 74, Olongapo City,
granting private respondents’ application for the issuance of a writ of preliminary injunction and (2) the
Writ of Preliminary Injunction2that was issued pursuant to such Order, which stayed the implementation
of Republic Act (R.A.) No. 9334, AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND
TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142, 143, 144, 145 AND 288
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED.

Petitioners likewise seek to enjoin, restrain and inhibit public respondent from enforcing the impugned
issuances and from further proceeding with the trial of Civil Case No. 102-0-05.

The relevant facts are as follows:

In 1992, Congress enacted Republic Act (R.A) No. 72273 or the Bases Conversion and Development Act of
1992 which, among other things, created the Subic Special Economic and Freeport Zone (SBF4) and the
Subic Bay Metropolitan Authority (SBMA).

R.A. No. 7227 envisioned the SBF to be developed into a "self-sustaining, industrial, commercial,
financial and investment center to generate employment opportunities in and around the zone and to
attract and promote productive foreign investments."5 In line with this vision, Section 12 of the law
provided:

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory
ensuring free flow or movement of goods and capital within, into and exported out of the Subic
Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw
materials, capital and equipment. However, exportation or removal of goods from the territory of the
Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes,
local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes,
three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special
Economic Zone shall be remitted to the National Government, one percent (1%) each to the local
government units affected by the declaration of the zone in proportion to their population area, and
other factors. In addition, there is hereby established a development fund of one percent (1%) of the
gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the City of Olongapo and the Municipality of
Subic, and other municipalities contiguous to be base areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the Subic
Special Economic Zone, the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities
and future shall be allowed and maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks
and other financial institutions within the Subic Special Economic Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of
local commercial banks and offshore banking units of foreign banks with minimum Central Bank
regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less
than Two hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under
twenty-one (21) years of age, shall be granted permanent resident status within the Subic Special
Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special Economic
Zone without any need of special authorization from the Bureau of Immigration and Deportation. The
Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue working visas
renewal every two (2) years to foreign executives and other aliens possessing highly-technical skills
which no Filipino within the Subic Special Economic Zone possesses, as certified by the Department of
Labor and Employment. The names of aliens granted permanent residence status and working visas by
the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation
within thirty (30) days after issuance thereof;

x x x x. (Emphasis supplied)

Pursuant to the law, private respondents Indigo Distribution Corporation, W Star Trading and
Warehousing Corporation, Freedom Brands Philippines Corporation, Branded Warehouse, Inc., Altasia,
Inc., Tainan Trade (Taiwan) Inc., Subic Park ‘N Shop, Incorporated, Trading Gateways International
Philipines, Inc., Duty Free Superstore (DFS) Inc., Chijmes Trading, Inc., Premier Freeport, Inc., Future
Trade Subic Freeport, Inc., Grand Comtrade Int’l., Corp., and First Platinum International, Inc., which are
all domestic corporations doing business at the SBF, applied for and were granted Certificates of
Registration and Tax Exemption6 by the SBMA.

These certificates allowed them to engage in the business either of trading, retailing or wholesaling,
import and export, warehousing, distribution and/or transshipment of general merchandise, including
alcohol and tobacco products, and uniformly granted them tax exemptions for such importations as
contained in the following provision of their respective Certificates:

ARTICLE IV. The Company shall be entitled to tax and duty-free importation of raw materials, capital
equipment, and household and personal items for use solely within the Subic Bay Freeport
Zonepursuant to Sections 12(b) and 12(c) of the Act and Sections 43, 45, 46 and 49 of the Implementing
Rules. All importations by the Company are exempt from inspection by the Societe Generale de
Surveillance if such importations are delivered immediately to and for use solely within the Subic Bay
Freeport Zone. (Emphasis supplied)

Congress subsequently passed R.A. No. 9334, however, effective on January 1, 2005,7 Section 6 of which
provides:

Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as amended, is hereby amended to
read as follows:

Sec. 131. Payment of Excise Taxes on Imported Articles. –

(A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or importer to the
Customs Officers, conformably with the regulations of the Department of Finance and before the
release of such articles from the customshouse or by the person who is found in possession of articles
which are exempt from excise taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies
exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-
exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and
shall be liable for the duty and internal revenue tax due on such importation.

The provision of any special or general law to the contrary notwithstanding, the importation of cigars
and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for
tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes
due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines
brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zone,
created under Republic Act No. 7227; x x x and such other freeports as may hereafter be established or
created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented
liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty
Free Philippines (DFP), shall be exempted from all applicable duties only: x x x Provided, finally, That the
removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar
articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one Freeport
to another Freeport, shall not be deemed an introduction into the Philippine customs territory. x x x.
(Emphasis and underscoring supplied)
On the basis of Section 6 of R.A. No. 9334, SBMA issued on January 10, 2005 a Memorandum 8 declaring
that effective January 1, 2005, all importations of cigars, cigarettes, distilled spirits, fermented liquors
and wines into the SBF, including those intended to be transshipped to other free ports in the
Philippines, shall be treated as ordinary importations subject to all applicable taxes, duties and charges,
including excise taxes.

Meanwhile, on February 3, 2005, former Bureau of Internal Revenue (BIR) Commissioner Guillermo L.
Parayno, Jr. requested then Customs Commissioner George M. Jereos to immediately collect the excise
tax due on imported alcohol and tobacco products brought to the Duty Free Philippines (DFP) and
Freeport zones.9

Accordingly, the Collector of Customs of the port of Subic directed the SBMA Administrator to require
payment of all appropriate duties and taxes on all importations of cigars and cigarettes, distilled spirits,
fermented liquors and wines; and for all transactions involving the said items to be covered from then
on by a consumption entry and no longer by a warehousing entry.10

On February 7, 2005, SBMA issued a Memorandum11 directing the departments concerned to require
locators/importers in the SBF to pay the corresponding duties and taxes on their importations of cigars,
cigarettes, liquors and wines before said items are cleared and released from the freeport. However,
certain SBF locators which were "exclusively engaged in the transshipment of cigarette products for
foreign destinations" were allowed by the SBMA to process their import documents subject to their
submission of an Undertaking with the Bureau of Customs.12

On February 15, 2005, private respondents wrote the offices of respondent Collector of Customs and
the SBMA Administrator requesting for a reconsideration of the directives on the imposition of duties
and taxes, particularly excise taxes, on their shipments of cigars, cigarettes, wines and liquors.13 Despite
these letters, however, they were not allowed to file any warehousing entry for their shipments.

Thus, private respondent enterprises, through their representatives, brought before the RTC of
Olongapo City a special civil action for declaratory relief14 to have certain provisions of R.A. No. 9334
declared as unconstitutional, which case was docketed as Civil Case No. 102-0-05.

In the main, private respondents submitted that (1) R.A. No. 9334 should not be interpreted as altering,
modifying or amending the provisions of R.A. No. 7227 because repeals by implication are not favored;
(2) a general law like R.A. No. 9334 cannot amend R.A. No. 7727, which is a special law; and (3) the
assailed law violates the one bill-one subject rule embodied in Section 26(1), Article VI15 of the
Constitution as well as the constitutional proscription against the impairment of the obligation of
contracts.16

Alleging that great and irreparable loss and injury would befall them as a consequence of the imposition
of taxes on alcohol and tobacco products brought into the SBF, private respondents prayed for the
issuance of a writ of preliminary injunction and/or Temporary Restraining Order (TRO) and preliminary
mandatory injunction to enjoin the directives of herein petitioners.

Petitioners duly opposed the private respondents’ prayer for the issuance of a writ of preliminary
injunction and/or TRO, arguing that (1) tax exemptions are not presumed and even when granted, are
strictly construed against the grantee; (2) an increase in business expense is not the injury contemplated
by law, it being a case of damnum absque injuria; and (3) the drawback mechanism established in the
law clearly negates the possibility of the feared injury.17

Petitioners moreover pointed out that courts are enjoined from issuing a writ of injunction and/or TRO
on the grounds of an alleged nullity of a law, ordinance or administrative regulation or circular or in a
manner that would effectively dispose of the main case. Taxes, they stressed, are the lifeblood of the
government and their prompt and certain availability is an imperious need. They maintained that
greater injury would be inflicted on the public should the writ be granted.

On May 4, 2005, the court a quo granted private respondents’ application for the issuance of a writ of
preliminary injunction, after it found that the essential requisites for the issuance of a preliminary
injunction were present.

As investors duly licensed to operate inside the SBF, the trial court declared that private respondents
were entitled to enjoy the benefits of tax incentives under R.A. No. 7227, particularly the exemption
from local and national taxes under Section 12(c); the aforecited provision of R.A. No. 7227, coupled
with private respondents’ Certificates of Registration and Tax Exemption from the SBMA, vested in them
a clear and unmistakable right or right in esse that would be violated should R.A. No. 9334 be
implemented; and the invasion of such right is substantial and material as private respondents would be
compelled to pay more than what they should by way of taxes to the national government.

The trial court thereafter ruled that the prima facie presumption of validity of R.A. No. 9334 had been
overcome by private respondents, it holding that as a partial amendment of the National Internal
Revenue Code (NIRC) of 1997,18 as amended, R.A. No. 9334 is a general law that could not prevail over a
special statute like R.A. No. 7227 notwithstanding the fact that the assailed law is of later effectivity.

The trial court went on to hold that the repealing provision of Section 10 of R.A. No. 9334 does not
expressly mention the repeal of R. A. No. 7227, hence, its repeal can only be an implied repeal, which is
not favored; and since R.A. No. 9334 imposes new tax burdens, whatever doubts arising therefrom
should be resolved against the taxing authority and in favor of the taxpayer.

The trial court furthermore held that R.A. No. 9334 violates the terms and conditions of private
respondents’ subsisting contracts with SBMA, which are embodied in their Certificates of Registration
and Exemptions in contravention of the constitutional guarantee against the impairment of contractual
obligations; that greater damage would be inflicted on private respondents if the writ of injunction is
not issued as compared to the injury that the government and the general public would suffer from its
issuance; and that the damage that private respondents are bound to suffer once the assailed statute is
implemented – including the loss of confidence of their foreign principals, loss of business opportunity
and unrealized income, and the danger of closing down their businesses due to uncertainty of continued
viability – cannot be measured accurately by any standard.

With regard to the rule that injunction is improper to restrain the collection of taxes under Section
21819 of the NIRC, the trial court held that what is sought to be enjoined is not per se the collection of
taxes, but the implementation of a statute that has been found preliminarily to be unconstitutional.

Additionally, the trial court pointed out that private respondents’ taxes have not yet been assessed, as
they have not filed consumption entries on all their imported tobacco and alcohol products, hence, their
duty to pay the corresponding excise taxes and the concomitant right of the government to collect the
same have not yet materialized.

On May 11, 2005, the trial court issued a Writ of Preliminary Injunction directing petitioners and the
SBMA Administrator as well as all persons assisting or acting for and in their behalf "1) to allow the
operations of [private respondents] in accordance with R.A. No. 7227; 2) to allow [them] to file
warehousing entries instead of consumption entries as regards their importation of tobacco and alcohol
products; and 3) to cease and desist from implementing the pertinent provisions of R.A. No. 9334 by not
compelling [private respondents] to immediately pay duties and taxes on said alcohol and tobacco
products as a condition to their removal from the port area for transfer to the warehouses of [private
respondents]."20

The injunction bond was approved at One Million pesos (P1,000,000).21

Without moving for reconsideration, petitioners have come directly to this Court to question the May 4,
2005 Order and the Writ of Preliminary Injunction which, they submit, were issued by public respondent
with grave abuse of discretion amounting to lack or excess of jurisdiction.

In particular, petitioners contend that public respondent peremptorily and unjustly issued the injunctive
writ despite the absence of the legal requisites for its issuance, resulting in heavy government revenue
losses.22 They emphatically argue that since the tax exemption previously enjoyed by private
respondents has clearly been withdrawn by R.A. No. 9334, private respondents do not have any right in
esse nor can they invoke legal injury to stymie the enforcement of R.A. No. 9334.

Furthermore, petitioners maintain that in issuing the injunctive writ, public respondent showed manifest
bias and prejudice and prejudged the merits of the case in utter disregard of the caveat issued by this
Court in Searth Commodities Corporation, et al. v. Court of Appeals23 and Vera v. Arca.24

Regarding the P1 million injunction bond fixed by public respondent, petitioners argue that the same is
grossly disproportionate to the damages that have been and continue to be sustained by the Republic.

In their Reply25 to private respondents’ Comment, petitioners additionally plead public respondent’s bias
and partiality in allowing the motions for intervention of a number of corporations26 without notice to
them and in disregard of their present pending petition for certiorari and prohibition before this Court.
The injunction bond filed by private respondent Indigo Distribution Corporation, they stress, is not even
sufficient to cover all the original private respondents, much less, intervenor-corporations.

The petition is partly meritorious.

At the outset, it bears emphasis that only questions relating to the propriety of the issuance of the May
4, 2005 Order and the Writ of Preliminary Injunction are properly within the scope of the present
petition and shall be so addressed in order to determine if public respondent committed grave abuse of
discretion. The arguments raised by private respondents which pertain to the constitutionality of R.A.
No. 9334 subject matter of the case pending litigation before the trial court have no bearing in resolving
the present petition.

Section 3 of Rule 58 of the Revised Rules of Court provides:

SEC. 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it
is established.

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

For a writ of preliminary injunction to issue, the plaintiff must be able to establish that (1) there is a
clear and unmistakable right to be protected, (2) the invasion of the right sought to be protected is
material and substantial, and (3) there is an urgent and paramount necessity for the writ to prevent
serious damage.27

Conversely, failure to establish either the existence of a clear and positive right which should be
judicially protected through the writ of injunction, or of the acts or attempts to commit any act which
endangers or tends to endanger the existence of said right, or of the urgent need to prevent serious
damage, is a sufficient ground for denying the preliminary injunction.28

It is beyond cavil that R.A. No. 7227 granted private respondents exemption from local and national
taxes, including excise taxes, on their importations of general merchandise, for which reason they
enjoyed tax-exempt status until the effectivity of R.A. No. 9334.

By subsequently enacting R.A. No. 9334, however, Congress expressed its intention to withdraw private
respondents’ tax exemption privilege on their importations of cigars, cigarettes, distilled spirits,
fermented liquors and wines. Juxtaposed to show this intention are the respective provisions of Section
131 of the NIRC before and after its amendment by R.A. No. 9334:

x x x x.

Sec. 131 of NIRC before R.A. No. 9334 Sec. 131, as amended by R.A. No. 9334

Sec. 131. Payment of Excise Taxes on Sec. 131. Payment of Excise Taxes on
Imported Articles. – Imported Articles. –

(A) Persons Liable. – Excise taxes on
imported articles shall be paid by the
owner or importer to the Customs
Officers, conformably with the regulations
of the Department of Finance and before
the release of such articles from the
customs house or by the person who is
found in possession of articles which are
(A) Persons Liable. – Excise taxes on
imported articles shall be paid by the
owner or importer to the Customs
Officers, conformably with the regulations
of the Department of Finance and before
the release of such articles from the
customs house or by the person who is
found in possession of articles which are
exempt from excise taxes other than those exempt from excise taxes other than those
legally entitled to exemption. legally entitled to exemption.

In the case of tax-free articles brought or In the case of tax-free articles brought or
imported into the Philippines by persons, imported into the Philippines by persons,
entities or agencies exempt from tax entities or agencies exempt from tax
which are subsequently sold, transferred which are subsequently sold, transferred
or exchanged in the Philippines to non- or exchanged in the Philippines to non-
exempt persons or entities, the purchasers exempt persons or entities, the purchasers
or recipients shall be considered the or recipients shall be considered the
importers thereof, and shall be liable for importers thereof, and shall be liable for
the duty and internal revenue tax due on the duty and internal revenue tax due on
such importation. such importation.

The provision of any special or general law The provision of any special or general
to the contrary notwithstanding, the law to the contrary notwithstanding, the
importation of cigars and cigarettes, importation of cigars and cigarettes,
distilled spirits, fermented liquors and distilled spirits, fermented liquors and
wines into the Philippines, even if destined wines into the Philippines, even if
for tax and duty free shops, shall be destined for tax and duty free shops, shall
subject to all applicable taxes, duties, be subject to all applicable taxes, duties,
charges, including excise taxes due charges, including excise taxes due
thereon. Provided, however, That this thereon. This shall apply to cigars and
shall not apply to cigars and cigarettes, cigarettes, distilled spirits, fermented
fermented spirits and wines brought liquors and wines brought directly into
directly into the duly chartered or the duly chartered or legislated freeports
legislated freeports of the Subic Economic of the Subic Economic Freeport Zone,
Freeport Zone, created under Republic created under Republic Act No. 7227; the
Act No. 7227; the Cagayan Special Cagayan Special Economic Zone and
Economic Zone and Freeport, created Freeport, created under Republic Act No.
under Republic Act No. 7922; and the 7922; and the Zamboanga City Special
Zamboanga City Special Economic Zone, Economic Zone, created under Republic
created under Republic Act No. 7903, and Act No. 7903, and such other freeports as
are not transshipped to any other port in may hereafter be established or created
the Philippines: Provided, further, That by law: Provided, further, That
importations of cigars and cigarettes, importations of cigars and cigarettes,
distilled spirits, fermented liquors and distilled spirits, fermented liquors and
wines made directly by a government- wines made directly by a government-
owned and operated duty-free shop, like owned and operated duty-free shop, like
the Duty Free Philippines (DFP), shall be the Duty Free Philippines (DFP), shall be
exempted from all applicable duties, exempted from all applicable duties
charges, including excise tax due only: Provided still further, That such
thereon; Provided still further, That such articles directly imported by a
articles directly imported by a government-owned and operated duty-
government-owned and operated duty- free shop, like the Duty-Free Philippines,
 free shop, like the Duty-Free Philippines, shall be labeled "tax and duty-free" and
shall be labeled "tax and duty-free" and "not for resale": Provided, finally, That the
"not for resale": Provided, still further, removal and transfer of tax and duty-free
That if such articles brought into the duly goods, products, machinery, equipment
chartered or legislated freeports under and other similar articles other than cigars
Republic Acts Nos. 7227, 7922 and 7903 and cigarettes, distilled spirits, fermented
are subsequently introduced into the liquors and wines, from one Freeport to
Philippine customs territory, then such another Freeport, shall not be deemed an
articles shall, upon such introduction, be introduction into the Philippine customs
deemed imported into the Philippines and territory.
shall be subject to all imposts and excise
x x x x.
taxes provided herein and other statutes:
Provided, finally, That the removal and
transfer of tax and duty-free goods,
products, machinery, equipment and
other similar articles, from one freeport to
another freeport, shall not be deemed an
introduction into the Philippine customs
territory.

x x x x.

(Emphasis and underscoring supplied)

To note, the old Section 131 of the NIRC expressly provided that all taxes, duties, charges, including
excise taxes shall not apply to importations of cigars, cigarettes, fermented spirits and wines brought
directly into the duly chartered or legislated freeports of the SBF.

On the other hand, Section 131, as amended by R.A. No. 9334, now provides that such taxes, duties and
charges, including excise taxes, shall apply to importation of cigars and cigarettes, distilled spirits,
fermented liquors and wines into the SBF.

Without necessarily passing upon the validity of the withdrawal of the tax exemption privileges of
private respondents, it behooves this Court to state certain basic principles and observations that should
throw light on the propriety of the issuance of the writ of preliminary injunction in this case.

First. Every presumption must be indulged in favor of the constitutionality of a statute.29 The burden of
proving the unconstitutionality of a law rests on the party assailing the law.30 In passing upon the validity
of an act of a co-equal and coordinate branch of the government, courts must ever be mindful of the
time-honored principle that a statute is presumed to be valid.

Second. There is no vested right in a tax exemption, more so when the latest expression of legislative
intent renders its continuance doubtful. Being a mere statutory privilege,31 a tax exemption may be
modified or withdrawn at will by the granting authority.32

To state otherwise is to limit the taxing power of the State, which is unlimited, plenary, comprehensive
and supreme. The power to impose taxes is one so unlimited in force and so searching in extent, it is
subject only to restrictions which rest on the discretion of the authority exercising it.33
Third. As a general rule, tax exemptions are construed strictissimi juris against the taxpayer and liberally
in favor of the taxing authority.34 The burden of proof rests upon the party claiming exemption to prove
that it is in fact covered by the exemption so claimed.35 In case of doubt, non-exemption is favored.36

Fourth. A tax exemption cannot be grounded upon the continued existence of a statute which precludes
its change or repeal.37 Flowing from the basic precept of constitutional law that no law is irrepealable,
Congress, in the legitimate exercise of its lawmaking powers, can enact a law withdrawing a tax
exemption just as efficaciously as it may grant the same under Section 28(4) of Article VI38 of the
Constitution. There is no gainsaying therefore that Congress can amend Section 131 of the NIRC in a
manner it sees fit, as it did when it passed R.A. No. 9334.

Fifth. The rights granted under the Certificates of Registration and Tax Exemption of private respondents
are not absolute and unconditional as to constitute rights in esse – those clearly founded on or granted
by law or is enforceable as a matter of law.39

These certificates granting private respondents a "permit to operate" their respective businesses are in
the nature of licenses, which the bulk of jurisprudence considers as neither a property nor a property
right.40 The licensee takes his license subject to such conditions as the grantor sees fit to impose,
including its revocation at pleasure.41 A license can thus be revoked at any time since it does not confer
an absolute right.42

While the tax exemption contained in the Certificates of Registration of private respondents may have
been part of the inducement for carrying on their businesses in the SBF, this exemption, nevertheless, is
far from being contractual in nature in the sense that the non-impairment clause of the Constitution can
rightly be invoked.43

Sixth. Whatever right may have been acquired on the basis of the Certificates of Registration and Tax
Exemption must yield to the State’s valid exercise of police power.44 It is well to remember that taxes
may be made the implement of the police power.45

It is not difficult to recognize that public welfare and necessity underlie the enactment of R.A. No. 9334.
As petitioners point out, the now assailed provision was passed to curb the pernicious practice of some
unscrupulous business enterprises inside the SBF of using their tax exemption privileges for smuggling
purposes. Smuggling in whatever form is bad enough; it is worse when the same is allegedly
perpetrated, condoned or facilitated by enterprises hiding behind the cloak of their tax exemption
privileges.

Seventh. As a rule, courts should avoid issuing a writ of preliminary injunction which would in effect
dispose of the main case without trial.46 This rule is intended to preclude a prejudgment of the main
case and a reversal of the rule on the burden of proof since by issuing the injunctive writ, the court
would assume the proposition that petitioners are inceptively duty bound to prove.47

Eighth. A court may issue a writ of preliminary injunction only when the petitioner assailing a statute has
made out a case of unconstitutionality or invalidity strong enough, in the mind of the judge, to
overcome the presumption of validity, in addition to a showing of a clear legal right to the remedy
sought.48
Thus, it is not enough that petitioners make out a case of unconstitutionality or invalidity to overcome
the prima faciepresumption of validity of a statute; they must also be able to show a clear legal right
that ought to be protected by the court. The issuance of the writ is therefore not proper when the
complainant’s right is doubtful or disputed.49

Ninth. The feared injurious effects of the imposition of duties, charges and taxes on imported cigars,
cigarettes, distilled spirits, fermented liquors and wines on private respondents’ businesses cannot
possibly outweigh the dire consequences that the non-collection of taxes, not to mention the unabated
smuggling inside the SBF, would wreak on the government. Whatever damage would befall private
respondents must perforce take a back seat to the pressing need to curb smuggling and raise revenues
for governmental functions.

All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower
court, this Court may and should intervene in a clear case of abuse.50

One such case of grave abuse obtained in this case when public respondent issued his Order of May 4,
2005 and the Writ of Preliminary Injunction on May 11, 200551 despite the absence of a clear and
unquestioned legal right of private respondents.

In holding that the presumption of constitutionality and validity of R.A. No. 9334 was overcome by
private respondents for the reasons public respondent cited in his May 4, 2005 Order, he disregarded
the fact that as a condition sine qua non to the issuance of a writ of preliminary injunction, private
respondents needed also to show a clear legal right that ought to be protected. That requirement is not
satisfied in this case.

To stress, the possibility of irreparable damage without proof of an actual existing right would not justify
an injunctive relief.52

Besides, private respondents are not altogether lacking an appropriate relief under the law. As
petitioners point out in their Petition53 before this Court, private respondents may avail themselves of a
tax refund or tax credit should R.A. No. 9334 be finally declared invalid.

Indeed, Sections 20454 and 22955 of the NIRC provide for the recovery of erroneously or illegally
collected taxes which would be the nature of the excise taxes paid by private respondents should
Section 6 of R.A. No. 9334 be declared unconstitutional or invalid.

It may not be amiss to add that private respondents can also opt not to import, or to import less of,
those items which no longer enjoy tax exemption under R.A. No. 9334 to avoid the payment of taxes
thereon.

The Court finds that public respondent had also ventured into the delicate area which courts are
cautioned from taking when deciding applications for the issuance of the writ of preliminary injunction.
Having ruled preliminarily against the prima facie validity of R.A. No. 9334, he assumed in effect the
proposition that private respondents in their petition for declaratory relief were duty bound to prove,
thereby shifting to petitioners the burden of proving that R.A. No. 9334 is not unconstitutional or
invalid.

In the same vein, the Court finds public respondent to have overstepped his discretion when he
arbitrarily fixed the injunction bond of the SBF enterprises at only P1million.
The alleged sparseness of the testimony of Indigo Corporation’s representative56 on the injury to be
suffered by private respondents may be excused because evidence for a preliminary injunction need not
be conclusive or complete. Nonetheless, considering the number of private respondent enterprises and
the volume of their businesses, the injunction bond is undoubtedly not sufficient to answer for the
damages that the government was bound to suffer as a consequence of the suspension of the
implementation of the assailed provisions of R.A. No. 9334.

Rule 58, Section 4(b) provides that a bond is executed in favor of the party enjoined to answer for all
damages which it may sustain by reason of the injunction. The purpose of the injunction bond is to
protect the defendant against loss or damage by reason of the injunction in case the court finally
decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly.57

Recalling this Court’s pronouncements in Olalia v. Hizon58 that:

x x x [T]here is no power the exercise of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an
injunction. It is the strong arm of equity that should never be extended unless to cases of great injury,
where courts of law cannot afford an adequate or commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the freedom of action of the
defendant and should not be granted lightly or precipitately. It should be granted only when the court is
fully satisfied that the law permits it and the emergency demands it,

it cannot be overemphasized that any injunction that restrains the collection of taxes, which is the
inevitable result of the suspension of the implementation of the assailed Section 6 of R.A. No. 9334, is a
limitation upon the right of the government to its lifeline and wherewithal.

The power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people.59 That the enforcement of tax laws and the
collection of taxes are of paramount importance for the sustenance of government has been repeatedly
observed. Taxes being the lifeblood of the government that should be collected without unnecessary
hindrance,60 every precaution must be taken not to unduly suppress it.

Whether this Court must issue the writ of prohibition, suffice it to stress that being possessed of the
power to act on the petition for declaratory relief, public respondent can proceed to determine the
merits of the main case. To halt the proceedings at this point may be acting too prematurely and would
not be in keeping with the policy that courts must decide controversies on the merits.

Moreover, lacking the requisite proof of public respondent’s alleged partiality, this Court has no ground
to prohibit him from proceeding with the case for declaratory relief. For these reasons, prohibition does
not lie.

WHEREFORE, the Petition is PARTLY GRANTED. The writ of certiorari to nullify and set aside the Order of
May 4, 2005 as well as the Writ of Preliminary Injunction issued by respondent Judge Caguioa on May
11, 2005 is GRANTED. The assailed Order and Writ of Preliminary Injunction are hereby declared NULL
AND VOID and accordingly SET ASIDE. The writ of prohibition prayed for is, however, DENIED.

SO ORDERED.
G.R. No. 179665 April 3, 2013

SOLID BUILDERS, INC. and MEDINA FOODS INDUSTRIES, INC., Petitioners,

vs.
CHINA BANKING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This petition for review on certiorari1 assails the Decision2 dated April 16, 2007 and the
Resolution3 dated September 18, 2007 of the Court of Appeals in CA-G.R. SP No. 81968.

During the period from September 4, 1992 to March 27, 1996, China Banking Corporation (CBC) granted
several loans to Solid Builders, Inc. (SBI), which amounted to ₱139,999,234.34, exclusive of interests and
other charges. To secure the loans, Medina Foods Industries, Inc. (MFII) executed in CBC’s favor several
surety agreements and contracts of real estate mortgage over parcels of land in the Loyola Grand Villas
in Quezon City and New Cubao Central in Cainta, Rizal.4

Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged properties
and share the proceeds with CBC on a 50-50 basis until such time that the whole obligation would be
fully paid. SBI also proposed that there be partial releases of the certificates of title of the mortgaged
properties without the burden of updating interests on all loans.5

In a letter dated March 20, 2000 addressed to CBC, SBI requested the restructuring of its loans, a
reduction of interests and penalties and the implementation of a dacion en pago of the New Cubao
Central property.6

The letter reads:

March 20, 2000

CHINA BANKING CORPORATION

Dasmarinas cor. Juan Luna Sts.
Binondo, Manila

Attn: Mr. George Yap

Account Officer

Dear Mr. Yap,

This is to refer to our meeting held at your office last March 10, 2000.

In this regard, please allow us to call your attention on the following important matters we have
discussed:

1. With respect to the penalties, we are requesting for a reduction in the rates as we find it onerous
considering the big amount of our loan (₱218,540,648.00). The interest together with the penalties that
you are imposing is similar to the ones being charged by private lending institutions, i.e., 4.5%/month
total.
2. As I had discussed with you regarding Dacion en Pago, which you categorically stated that it could be
a possibility, we are considering putting our New Cubao Central (NCC) on Dacion and restructuring our
loan with regards to our Loyola Grand Villas.

Considering that you had stated that our restructuring had not been finalized, we find it timely to raise
these urgent matters and possibly agree on a realistic and workable scheme that we can incorporate on
our final agreement.

Thank you and we strongly hope for your prompt consideration on our request.

Very truly yours,

V. BENITO R. SOLIVEN (Sgd.)

President7

In response, CBC sent SBI a letter dated April 17, 2000 stating that the loans had been completely
restructured effective March 1, 1999 in the amount of ₱218,540,646.00. On the aspect of interests and
charges, CBC suggested the updating of the obligation to avoid paying interests and charges.8 The
relevant portion of the letter dated April 17, 2000 reads:

First of all, to clarify, the loan’s restructuring has been finalized and completed on 3/01/99 with the
booking of the Restructured loan of ₱218,540,646. Only two Amendments of Real Estate Mortgages
remain to be registered to date. Certain documents that we requested from your company since last
year, that could facilitate this amendment have not yet been forwarded to us until now. Nevertheless,
this does not change the fact that the restructuring of the loan has been done with and finalized.

This in turn is with regards to statement[s] no. 1 & 2 of your letter, referring to the interest rates and
penalties. As per our records, the rates are actually the prevailing bank interest rates. In addition,
penalty charges are imposed in the event of non-payment. To avoid experiencing having to pay more
due to the penalty charges, updating of obligations is necessary. Thus, we advise updating of your
obligations to avoid penalty charges. However, should you be able to update both interest and penalty
through a "one-time" payment, we shall present your request to Senior Management for possible
reduction in penalty charges.

Concerning statement no. 3 containing your request for the possible Dacion en Pago of your NCC
properties, as was discussed already in the meeting, it is a concern that has to be discussed with Senior
Management and approved by the Executive Committee before we can commit to you on the matter.
We suggest that your company, Solid Builders, exhaust all possibilities to sell the NCC properties
yourselves because, being a real estate company, Solid has better ways and means of selling the
properties.9

This was followed by another communication from CBC to SBI reiterating, among others, that the loan
has been restructured effective March 1, 1999 upon issuance by SBI of promissory notes in favor of CBC.
The relevant portion of that letter dated May 19, 2000 reads:

Again, in response to your query with regards the issue of the loans restructuring, to reiterate, the loan
restructuring has been finalized and completed on 3/01/99 with the booking of the Restructured loan of
₱231,716,646. The Restructured Loan was effective ever since the new Promissory Note was signed on
the said date.
The interest rates for the loans are actually rates booked since the new Promissory Notes were
effective.1âwphi1 Any move of changing it or "re-pricing" the interest is only possible every 90 days
from the booking date, which represents the interest amortization payment dates. No change or "re-
pricing" in interest rates is possible since interest payment/obligations have not yet been paid.

With regards to the possible Dacion en Pago of your NCC properties, as was discussed already in the
meeting, it is a concern that has to be discussed with Senior Management and approved by the
Executive Committee before we can commit to you on the matter. We suggest that your company, Solid
Builders, exhaust all possibilities to sell the NCC properties yourselves because, being a real estate
company, Solid has better ways and means of selling the properties.10

Subsequently, in a letter dated September 18, 2000, CBC demanded SBI to settle its outstanding account
within ten days from receipt thereof. The letter dated September 18, 2000 reads:

September 18, 2000

SOLID BUILDERS, INC.

V.V. Soliven Bldg., I
EDSA, San Juan, Metro Manila

1âwphi1

PN NUMBER O/S BALANCE DUE DATE INTEREST

PN-MK-TS-342924 PHP 89,700,000.00 03/01/2004 04/13/1999

PN-MK-TS-342931 19,350,000.00 03/01/2004 08/05/1999

PN-MK-TS-342948 35,888,000.00 03/01/2004 ---------------

PN-MK-TS-342955 6,870,000.00 03/01/2004 ---------------

PN-MK-TS-342962 5,533,646.00 03/01/2004 07/26/1999

PN-MK-TS-342979 21,950,000.00 03/01/2004 ---------------

PN-MK-TS-342986 3,505,000.00 03/01/2004 08/09/1999

PN-MK-TS-342993 19,455,000.00 03/01/2004 ---------------

PN-MK-TS-343002 4,168,000.00 03/01/2004 ---------------

PN-MK-TS-343026 12,121,000.00 03/01/2004 ---------------

 PH₱218,540,646.00
================

Greetings!

We refer again to the balances of the abovementioned Promissory Notes amounting to

PH₱218,540,646.00 excluding interest, penalties and other charges signed by you jointly and severally in
our favor, which remains unpaid up to this date despite repeated demands for payment.

In view of the strict regulations of Bangko Sentral ng Pilipinas on past due accounts, we regret that we
cannot hold these accounts further in abeyance. Accordingly, we are reiterating our request that
arrangements to have these accounts settled within ten (10) days from receipt hereof, otherwise, we
shall be constrained to refer the matter to our lawyers for collection.

We enclose a Statement of Account as of September 30, 2000 for your reference and guidance.

Very truly yours,

MERCEDES E. GERMAN (Sgd.)

Manager

Loans & Discounts Department – H.O.11

On October 5, 2000, claiming that the interests, penalties and charges imposed by CBC were iniquitous
and unconscionable and to enjoin CBC from initiating foreclosure proceedings, SBI and MFII filed a
Complaint "To Compel Execution of Contract and for Performance and Damages, With Prayer for Writ of
Preliminary Injunction and Ex-Parte Temporary Restraining Order" in the Regional Trial Court (RTC) of
Pasig City. The case was docketed as Civil Case No. 68105 and assigned to Branch 264.12

In support of their application for the issuance of writ of preliminary injunction, SBI and MFII alleged:

IV. APPLICATION FOR PRELIMINARY INJUNCTION WITH EX- PARTE TEMPORARY RESTRAINING ORDER

A. GROUNDS FOR PRELIMINARY INJUNCTION

1. That SBI and MFII are entitled to the reliefs demanded, among which is enjoining/restraining the
commission of the acts complained of, the continuance of which will work injustice to the plaintiffs; that
such acts are in violation of the rights of plaintiffs and, if not enjoined/restrained, will render the
judgment sought herein ineffectual.

2. That under the circumstances, it is necessary to require, through preliminary injunction, CBC to refrain
from immediately enforcing its letters dated April 17, 2000 and May 19, 2000 and September 18, 2000
during the pendency of this complaint, and

3. That SBI and MFII submit that they are exempt from filing of a bond considering that the letters dated
April 17, 2000, May 19, 2000 and September 18, 2000 are a patent nullity, and in the event they are not,
they are willing to post such bond this Honorable Court may determine and under the conditions
required by Section 4, Rule 58.13
In its Answer and Opposition to the issuance of the writ of preliminary injunction, CBC alleged that to
implement the agreed restructuring of the loan, SBI executed ten promissory notes stipulating that the
interest rate shall be at 18.5% per annum. For its part, MFII executed third party real estate mortgage
over its properties in favor of CBC to secure the payment of SBI’s restructured loan. As SBI was
delinquent in the payment of the principal as well as the interest thereon, CBC demanded settlement of
SBI’s account.14

After hearing the parties, the trial court issued an Order dated December 14, 2000 granting the
application of SBI and MFII for the issuance of a writ of preliminary injunction. The trial court held that
SBI and MFII were able to sufficiently comply with the requisites for the issuance of an injunctive writ:

It is well-settled that to be entitled to an injunctive writ, a party must show that: (1) the invasion of right
sought to be protected is material and substantial; (2) the right of complainant is clear and
unmistakable; and, (3) there is an urgent and paramount necessity for the writ to prevent serious
damage.

The Court opines that the above-mentioned requisites have been sufficiently shown by plaintiffs in this
case, accordingly, a writ of preliminary injunction is in order.

The three subject letters, particularly the letter dated September 18, 2000, indicate that the promissory
notes executed by Benito Soliven as President of plaintiff SBI amounted to ₱218,540,646.00, excluding
interest, penalties and other charges remained unpaid, and demand that the account be settled within
ten days, else defendant bank shall refer the latter to its lawyers for collection.

The message in the letter is clear: If the account is not settled within the grace period, defendant bank
will resort to foreclosure of mortgage on the subject properties.

The actual or imminent damage to plaintiffs is likewise clear. Considering the number of parcels of land
and area involved, if these are foreclosed by defendant bank, plaintiffs’ properties and source of income
will be effectively diminished, possibly to the point of closure.

The only issue remaining is whether or not plaintiffs have the right to ask for an injunctive writ in order
to prevent defendant bank from taking over their properties.

Plaintiffs argued that the interest and penalties charged them in the subject letters and attached
statements of account increased during a seven-month period to an amount they described as
"onerous", "usurious" ad "greedy".

They likewise asserted that there were on-going talks between officers of the corporations involved to
treat or restructure the contracts to a dacion en pago, as there was a proposed plan of action by
representatives of plaintiffs during the meetings.

Defendant, on the other hand, sought to explain the increase in the interest as contained in the
promissory notes which were voluntarily and willingly signed by Soliven, therefore, binding on plaintiffs
and that the proposed plan of action is merely an oral contract still in the negotiation stage and not
binding.

The condition on the interest payments as contained in the promissory notes are as follows:
"Interest for the first quarter shall be @ 18.5% P.A. Thereafter, it shall be payable quarterly in arrears
based on three months average rate."

In its Memorandum, defendant bank tried to show that the questioned increase in the interests was
merely in compliance with the above condition. To this Court, the explanation is insufficient. A more
detailed rationalization is required to convince the court of the fairness of the increase in interests and
penalties.

However, the coming explanation may probably be heard only during trial on the merits, and by then
this pending incident or the entire case, may already be moot and academic if the injunctive writ is not
issued.15

The dispositive portion of the trial court’s Order dated December 14, 2000 reads:

WHEREFORE, premises considered, the application for issuance of writ of preliminary injunction is
GRANTED.

Defendant CHINA BANKING CORPORATION, its representatives, agents and all persons working in its
behalf are hereby enjoined from enforcing the contents of its letters to plaintiffs dated April 17, 2000,
May 19, 2000 and September 18, 2000, particularly the bank’s legal department or other counsel
commencing collection proceedings against plaintiffs in the amount stated in the letters and statements
of account.

The Writ of Preliminary Injunction shall be issued upon plaintiffs’ posting of a bond executed to
defendant in the amount of Two Million Pesos (₱2,000,000.00) to the effect [that] the plaintiffs will pay
defendant all damages which the latter may sustain by reason of the injunction if it be ultimately
decided that the injunction is unwarranted.16

CBC sought reconsideration but the trial court denied it in an Order17 dated December 10, 2001.

Subsequently, CBC filed a "Motion to Dissolve Injunction Order" but this was denied in an Order18 dated
November 10, 2003. The trial court ruled that the motion was in the nature of a mere belated second
motion for reconsideration of the Order dated December 14, 2000. It also declared that CBC failed to
substantiate its prayer for the dissolution of the injunctive writ.

Aggrieved, CBC filed a Petition for Certiorari docketed as CA-G.R. SP No. 81968 in the Court of Appeals
where it claimed that the Orders dated December 14, 2000 (granting the application of petitioners SBI
and MFII for the issuance of writ of preliminary injunction), December 10, 2001 (denying reconsideration
of the order dated December 14, 2000), and November 10, 2003 (denying the CBC’s motion to dissolve
injunction order) were all issued with grave abuse of discretion amounting to lack of jurisdiction.19

In a Decision dated April 16, 2007, the Court of Appeals found that, on its face, the trial court’s Order
dated December 14, 2000 granting the application of SBI and MFII for the issuance of a writ of
preliminary injunction had no basis as there were no findings of fact or law which would indicate the
existence of any of the requisites for the grant of an injunctive writ. It appeared to the Court of Appeals
that, in ordering the issuance of a writ of injunction, the trial court simply relied on the imposition by
CBC of the interest rates to the loans obtained by SBI and MFII. According to the Court of Appeals,
however, the records do not reveal a clear and unmistakable right on the part of SBI and MFII that
would entitle them to the protection of a writ of preliminary injunction. Thus, the Court of Appeals
granted the petition of CBC, set aside the Orders dated December 14, 2000, December 10, 2001, and
November 10, 2003 and dissolved the injunctive writ issued by the RTC of Pasig City.20

SBI and MFII filed a motion for reconsideration but it was denied by the Court of Appeals in a Resolution
dated September 18, 2007.

Hence, this petition.

SBI and MFII assert that the Decision dated April 16, 2007 of the Court of Appeals is legally infirm as its
conclusions are contrary to the judicial admissions of CBC. They allege that, in its Answer, CBC admitted
paragraphs 25 and 26 of the Complaint regarding the interests and charges amounting to
₱35,093,980.14 and ₱80,614,525.15, respectively, which constituted more than 50% of the total
obligation of ₱334,249,151.29 as of February 15, 2000. For SBI and MFII, CBC’s admission of paragraphs
25 and 26 of the Complaint is an admission that the interest rate imposed by CBC is usurious, exorbitant
and confiscatory. Thus, when the Court of Appeals granted the petition of CBC and ordered the lifting of
the writ of preliminary injunction it effectively disposed of the main case, Civil Case No. 68105, without
trial on the merits and rendered moot and academic as it enabled CBC to foreclose on the mortgages
despite the usurious, exorbitant and confiscatory interest rates.21

SBI and MFII also claim that the Court of Appeals either overlooked or disregarded undisputed and
admitted facts which, if properly considered, would have called for the maintenance and preservation of
the preliminary injunction issued by the trial court. They argue that the Court of Appeals did not even
consider Article 1229 of the Civil Code which provides:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.

For SBI and MFII, the failure of the Court of Appeals to take into account Article 1229 of the Civil Code
and its act of lifting the preliminary injunction "would definitely pave the way for CBC’s unbridled
imposition of illegal rates of interest and immediate foreclosure" of the properties of SBI and MFII
"without the benefit of a full blown trial."22

For its part, CBC assails the petition contending that it is not allowed under Rule 45 of the Rules of Court
because it simply raises issues of fact and not issues of law. CBC further asserts that the Decision of the
Court of Appeals is an exercise of sound judicial discretion as it is in accord with the law and the
applicable provisions of this Court.23

The petition fails.

This Court has recently reiterated the general principles in issuing a writ of preliminary injunction in
Palm Tree Estates, Inc. v. Philippine National Bank24:

A preliminary injunction is an order granted at any stage of an action prior to judgment of final order,
requiring a party, court, agency, or person to refrain from a particular act or acts. It is a preservative
remedy to ensure the protection of a party’s substantive rights or interests pending the final judgment
in the principal action. A plea for an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for otherwise, the outcome of a litigation would be
useless as far as the party applying for the writ is concerned.
At times referred to as the "Strong Arm of Equity," we have consistently ruled that there is no power the
exercise of which is more delicate and which calls for greater circumspection than the issuance of an
injunction. It should only be extended in cases of great injury where courts of law cannot afford an
adequate or commensurate remedy in damages; "in cases of extreme urgency; where the right is very
clear; where considerations of relative inconvenience bear strongly in complainant’s favor; where there
is a willful and unlawful invasion of plaintiff’s right against his protest and remonstrance, the injury
being a continuing one, and where the effect of the mandatory injunction is rather to reestablish and
maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted by
the defendant, than to establish a new relation."

A writ of preliminary injunction is an extraordinary event which must be granted only in the face of
actual and existing substantial rights. The duty of the court taking cognizance of a prayer for a writ of
preliminary injunction is to determine whether the requisites necessary for the grant of an injunction
are present in the case before it.25 In this connection, a writ of preliminary injunction is issued to
preserve the status quo ante, upon the applicant’s showing of two important requisite conditions,
namely: (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are
violative of that right. It must be proven that the violation sought to be prevented would cause an
irreparable injury.26

Here, SBI and MFII basically claim a right to have their mortgaged properties shielded from foreclosure
by CBC on the ground that the interest rate and penalty charges imposed by CBC on the loans availed of
by SBI are iniquitous and unconscionable. In particular, SBI and MFII assert:

There is therefore an urgent necessity for the issuance of a writ of preliminary injunction or at least a
status quo [order], otherwise, respondent bank will definitely foreclose petitioners’ properties without
awaiting the trial of the main case on the merits, with said usurious and confiscatory rates of interest as
basis.27

and

There is therefore no legal justification for the Honorable Court of Appeals to lift/dissolve the injunction
issued by the trial court, otherwise, respondent bank – on the basis of this illegal imposition of interest –
can already foreclose the properties of petitioners and render the whole case (sans trial on the merits)
moot and academic.28

On this matter, the Order dated December 14, 2000 of the trial court enumerates as the first argument
raised by SBI and MFII in support of their application for the issuance of a writ of preliminary injunction:

1. Their rights basically are for the protection of their properties put up as collateral for the loans
extended by defendant bank to them.29

As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee
CBC from foreclosing on the mortgaged properties simply on the basis of alleged "usurious, exorbitant
and confiscatory rate of interest."30 First, assuming that the interest rate agreed upon by the parties is
usurious, the nullity of the stipulation of usurious interest does not affect the lender’s right to recover
the principal loan, nor affect the other terms thereof.31 Thus, in a usurious loan with mortgage, the right
to foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the
debtor to pay the debt due.32
Second, even the Order dated December 14, 2000 of the trial court, which granted the application for
the issuance of a writ of preliminary injunction, recognizes that the parties still have to be heard on the
alleged lack of "fairness of the increase in interests and penalties" during the trial on the merits.33 Thus,
the basis of the right claimed by SBI and MFII remains to be controversial or disputable as there is still a
need to determine whether or not, upon consideration of the various circumstances surrounding the
agreement of the parties, the interest rates and penalty charges are unconscionable. Therefore, such
claimed right cannot be considered clear, actual and subsisting. In the absence of a clear legal right, the
issuance of the injunctive writ constitutes grave abuse of discretion.34

The Order dated December 10, 2001 also shows the reasoning of the trial court which betrays that its
grant of the application of SBI and MFII for the issuance of a writ of preliminary injunction was not based
on a clear legal right. Said the trial court:

It was likewise shown that plaintiffs SBI and MFII had the clear right and urgency to ask for injunction
because of the issue of validity of the increase in the amount of the loan obligation.35 (Emphasis
supplied.)

At most, the above finding of the trial court that the validity of the increase in the amount of the loan
obligation is in issue simply amounted to a finding that the rights of SBI and MFII vis-à-vis that of CBC are
disputed and debatable. In such a case where the complainant-movant’s right is doubtful or disputed,
the issuance of an injunctive writ is not proper.36

Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless
disintegrates in the face of the ten promissory notes in the total amount of ₱218,540,648.00, exclusive
of interest and penalties, issued by SBI in favor of CBC on March 1, 1999 which until now remain unpaid
despite the maturity of the said notes on March 1, 2004 and CBC’s repeated demands for
payment.37 Foreclosure is but a necessary consequence of nonpayment of mortgage indebtedness.38 As
this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.39:

Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that
the mortgagee is authorized to foreclose the mortgaged properties in case of default by the mortgagors,
the mortgagee has a clear right to foreclosure in case of default, making the issuance of a Writ of
Preliminary Injunction improper. x x x. (Citation omitted.)

In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from
availing of the equitable relief that is the injunctive writ. In particular, SBI and MFII have stated in their
Complaint that they have made various requests to CBC for restructuring of the loan.40 The trial court’s
Order dated December 14, 2000 also found that SBI wrote several letters to CBC "requesting, among
others, for a reduction of interests and penalties and restructuring of the loan."41 A debtor’s various and
constant requests for deferment of payment and restructuring of loan, without actually paying the
amount due, are clear indications that said debtor was unable to settle his obligation.42 SBI’s default or
failure to settle its obligation is a breach of contractual obligation which tainted its hands and
disqualified it from availing of the equitable remedy of preliminary injunction.

As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory follows
the principal. The accessory obligation of MFII as accommodation mortgagor and surety is tied to SBI’s
principal obligation to CBC and arises only in the event of SBI’s default.
Thus, MFII’s interest in the issuance of the writ of preliminary injunction is necessarily prejudiced by
SBI’s wrongful conduct and breach of contract.

Even Article 1229 of the Civil Code, which SBI and MFII invoke, works against them. Under that
provision, the equitable reduction of the penalty stipulated by the parties in their contract will be based
on a finding by the court that such penalty is iniquitous or unconscionable. Here, the trial court has not
yet made a ruling as to whether the penalty agreed upon by CBC with SBI and MFII is unconscionable.
Such finding will be made by the trial court only after it has heard both parties and weighed their
respective evidence in light of all relevant circumstances. Hence, for SBI and MFII to claim any right or
benefit under that provision at this point is premature.

As no clear right that warrants the extraordinary protection of an injunctive writ has been shown by SBI
and MFII to exist in their favor, the first requirement for the grant of a preliminary injunction has not
been satisfied. In the absence of any requisite, and where facts are shown to be wanting in bringing the
matter within the conditions for its issuance, the ancillary writ of injunction must be struck down for
having been rendered in grave abuse of discretion.43 Thus, the Court of Appeals did not err when it
granted the petition for certiorari of CBC and ordered the dissolution of the writ of preliminary
injunction issued by the trial court.

Neither has there been a showing of irreparable injury. An injury is considered irreparable if it is of such
constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of
law, or where there is no standard by which their amount can be measured with reasonable accuracy,
that is, it is not susceptible of mathematical computation. The provisional remedy of preliminary
injunction may only be resorted to when there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard of compensation.44

In the first place, any injury that SBI and MFII may suffer in case of foreclosure of the mortgaged
properties will be purely monetary and compensable by an appropriate judgment in a proper case
against CBC. Moreover, where there is a valid cause to foreclose on the mortgages, it cannot be
correctly claimed that the irreparable damage sought to be prevented by the application for preliminary
injunction is the loss of the mortgaged properties to auction sale.45 The alleged entitlement of SBI and
MFII to the "protection of their properties put up as collateral for the loans" they procured from CBC is
not the kind of irreparable injury contemplated by law. Foreclosure of mortgaged property is not an
irreparable damage that will merit for the debtor-mortgagor the extraordinary provisional remedy of
preliminary injunction. As this Court stated in Philippine National Bank v. Castalloy Technology
Corporation46:

All is not lost for defaulting mortgagors whose properties were foreclosed by creditors-mortgagees. The
respondents will not be deprived outrightly of their property, given the right of redemption granted to
them under the law. Moreover, in extrajudicial foreclosures, mortgagors have the right to receive any
surplus in the selling price. Thus, if the mortgagee is retaining more of the proceeds of the sale than he
is entitled to, this fact alone will not affect the validity of the sale but will give the mortgagor a cause of
action to recover such surplus. (Citation omitted.)

The En Banc Resolution in A.M. No. 99-10-05-0, Re: Procedure in Extrajudicial or Judicial Foreclosure of
Real Estate Mortgages, further stacks the odds against SBI and MFII. Issued on February 20, 2007, or
some two months before the Court of Appeals promulgated its decision in this case, the resolution
embodies the additional guidelines intended to aid courts in foreclosure proceedings, specifically
limiting the instances, and citing the conditions, when a writ against foreclosure of a mortgage may be
issued, to wit:

(1) No temporary restraining order or writ of preliminary injunction against the extrajudicial foreclosure
of real estate mortgage shall be issued on the allegation that the loan secured by the mortgage has been
paid or is not delinquent unless the application is verified and supported by evidence of payment.

(2) No temporary restraining order or writ of preliminary injunction against the extrajudicial foreclosure
of real estate mortgage shall be issued on the allegation that the interest on the loan is unconscionable,
unless the debtor pays the mortgagee at least twelve percent per annum interest on the principal
obligation as stated in the application for foreclosure sale, which shall be updated monthly while the
case is pending.

(3) Where a writ of preliminary injunction has been issued against a foreclosure of mortgage, the
disposition of the case shall be speedily resolved. To this end, the court concerned shall submit to the
Supreme Court, through the Office of the Court Administrator, quarterly reports on the progress of the
cases involving ten million pesos and above.

(4) All requirements and restrictions prescribed for the issuance of a temporary restraining order/writ of
preliminary injunction, such as the posting of a bond, which shall be equal to the amount of the
outstanding debt, and the time limitation for its effectivity, shall apply as well to a status quo order.47

The guidelines speak of strict exceptions and conditions.48 To reverse the decision of the Court of
Appeals and reinstate the writ of preliminary injunction issued by the trial court will be to allow SBI and
MFII to circumvent the guidelines and conditions provided by the En Banc Resolution in A.M. No. 99-10-
05-0 dated February 20, 2007 and prevent CBC from foreclosing on the mortgaged properties based
simply on the allegation that the interest on the loan is unconscionable. This Court will not permit such a
situation. What cannot be done directly cannot be done indirectly.49

All told, the relevant circumstances in this case show that there was failure to satisfy the requisites for
the issuance of a writ of preliminary injunction. The injunctive writ issued by the trial court should
therefore be lifted and dissolved. That was how the Court of Appeals decided. That is how it should be.

WHEREFORE, the petition is hereby DENIED.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:
[G.R. NO. 164548 : September 27, 2006]

PHILIPPINE NATIONAL BANK, Petitioner, v. RJ VENTURES REALTY & DEVELOPMENT CORPORATION and
RAJAH BROADCASTING NETWORK, INC., Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review filed under Rule 45 of the Rules of Court assailing the 31 March
2004 Decision1 and the 8 July 2004 Resolution2 of the Court of Appeals in CA-G.R. SP No. 56119. The
challenged Decision disposed, thus:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED, the assailed Orders dated July
28, 1999 and October 26, 1999, respectively, [are] REVERSED AND SET ASIDE, and the preliminary
injunction earlier issued is reinstated. No cost.3

The assailed Resolution denied petitioner Philippine National Bank's (PNB's) Motion for Reconsideration
dated 3 May 2004.

The Antecedents

As culled from the records, the facts show that on 26 February 1999, respondents RJ Ventures Realty &
Development Corporation (RJVRD) and Rajah Broasting Network, Inc. (RBN) filed a Complaint for
Injunction with Prayer for Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction4against petitioner PNB and Juan S. Baun, Jr.5 with the Regional Trial Court (RTC), Branch 66 of
Makati City, and docketed as Civil Case No. 99-452.

In its Complaint, respondents contended that on 13 June 1996, First Women's Credit Corporation
(FWCC) received an invitation to bid from PNB anent the sale of an 8,000 square meter property, located
at Paseo de Roxas corner Sen. Gil. Puyat Avenue, Makati City, and covered by Transfer Certificate of Title
No. S-15223 (Buendia Property).6 On 10 July 1996, FWCC bid the amount of P455,000.00 per square
meter or a total of P3,640,000,000.00; and pursuant to PNB Rules and Regulations on the Acceptance
and Evaluation of Proposals, it deposited ten percent (10%) of the offered price or P364,000,000.00 with
the PNB by way of two checks, No. 418796 and No. 418797, in the amounts of P312,000,000.00
and P52,000,000.00, respectively.7 On 11 July 1996, FWCC submitted a revised offer increasing its bid
by P5,000.00 per square meter or a total additional amount of P40,000,000.00. In view of the increase,
FWCC deposited with PNB an additional amount of P4,000,000.00.8 On 17 July 1996, FWCC was awarded
the Buendia Property.9 PNB's Notice of Award to FWCC set a condition that within thirty (30) calendar
days from receipt of the same, the successful offeror shall tender payment of the balance of the
purchase price in the form of a manager's or cashier's check.10 On 24 July 1996, FWCC, invoking Section
7.211 of the PNB Rules requested PNB to finance the entire balance of the purchase price.12 On 17
September 1996 and pending action on its loan application, FWCC assigned all its rights, claims, interest,
and title over the Buendia Property to RJVRD.13 The latter assumed the right to purchase the Buendia
Property and the obligations of FWCC to PNB on the balance of the bid price.

Respondents further posited that PNB initially refused to finance the entire balance of the purchase
price except to the extent of seventy-five percent (75%) thereof.14 However, PNB finally agreed to grant
a loan to RJVRD equivalent to eighty percent (80%) of the purchase price or for the amount
of P2,944,000,000.00. The grant was conditioned on the deposit by RJVRD with PNB of an additional ten
percent (10%) of the purchase price to the first ten percent (10%) downpayment which the former had
paid. Otherwise stated, RJVRD was required to raise an additional amount
of P368,000,000.00.15Moreover, to allow RJVRD to raise the additional amount, PNB proposed to lend
RBN the required amount, the latter being an affiliate company of RJVRD, which amount will be
available for relending to RJVRD.16

Respondents described the said arrangement in this wise:

15.0 PNB shall extend a loan to RBN in the amount of P350,000,000.00 which in turn would be loaned to
RJVRD.

15.1 The proceeds of the loan shall be used by RJVRD to partially pay the additional 10%
or P368,000,000.00 deposit on the Property. PNB documents would however show that the loan was for
the expansion of RBN.

15.2 Mr. Ramon P. Jacinto, the majority stockholder of RJVRD will pledge to PNB 70% of his shares of
stock in RBN and 40% of his shares of stock in FWCC.17

Moreover, in their Complaint a quo, respondents avowed that on 30 September 1996, following the
payment by RJVRD to PNB of the additional deposit of P368,000,000.00, the parties entered into a loan
agreement wherein PNB will finance the balance of the purchase price in the amount
of P2,944,000,000.00 subject to conditions, inter alia, that after the transfer of the Buendia Property in
the name of RJVRD, the same shall be mortgaged in favor of PNB. On even date, RJVRD and PNB
executed a Loan Agreement.18 A Deed of Sale19 and a Real Estate Mortgage,20 both dated 30 September
1996 were similarly executed between RJVRD and PNB over the Buendia Property. The Loan Agreement
included a two-way peso/dollar convertibility feature at the option of RJVRD; hence, to avail of a lower
interest rate, RJVRD converted its peso loan to US dollar based on a rate of exchange of P26.23 to
US$1.00, or for a total amount of US$112,237,895.54.

Respondents claimed that RJVRD undertook to engage foreign investors for the project. It entered into
negotiations with Hyundai Construction of South Korea which were eventually suspended. Its talks with
Siemens of Austria, and Property Investment and Development Management Corporation of Singapore
failed.21 Respondents interposed further that the Asian currency crisis on 11 July 1997 caused a
depreciation of the Philippine peso which correspondingly increased the obligation of RJVRD to PNB
from P2,944,000,000.00 to P5,405,301,470.82 inclusive of interest.22 On 30 September 1997, in an effort
to continue the project, RJVRD entered into a joint venture agreement with Fil-Estate Management
Incorporated for the development of the Buendia Property. RBN secured another loan from PNB in the
amount of P100,000,000.00, part of which was used in paying the interest for the loan it had secured in
favor of RJVRD. In addition, as and by way of security, RBN assigned in favor of PNB, all its rights and
interest over radio and television frequencies issued by the National Telecommunications Commission,
located in Tuguegarao, Baguio, Manila, Cebu, Bacolod, Iloilo, including those in Cagayan de Oro (FM
Stations), and Manila (AM Station and TV-UHF Station).23 On September 1997, RJVRD paid PNB the
accrued interest on the loan amounting to P353,478,628.88. RBN also updated its first account with PNB
by paying about P41,000,00.00. In March 1998, RJVRD, RBN and PNB entered into discussions on the
restructuring of the loans. Respondents alleged that while discussions were ongoing, the accounts of
RJVRD and RBN became delinquent.24 PNB sent RJVRD, a notice,25 dated 2 June 1998, declaring their
accounts delinquent and demanding the settlement of the same.26

Respondents asserted that prior to 11 June 1998, in line with the continuing discussions between PNB
and RBN for the restructuring of the loan, PNB required the redenomination of RBN's loan as a condition
for its restructuring.27 On 11 June 1998, RBN sent a letter to PNB in agreement to the redenomination of
the loan, stating therein the agreed terms for the restructuring of the loan. RJVRD sent a letter to PNB
agreeing to redenominate its own loan based on PNB's initial proposal, which letter was returned to
RJVRD for the reason that, at that time, the proposals for the restructuring of the RJVRD loan
component did not call for the redenomination of the loan of RJVRD.28 On 24 June 1998, RBN sent a
letter to PNB, confirming to redenominate the loan under the terms stated in its letter of 11 June
1998.29 On 9 September 1998, respondents asseverated that PNB made a call to RJVRD, asking the latter
to redenominate its loans. On the same date, RJVRD sent PNB, a letter in agreement to the
redenomination.30 On 23 October 1998, the RJ Groups of Companies sent Mr. Benjamin Palma Gil,
president of PNB, a proposal for the settlement of respondents' accounts, including a request for the
restructuring of the loans.31

On 25 January 1999, PNB, through its counsel, sent RBN a demand letter, requiring the latter to settle
their outstanding account of P841,460,891.91.32 In a letter similarly dated 25 January 1999, PNB by
counsel, demanded from RJVRD the settlement of its total obligation of P5,405,301,470.82.33 On 28
January 1999, RBN sent a letter to PNB's counsel, expressing its surprise to receive the demand letter
despite their continuing negotiations with PNB for the restructuring of its accounts.34 In its letter, RBN
said that it was, in fact, required by PNB to redenominate its dollar loans into pesos as an initial step for
the restructuring of the account, and which it has complied.35 On even date, RJVRD sent a letter to PNB's
counsel emphasizing that it had not been advised of any adverse development in their negotiation with
PNB nor had it been informed of the discontinuance of the negotiation. RJVRD sought for additional
time to justify its proposal to PNB with the aim of arriving at a friendly settlement.36

On 18 February 1999, PNB made a demand to RBN to turnover the possession and/or control of
Broasting Equipment Inventory located at No. 33, Dominican Hills, Baguio City.37 On 18 February 1999,
RJVRD received a Notice of Extrajudicial Sale, dated 1 February 1999 for the sale of the Buendia
Property38 to be held on 2 March 1999 at the City Hall, Makati City.

Respondents manifested in their Complaint that when RJVRD, as assignee of FWCC purchased the
Buendia Property from PNB, the Philippine economy was progressive; that it was under this favorable
economic scenario that RJVRD agreed to the terms and conditions of the loan agreements; however,
following the Asian economic crisis of July 1997, and with the depreciation of the Philippine peso, the
loan of RJVRD which was denominated in US dollars rose from P2,944,000,000.00 (US$112,237,895.54)
to P5,405,301,470.82.39 According to respondents, from the original contract price
of P3,680,000,000.00, RJVRD already made a payment of P736,000,000.00, representing twenty-percent
(20%) of the value of the Buendia Property and P353,478,628.88, representing interest on the loan or a
total of P1,089,478,628.88; and that PNB never effectively lost control over the Buendia Property,
considering that simultaneous with the execution of the Loan Agreement between RJVRD and PNB,
RJVRD executed a Real Estate Mortgage over the Buendia Property in favor of PNB. Furthermore,
respondents sought to find recourse under Article 1940 of the Civil Code. They contended that the action
on the part of PNB to foreclose the collaterals pledged or mortgaged by RJVRD and RBN, including the
extrajudicial sale of the Buendia Property on 2 March 1999 at the City Hall of Makati City, and the
planned take over of RBN's radio facilities in Baguio City would be, among others, premature.41

Finally, in support of its Application for the Issuance of a Temporary Restraining Order and a Writ of
Preliminary Injunction, respondents alleged that RJVRD and RNB would suffer great and irreparable
injury by the extrajudicial foreclosure of the property and the take over of RBN's radio facilities in
Baguio, unless a Temporary Restraining Order and/or Writ of Preliminary Injunction is issued enjoining
defendants from implementing the Notice of Extrajudicial Sale dated 1 February 1999, and enjoining
PNB from taking possession and control of RBN's radio facilities in Baguio City. Respondents maintained
that the commission or continuance of the acts complained of during the litigation or the non-
performance thereof would work injustice to RJVRD and RBN. They manifested their willingness to post
a bond as the court a quo may fix in its discretion, to answer for whatever damages PNB may sustain for
the reason of the restraining order or injunction, if finally determined that respondents are not entitled
thereto.

Acting on respondent's prayer for the issuance of a Temporary Restraining Order, the RTC, issued an
Order42 dated 2 March 1999, denying the same. The RTC held that the evidence showed that
respondents are in default of payment of its loan from PNB, amounting to P5,405,301,470.82, including
interests and penalties. According to the RTC, the respondents failed to prove that they have a clear
right to restrain the foreclosure of the Buendia Property; whereas, it is PNB which has a clear right to the
Buendia Property. The RTC opined that the evidence failed to prove that respondents will suffer
"irreparable injury" if the foreclosure of the Buendia Property is not enjoined, for under the law,
respondents have one (1) year from the date of the registration of the sale with the Register of Deeds
within which to redeem the Buendia Property; thus, respondents will have a chance to recover the
ownership thereof by way of redemption. Finally, the RTC ruled that the rule of equity is on the side of
PNB considering that the Buendia Property was formerly owned by PNB. The RTC denied the application
for Temporary Restraining Order for lack of merit, and held that the exposure of PNB in the transaction
amounted to P5,405,301,470.82, while the exposure of respondents is P1,089,478,628.00.43

On 2 March 1999, the Buendia Property was sold in a public auction conducted by Atty. Juan S. Buan,
Notary Public of Makati City.44 There being no other bidder, the Buendia Property was sold to PNB for
the amount of P2,800,000,000.00. On 3 May 1999, RBN received a Notice of Extrajudical Sale from PNB,
specifying therein that the property covered by Broating Equipment Inventory located at No. 33
Dominical Hills, Baguio City will be sold for cash at public auction to the highest bidder on 10 May 1999,
at the City Hall, Baguio City, pursuant to the terms of the Deed of Chattel Mortage dated 19 June 1994
to satisfy the mortgage indebtedness of P841,460,491.91.45

Following this development, on 4 May 1999, respondents filed an Urgent Application for the Issuance of
a Temporary Restraining Order and/or Writ of Preliminary Injunction.46 Respondents prayed that a
Temporary Restraining Order be issued enjoining PNB or any persons acting under its instructions from
foreclosing on any other collaterals pledged or mortgaged by respondents to PNB, particularly that
which is subject of the Notice of Extrajudicial Sale to be conducted by Notary Public Perlita Chan-Rondez
in Baguio City on 10 May 1999. It was likewise prayed that after due proceedings, a Writ of Preliminary
Injunction be similarly issued.47
On 7 May 1999, the RTC issued an Order48 granting the Writ of Preliminary Injunction respondents'
application for the issuance of a Temporary Restraining Order (TRO), upon posting of a bond in the
amount of P1,000,000.00.

On 27 May 1999, the RTC issued an Order,49 granting the Writ of Preliminary Injunction, enjoining PNB
from foreclosing all collaterals pledged or mortgaged by respondents to PNB, in particular those
described in Exhibits A to L thereof, after the posting of a bond in the amount
of P5,000,000.00.50 According to the court, the right of PNB to foreclose the chattel mortgages is still
challenged by the respondents and therefore, is not yet clearly established. Hence, if PNB is allowed to
foreclose the subject chattel mortgages, the determination of the right of PNB to foreclose the subject
properties will become moot and academic. Subsequently, on 28 May 1999, a Writ of Preliminary
Injunction was issued.

On 9 June 1999, PNB filed a Motion for Reconsideration51 of the Order of 27 May 1999. PNB
averred, inter alia, that RBN failed to produce any evidence to substantiate and support its claim that it
is entitled to the Writ of Preliminary Injunction in order to enjoin PNB from foreclosing on the subject
chattels. According to PNB, it was able to show that RBN failed without justifiable cause or reason to
service the credit facilities extended to it. PNB advanced the argument that RBN has no clear right
in esse; therefore, it cannot seek relief from the court. PNB claimed that they were able to prove
irreparable damage to the bank if PNB will be enjoined from foreclosing on the chattel mortgages. PNB
maintained that proceeding with the auction sale of the subject properties would lower the bank's "past
due ratio" approximately by 2%; hence, with the decrease in the bank's "past due ratio percentage,"
there would be no legal impediment to PNB's resumption to full lending operations since the Bangko
Sentral ng Pilipinas' recommendation for stoppage of grants of new loans is anchored on PNB's current
high "past due ratio." In support of its Motion for Reconsideration, PNB further theorized that
decreasing its "past due ratio" would improve investors' confidence; hence, substantially enhancing the
viability of PNB in its move to attain full privatization by the year 2000.

In its Opposition,52 respondents submitted that during the hearing of the application for a Writ of
Preliminary Injunction, the court expressed its position that it will not receive evidence relative to the
merits of the case as the same would pre-empt the resolution of the merits or dispose of the main case
without trial; therefore, by agreement of the parties, the principal issue was limited to whether RBN will
suffer irreparable injury if the writ of preliminary injunction is not issued. According to respondents, the
damage to RBN's image, loss of listenership, advertisers, staff and employees is unquantifiable in
monetary terms. Irreparable damage would be caused to RBN if PNB is allowed to foreclose its
equipments. It would also disrupt, if not, paralyze, the operations of RBN's stations. They further
asserted that there is no reason to disturb the injunction issued by the court absent a showing of
manifest abuse.

On 28 July 1999, the RTC issued an Order53 granting PNB's Motion for Reconsideration. This was
subsequently rectified in the Order of 29 July 1999 as to the date of the Writ of Preliminary Injunction
from May 28, 1998 to May 28, 1999.54 In lifting the Writ of Preliminary Injunction of 28 May 1999, the
RTC rationalized that the failure of RBN to pay the three (3) credit facilities it obtained from defendant
PNB was established; thus, RBN was considered to have effectively "defaulted" on its loan obligation. In
the same Order, the RTC concluded that RBN made express admission of its delinquency in its
Complaint. Moreover, the RTC held that the "cross-default provision"55 embodied in the Loan
Agreement between the parties establishes against the grant of the injunction.

Respondents moved for a reconsideration of the 28 July 1999 Order, submitting that there was no
reason to disturb the preliminary injunction order as there was no showing of a manifest abuse by then
Presiding Judge Hon. Eriberto U. Rosario, in the issuance thereof. Respondents explicated, inter alia, that
the sufficiency of their application was already passed upon by the RTC through the Order dated 27 May
1999.

On 26 October 1999, the RTC issued an Order,56 denying respondents' Motion for Reconsideration for
the lifting of the Writ of Preliminary Injunction dated 28 May 1999.

Aggrieved, on 7 December 1999, respondents filed with the Court of Appeals a Petition
for Certiorariunder Rule 65 of the Rules of Court assailing the Orders dated 28 July 1999 and 26 October
1999, imputing grave abuse of discretion on the part of the RTC in dissolving the Writ of Preliminary
Injunction earlier issued.

Before the appellate court, respondents argued that the sufficiency of their application for preliminary
injunction was already raised and passed upon by the RTC in the Injunction Order dated 27 May 1999;
however, PNB was not able to allege "other grounds" for the lifting thereof as mandated by Section 6 of
Rule 58 of the Rules of Court.57 Moreover, respondents asserted that on the issue of the purported
delinquency, the RTC failed to consider PNB's judicial admissions, whereby the rights of PNB should be
those of a seller covered by the law on Sales (Title VI, Book IV, Civil Code), and not those of a money-
lender covered by the law on Loans (TitleXI, Book IV, Civil Code); hence, PNB's rights as a seller are either
to rescind the sale, retrieve the title to the property transferred to the buyer, and exact payment of
damages or to leave the property with the buyer, to exact payment of the entire price with interest, and
recover damages thereby suffered. According to the respondents, the PNB as seller had recovered
through foreclosure the Buendia Property. They alleged that: PNB had forfeited in its favor as
mortgagor, the payments already made by RJVRD and the interest thereon; PNB is in the process of
recovering as mortgagor and seller additional damages in the form of interests, penalties, charges,
attorney's fees, etc; and PNB is in the process of recovering as mortgagor, by way of the foreclosure of
mortgage, other realty and chattels of significant value. Respondents contended that there was no grave
abuse of discretion in the issuance of the Writ of Preliminary Injunction because the contemplated
foreclosure of the other properties will work injustice to RBN and would render ineffectual any
judgment on the merits of the case ineffectual.

Anent the issue of whether respondents will suffer irreparable injury, respondents pleaded that
although the immediate effect of a Writ of Preliminary Injunction may be quantifiable in pesos, the
effect on the respondents is its viability that stands to be affected in the long-term. Respondents
rationalized that the foreclosure of the radio equipment will result in the stoppage of operations, and
eventually, the loss of the image of the station. These factors will cause the loss of its listenership and
client confidence, which cannot be quantifiable in monetary terms. Moreover, respondents set forth the
contention that even as PNB suggested that after foreclosure, the radio equipment would either be sold
to improve PNB's liquidity or disposed by way of lease-purchase agreement, there exists no assurance
that RBN can repurchase the foreclosed collaterals.

The Ruling of the Court of Appeals

On 9 December 1999, the Court of Appeals issued a Resolution58 temporarily enjoining PNB from
foreclosing any collateral pledged or mortgaged by RJVRD and RBN, and from taking possession and
control of the latter's radio facilities in Baguio City, until further orders from the appellate court. In
granting the same, the Court of Appeals underscored that the purpose of the temporary injunctive relief
is to preserve the status quo ante between the parties, and so as not to render moot and academic the
relief prayed for in the Petition. Accordingly, the Court of Appeals set the hearing on the application for
the issuance of a preliminary injunction on 11 January 2000.

On 10 January 2000, the PNB filed a Comment with the Court of Appeals, disputing the imputation of
grave abuse of discretion on the part of the RTC when it lifted the preliminary injunction. The PNB
opposed respondents' claim that there exists in their favor a right to be protected. According to PNB,
the foreclosure of the collaterals shall be effective upon the default of RBN, which default had been
established as RBN was unable to properly service the loan agreements without justifiable cause and
despite due demand. Anent the issue on the existence of irreparable injury, PNB challenged
respondents' contention by arguing that there is, in fact, a pecuniary standard by which RBN's damage
can be measured per the testimony of RBN's witness that it will suffer a loss of P1.2 Billion for the next
ten (10) years. PNB further posited that there were no judicial admissions on their part to the effect that
RJVRD and RBN are not delinquent. In furtherance of its opposition, PNB averred that it acted in two
separate capacities as seller and lender. As a seller, PNB owned the Buendia Property and offered it for
sale to interested parties. PNB accepted the bid of RJVRD and the property was sold to the latter. As a
lender, PNB supplied the credit facility to RJVRD as the latter needed to borrow money to finance the
payment of the remaining balance. PNB insisted that these two transactions cannot be treated as one
and the same; hence, there is nothing that prevents it from acting as a seller and lender at the same
time. In fine, PNB maintained that RJVRD did not default on the payment of the purchase price for such
was completely paid; rather, it defaulted on the payment of the loan, on its principal, and interest.

On 4 February 2000, the Court of Appeals issued a Resolution,59 granting the Writ of Preliminary
Injunction, enjoining PNB and its agents from foreclosing the collaterals pledged and mortgaged by
RJVRD and RBN and from taking over possession and control of RBN radio facilities in Baguio City. The
appellate court, held, viz:

The principal action in the petition at bar dwells on the controversy on whether or not the respondent
court committed grave abuse of discretion in issuing the order lifting and setting aside the injunctive
relief earlier issued in Civil Case No. 4592 (sic). If no preliminary injunction is issued in this case, pending
resolution of such main petition, respondent will proceed to foreclose the pledged or mortgaged
collaterals. In that eventuality, petitioners stand to sustain injury and irreparable damage, the loss of its
properties, income[,] and clientele listeners in the subject radio broasting station in Baguio City, even
before the instant certiorari proceeding could be resolved. To allow the impending foreclosure to
proceed, at this point in time, will surely be violative of petitioners' right to be heard and to due process.
It is for this reason, for the preservation of the status quo between the parties, pending decision of the
main petition and in order not to render the same moot and academic, We feel justified to grant the
preliminary injunction prayed for.

IN VIEW OF ALL THE FOREGOING, pending final resolution of the petition at bar, let a Writ of Preliminary
Injunction be issued in this case enjoining the respondent PNB, its officers or agents from foreclosing the
collateral pledged and mortgaged by petitioners, RJ Ventures Realty & Development Corporation and
Rajah Broasting Network, Inc., from taking over possession and control of RBN radio facilities in Baguio
City, upon the posting of a P1,000,000.00 injunction bond.

Undeterred, PNB filed a Motion for Reconsideration praying that the Order of 4 February 2000 be set
aside and the Writ of Preliminary Injunction issued by the Court of Appeals be immediately lifted and
dissolved.

Acting on the Motion, the Court of Appeals, rendered the assailed Decision dated 31 March 2004,
denying the same. In the same order, the appellate court, reversed and set aside the Orders dated 28
July 1999 and 26 October 1999 of the RTC; hence, effectively reinstating the Writ of Preliminary
Injunction earlier issued on 28 May 1999. The Court of Appeals held that the RTC was not asked to make
a definitive conclusion on the issue of whether RBN was indeed guilty of default in paying its loan nor
was it asked to resolve whether RBN committed a breach against PNB which necessitated foreclosure. A
determination of whether there was default or breach can be only be reached after the principal action
is set for trial on the merits after the parties are given opportunity to present evidence in support of
their respective claims.

The appellate court decreed, to wit:

It must be emphasized that a preliminary injunction may be granted at any stage of an action prior to
final judgment, requiring a person to refrain from a particular act. As the term itself suggests, it is merely
temporary, subject to the final disposition of the principal action. The justification for the preliminary
injunction is urgency. It is based on evidence tending to show that the action complained of must be
stayed lest the movant suffer irreparable injury or the final judgment granting the relief sought become
ineffectual. Necessarily, that evidence need only be a "sampling," as it were, and intended merely to give
the court an idea of the justification for the preliminary injunction pending the decision of the case on the
merits. The evidence submitted at the hearing on the motion for preliminary injunction is not conclusive
of the principal action, which has yet to be decided. (Olalia v. Hizon, 196 SCRA 665 [1991]).

Anent the issue of whether RBN would sustain "irreparable injury" should the chattel mortgage be
foreclosed, it bears repeating that the evidence to be submitted at the hearing on the motion for
preliminary injunction need not be conclusive and complete. On this score, We find petitioners to have
sufficiently established the existence of irreparable injury to justify, albeit provisionally, the restraint of
the act complained against them.

We find that the potential injury demonstrated by the various testimonies presented by petitioners
more than satisfies the legal and jurisprudential requirements of "irreparable injury." There is no
gainsaying in that the foreclosure of the subject radio equipment[s] would inevitably result in stoppage
of operations. This, in turn, shall result to (sic) the station's tarnished image and consequent loss of
public listenership. Loss of listenership then leads to loss of confidence of the station's patrons and
advertising clients that would cause serious repercussions on its ability to sustain its operations.
Undoubtedly, the loss of image and reputation by a radio station are matters that are not quantifiable in
terms of monetary value.

All told, We find the court a quo's lifting of the injunction earlier issued tainted with grave abuse of
discretion properly correctable by the special writ of certiorari .60
On 4 May 2004, PNB moved for the reconsideration thereon. On 8 July 2004, the Court of Appeals
rendered a Resolution, finding no justification to compel a modification or reversal of the 31 March 2004
Decision.

Hence, the instant Petition.

The Issues

PNB recites the following statement of the issues, viz:

WHETHER OR NOT THE PETITION FILED BY PNB INVOLVES QUESTIONS OF FACTS WHICH SHOULD BE A
CAUSE FOR ITS DISMISSAL;

II

WHETHER OR NOT THE DEFAULT BY RJVRD AND RBN IN THE PAYMENT OF THEIR RESPECTIVE LOAN
OBLIGATIONS TO PNB JUSTIFIES THE DENIAL OF THE ISSUANCE OF THE WRIT OF PRELIMINARY
INJUNCTION FOR THE FORECLOSURE OF THE MORTGAGED PROPERTIES;

III

WHETHER OR NOT RBN'S ADMISSION OF ITS FAILURE TO SETTLE ITS LOAN OBLIGATION IN FULL GIVES
PNB A CLEAR RIGHT TO FORECLOSE THE MORTGAGE;

IV

WHETHER OR NOT [THE] RIGHT OF RJVRD AND RBN TO A WRIT OF INJUNCTION IS CLEAR, EXISTING[,]
AND UNMISTAKABLE; and

WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAD LEGAL BASIS IN REVERSING AND SETTING
ASIDE THE ORDER DATED JULY 28, 1999 AND OCTOBER 26, 1999 OF THE REGIONAL TRIAL COURT OF
MAKATI, BRANCH 66, AND THEREBY ISSUING A WRIT OF CERTIOARI IN FAVOR OF RJVRD AND RBN.61

The Ruling of the Court

The pivotal issue in the instant Petition is whether the Court of Appeals correctly reinstated the Writ of
Preliminary Injunction dated 28 May 1999. Hence, the question is whether respondents RJVRD and RBN
are entitled to the Writ of Preliminary Injunction. It is for this reason that we shall address and concern
ourselves only with the assailed writ, but not with the merits of the case pending before the trial
court. A preliminary injunction is merely a provisional remedy, adjunct to the main case subject to the
latter's outcome.62 It is not a cause of action in itself.63

This Petition has no merit.

Foremost, we reiterate that the sole object of a preliminary injunction is to maintain the status quo until
the merits can be heard.64 A preliminary injunction65 is an order granted at any stage of an action prior
to judgment of final order, requiring a party, court, agency, or person to refrain from a particular act or
acts. It is a preservative remedy to ensure the protection of a party's substantive rights or interests
pending the final judgment in the principal action. A plea for an injunctive writ lies upon the existence of
a claimed emergency or extraordinary situation which should be avoided for otherwise, the outcome of
a litigation would be useless as far as the party applying for the writ is concerned.66

The grounds for the issuance of a Writ of Preliminary Injunction are prescribed in Section 3 of Rule 58 of
the Rules of Court. Thus:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it
is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or nonperformance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

Otherwise stated, for a Writ of Preliminary Injunction to issue, the following requisites must be present,
to wit: (1) the existence of a clear and unmistakable right that must be protected, and (2) an urgent and
paramount necessity for the writ to prevent serious damage.67 Indubitably, this Court has likewise
stressed that the very foundation of the jurisdiction to issue a writ of injunction rests in the existence of
a cause of action and in the probability of irreparable injury, inadequacy of pecuniary compensation and
the prevention of multiplicity of suits.68 Sine dubio, the grant or denial of a writ of preliminary injunction
in a pending case rests in the sound discretion of the court taking cognizance of the case since the
assessment and evaluation of evidence towards that end involve findings of facts left to the said court
for its conclusive determination.69 Hence, the exercise of judicial discretion by a court in injunctive
matters must not be interfered with except when there is grave abuse of discretion.70 Grave abuse of
discretion in the issuance of writs of preliminary injunction implies a capricious and whimsical exercise
of judgment that is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice or personal aversion amounting to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of
law.71

We find the conclusions reached by the Court of Appeals to be in accord with law.

The Supreme Court is not a trier of facts.72 While this is perhaps one of our more emphatic doctrines, it
admits of certain exceptions, inter alia, when the findings of the Court of Appeals are contrary to those
of the trial court.73 In the case at bar, we apply the exception and proceed to make a determination of
whether there is a factual and legal bases for a Writ of Preliminary Injunction to issue.

First, respondents were able to establish a clear and unmistakable right to the possession of the subject
collaterals. Evidently, as owner of the subject collaterals that stand to be extrajudicially foreclosed,
respondents are entitled to the possession and protection thereof. RBN as the owner and operator of
the subject radio equipment and radio stations have a clear right over them. The instant case does not
involve abstract rights, or a future and contingent rights, but a right that is already in existence. To our
minds, petitioner's claim that respondents have lost their rights to the subject collaterals in the face of
their admission of default is best threshed out in a full-blown trial a quo where the merits of the case
can be tried and determined. Significantly, to give the trial court a fair idea of whether a justification for
the issuance of the writ exists, only a "sampling" of the evidence is needed, pending a decision on the
merits of the case.74 Hence, the determination of respondents' default and the legality of the defenses
they adduced are matters appropriately subject of the trial on the merits.

Second, there is an urgent and paramount necessity to prevent serious damage. Indeed, an injunctive
remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard compensation.75 PNB assails the existence of this ground
by raising the argument that there is, in actuality, a pecuniary standard by which RBN's damage can be
measured, as evidenced by the testimony of RBN's witness that it will suffer a loss of P1.2 Billion for the
next ten (10) years.

To be sure, this court has declared that the term irreparable injury has a definite meaning in law. It does
not have reference to the amount of damages that may be caused but rather to the difficulty of
measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will
not apply the remedy of injunction.76 The Court of Appeals declared that the evidence adduced by
respondents more than satisfies the legal and jurisprudential requirements of irreparable injury. It
behooves this court to appreciate the unique character of the collaterals that stand to be affected
should the Writ of Preliminary Injunction be dissolved as PNB would have it. The direct and inevitable
result would be the stoppage of the operations of respondents' radio stations, consequently, losing its
listenership, and tarnishing the image that it has built over time. It does not stretch one's imagination to
see that the cost of a destroyed image is significantly the loss of its good name and reputation. As aptly
appreciated by the appellate court, the value of a radio station's image and reputation are not
quantifiable in terms of monetary value. This conclusion can be gleaned from the testimony of
respondents' witness, Jose E. Escaner, Jr., General Manager of RBN, thus:

Atty. Mendoza:

Q: Now, in your forty (40) years in the broast (sic) industry, have you had any personal experience in (sic)
any actual interruption in the operations of a radio station programming?cralaw library

Witness:

A: Yes, when I was handling the network of the then Ambassador Nanding Cojuanco within which the
radio stations were sequestered and sometime or the other it (sic) went off the air and immediately, we
do not have any revenues, so much so that we actually suffered two (2) to three (3) years.

Atty. Mendoza:

Q: And how long did it take for that station in Cebu that you mentioned to retain its listenership day?
(sic)

Witness:
A: Well, honestly, until now its airtime, because of its image, status image (sic) which is the reputation of
an AM Station while they are still recouping other stations, the other reports came over (sic) and
practically brought their ratings down, so, until now they still have to recoup.

Atty. Mendoza:

Q: What radio station are you referring to?cralaw library

Witness:

A: DYRB.

Atty. Mendoza:

Q: What would be the consequence if the radio stations of RBN stops (sic) operation (sic)?cralaw library

Witness:

A: It will lose whatever image it has generated to this point and (sic) time, it will cost irreparable damage
not only to its operation but most of all (sic) its image as being built by RNB. Rajah Broasting Network
and I doubt very much if it will still be able to recoup to a very good result, what we are now generating.

Atty. Mendoza:

That is all for the witness, Your Honor.

COURT:

Alright (sic), cross.

Atty. dela Vega:

With the permission of the Honorable Court.

xxx

Atty. dela Vega:

Q: Based from (sic) your experienced (sic) as the person engaged in media practice Mr. Witness, with
respect to the possession, let us go to the heart of the matter as of this point and time.

COURT:

You shoot the question straight.

Atty. dela Vega:

Yes, Your Honor.

(continuing to (sic) the witness

Q Will it made a difference to the operations of a radio station and relation with the listeners and their
clients if technical equipments, in (sic) the technical equipments, the ownership over the sale are
transferred to another person?cralaw library
Witness:

A: If you take the equipment immediately that would mean stopping our operations. That would mean
stopping our day to day communication with our listenership. That they will be wondering, that will cost
damage and (sic) our image immediately. That will cost damage to our contracts right now without
keeping with our clients.

Atty. dela Vega:

Q: Usually that person who owns that particular equipment will get the particular equipment. When you
say get, what do you mean by get Mr. Witness?cralaw library

Witness:

A: If for instance was what we are talking about right now, you are going to foreclose, ok, (sic), what will
we use?cralaw library

Atty. dela Vega:

Q: Assuming Mr. Witness, that the creditor of Rajah Broasting Network will not get, will not get the
equipment, will not get their account, will it adversely affect the operations of Rajah Broating?cralaw
library

Witness:

A: Still it will.

Atty. dela vega:

Q: In what way?cralaw library

Witness:

A: Because that will have an effect now on our relation with our clientele. The image will be doubt (sic).
The will be doubt, there be vacillation in the planning of the media plans, vacillation in the buying of
airtime.

Atty. dela Vega:

Q It will affect?cralaw library

Witness:

A: It will affect. The confidence is there.

Atty. dela Vega:

Q: It will affect?cralaw library

Witness:

A: We do not want our clientele to lose confidence.77

Evidently, there exists in the case at bar a pressing necessity to avoid injurious consequences to
respondents which cannot be remedied under any standard compensation. After a careful scrutiny of
the attendant circumstances, we do not find herein a reason for reversing the reinstatement by the
Court of Appeals of the Writ of Preliminary Injunction earlier issued.

The Fallo

WHEREFORE, the Petition is DENIED. The Decision dated 31 March 2004 and the Resolution dated 8 July
2004 of the Court of Appeals in CA-G.R. SP No. 56119, reversing and setting aside the 28 July 1999 and
26 October 1999 Orders of the RTC, Branch 66 of Makati City in Civil Case No. 99-452, and reinstating
the Writ of Preliminary Injunction issued on 28 May 1999 are AFFIRMED. Costs against petitioners.

SO ORDERED.
G.R. No. 177130 June 7, 2011

HON. EDUARDO ERMITA in his official capacity as THE EXECUTIVE SECRETARY, Petitioner,
vs.
HON. JENNY LIND R. ALDECOA-DELORINO, Presiding Judge, Branch 137, Regional Trial Court, Makati
City, ASSOCIATION OF PETROCHEMICAL MANUFACTURERS OF THE PHILIPPINES, representing JG
Summit Petrochemical Corporation, et al., Respondents.

DECISION

CARPIO MORALES, J.:

Then Executive Secretary petitioner Eduardo Ermita assailed via certiorari the writ of preliminary
injunction granted by public respondent Judge Jenny Lind R. Aldecoa Delorino, then Presiding Judge of
the Regional Trial Court of Makati City, Branch 137, by Omnibus Order1 dated February 6, 2007 in favor
of private respondent Association of Petrochemical Manufacturers of the Philippines (APMP or private
respondent) denying petitioner’s Motion to Dismiss and enjoining the government from implementing
Executive Order No. 486.

Executive Order No. 486 (E.O. 486) issued on January 12, 2006 by then President Gloria Macapagal-
Arroyo reads:

LIFTING THE SUSPENSION OF THE APPLICATION OF THE TARIFF REDUCTION SCHEDULE ON

PETROCHEMICALS AND CERTAIN PLASTIC PRODUCTS UNDER THE COMMON EFFECTIVE PREFERENTIAL
TARIFF (CEPT) SCHEME FOR THE ASEAN FREE TRADE AREA (AFTA)

WHEREAS, Executive Order 234 dated 27 April 2000, which implemented the 2000-2003 Philippine
schedule of tariff reduction of products transferred from the Temporary Exclusion List and the Sensitive
List to the Inclusion List of the accelerated CEPT Scheme for the AFTA, provided that the CEPT rates on
petrochemicals and certain plastic products will be reduced to 5% on 01 January 2003;

WHEREAS, Executive Order 161 issued on 9 January 2003 provides for the suspension of the application
of the tariff reduction schedule on petrochemicals and certain products in 2003 and 2004 only;

WHEREAS, the government recognizes the need to provide an enabling environment for the naphtha
cracker plant to attain international competitiveness;

WHEREAS, the NEDA Board approved the lifting of the suspension of the aforesaid tariff reduction
schedule on petrochemicals and certain plastic products and the reversion of the CEPT rates on these
products to EO 161 (s.2003) levels once the naphtha cracker plant is in commercial operation;

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines,

pursuant to the powers vested in me under Section 402 of the Tariff and Customs Code of 1978
(Presidential Decree No. 1464), as amended, do hereby order:

SECTION 1. The articles specifically listed in Annex "A" (Articles Granted Concession under the CEPT
Scheme for the AFTA) hereof, as classified under Section 104 of the Tariff and Customs Code of 1978, as
amended, shall be subject to the ASEAN CEPT rates in accordance with the schedule indicated in Column
4 of Annex "A". The ASEAN CEPT rates so indicated shall be accorded to imports coming from ASEAN
Member States applying CEPT concession to the same product pursuant to Article 4 of the CEPT
Agreement and Its Interpretative Notes.

SECTION 2. In the event that any subsequent change is made in the basic (MFN) Philippine rate of duty
on any of the article listed in Annex "A" to a rate lower than the rate prescribed in Column 4 of Annex
""A, such article shall automatically be accorded the corresponding reduced duty.

SECTION 3. From the date of effectivity of this Executive Order, all articles listed in Annex "A" entered
into or withdrawn from warehouses in the Philippines for consumption shall be imposed the rates of
duty therein prescribed subject to qualification under the Rules of Origin as provided for in the
Agreement on the CEPT Scheme for the AFTA signed on 28 January 1992.

SECTION 4. The Department of Trade and Industry, in coordination with National Economic and
Development Authority, the Department of Finance, the Tariff Commission and the Bureau of Customs,
shall promulgate the implementing rules and regulations that will govern the reversion of the CEPT rates
on petrochemicals and plastic products to EO 161 (s.2003) levels once the naphtha cracker plant is in
commercial operation.

SECTION 5. All presidential issuances, administrative rules and regulations, or parts thereof, which are
contrary to or inconsistent with this Executive Order are hereby revoked or modified accordingly.

SECTION 6. This Executive Order shall take effect immediately following its complete publication in two
(2) newspapers of general circulation in the Philippines.

Done in the City of Manila, this 12th day of January in the year of Our Lord Two Thousand and Six.
(emphasis supplied)

The above issuance in effect reduces protective tariff rates from 10% to 5% on the entry of inexpensive
products, particularly plastic food packaging, from ASEAN Free Trade (AFTA) member countries into the
Philippines.

APMP, an organization composed of manufacturers of petrochemical and resin products, opposed the
implementation of E.O. 486. Contending that the E.O. would affect local manufacturers, it filed a
petition before the RTC of Makati, docketed as Civil Case No. 06-2004, seeking the declaration of its
unconstitutionality for being violative of Sec. 4 of Republic Act No. 6647 which prohibits the President
from increasing or reducing taxes while Congress is in session2 and Sec. 402(e)3 of the Tariff and Customs
Code. It thereupon prayed for the issuance of a writ of preliminary injunction to enjoin its
implementation.

Petitioner contends that public respondent gravely abused her discretion in assuming jurisdiction over
the petition for prohibition and granting the writ of preliminary injunction as the exercise of the quasi-
legislative functions of the President cannot be enjoined. He avers that writs of prohibition lie only
against those persons exercising judicial, quasi-judicial or ministerial functions.

By granting injunctive relief, petitioner contends that public respondent effectively preempted the trial
of and pre-judged the case, given that what private respondent seeks is to stop the implementation of
E.O. 486. Further, petitioner contends that the grant of injunctive relief was not supported by fact and
law, for what APMP sought to be protected was "future economic benefits" which may be affected by
the implementation of the E.O. – benefits which its members have no right to since protective tariff
rates are government privileges wherein no one can claim any vested right to.

On the merits, petitioner maintains that E.O. 486 is not constitutionally infirm, it having been issued
under the authority of Secs. 401 and 402 of the Tariff and Customs Code which set no limitations on the
President’s power to adjust tariff rate and serve as the government’s response to its AFTA commitment
on Common Effective Preferential Tariff (CEPT).

Since it is only the Omnibus Order denying the Motion to Dismiss and granting a writ of preliminary
injunction that is being assailed, the Court will not pass on the constitutionality of E.O. 486 which is still
pending before the trial court.

Private respondent prays in its Comment for the denial of the present petition, alleging that, among
other things, the petition is premature as petitioner failed to file a Motion for Reconsideration of the
assailed Omnibus Order of public respondent, and maintaining the propriety of the remedy of
prohibition which it filed to assail the E.O.

The issues then are:

1. Whether public respondent erred in assuming jurisdiction over the petition for prohibition and not
granting petitioner’s motion to dismiss the petition;

2. Whether a motion for reconsideration should have been filed by petitioner; and

3. Whether public respondent erred in granting the writ of preliminary injunction in favor of APMP.

On the issue of jurisdiction

Rule 65, Sec. 2 of the Rules of Court provides:

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
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. (emphasis supplied)

Holy Spirit Homeowners’ Association v. Defensor4 expounds on prohibition as a remedy to assail

executive issuances:

A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said
entity or person to desist from further proceedings when said proceedings are without or in excess of
said entity’s or person’s jurisdiction, or are accompanied with grave abuse of discretion, and there is no
appeal or any other plain, speedy and adequate remedy in the ordinary course of law. Prohibition lies
against judicial or ministerial functions, but not against legislative or quasi-legislative functions.
Generally, the purpose of a writ of prohibition is to keep a lower court within the limits of its jurisdiction
in order to maintain the administration of justice in orderly channels. Prohibition is the proper remedy
to afford relief against usurpation of jurisdiction or power by an inferior court, or when, in the exercise
of jurisdiction in handling matters clearly within its cognizance the inferior court transgresses the
bounds prescribed to it by the law, or where there is no adequate remedy available in the ordinary
course of law by which such relief can be obtained. Where the principal relief sought is to invalidate an
IRR, petitioners’ remedy is an ordinary action for its nullification, an action which properly falls under
the jurisdiction of the Regional Trial Court. In any case, petitioners’ allegation that "respondents are
performing or threatening to perform functions without or in excess of their jurisdiction" may
appropriately be enjoined by the trial court through a writ of injunction or a temporary restraining
order. (emphasis supplied)

Be that as it may, it is settled that what determines the nature of the action and which court has
jurisdiction over it are the allegations in the complaint and the character of the relief sought.5 A perusal
of the petition of APMP before the trial court readily shows that it is not a mere petition for prohibition
with application for the issuance of a writ of preliminary injunction. For it is also one for certiorari as it
specifically alleges that E.O. 486 is invalid for being unconstitutional, it having been issued in
contravention of Sec. 4 of R.A. 6647 and Sec. 402(e) of the Tariff and Customs Code, hence, its
enforcement should be enjoined and petitioner prohibited from implementing the same.

Petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues and to
review and/or prohibit or nullify, when proper, acts of legislative and executive officials.6 Thus, even if
the petition was denominated as one for prohibition, public respondent did not err in treating it also as
one for certiorari and taking cognizance of the controversy.

On the propriety of filing a motion

for reconsideration

Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed
before the respondent tribunal, to allow it an opportunity to correct its assigned errors.7 This rule,
however, is not without exceptions.

The rule is, however, circumscribed by well-defined exceptions, such as (a) where the order is a patent
nullity, as where the court a quo had no jurisdiction; (b) where the questions raised in
the certiorari proceeding have been duly raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court; (c) where there is an urgent necessity for the
resolution of the question and any further delay would prejudice the interests of the Government or of
the petitioner or the subject matter of the action is perishable; (d) where, under the circumstances, a
motion for reconsideration would be useless; (e) where petitioner was deprived of due process and
there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of arrest is urgent
and the granting of such relief by the trial court is improbable; (g) where the proceedings in the lower
court are a nullity for lack of due process; (h) where the proceedings were ex parte, or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or where
public interest is involved.8 (emphasis supplied)

The present case involves the constitutionality and implementation of an executive issuance involving
tariff rates and, as alleged by petitioner, the Government’s commitments under the AFTA. Clearly, the
filing of a motion for reconsideration may be dispensed with following exceptions (c ) and (i) in the
above enumeration in Siok Ping Tang.

On the grant of the writ of

preliminary injunction

APMP alleges that it is composed of manufacturers of petrochemical products and that the
implementation of the assailed E.O. reducing tariff rates on certain petroleum-based products will result
in the local market being flooded with lower-priced imported goods which will, consequently, adversely
affect their sales profits. In granting the assailed writ, public respondent held that, based on the initial
evidence presented, the APMP stands to lose "substantial revenues" and some of its members "may
eventually have to close up or stop ongoing works on their Naphtha Cracker plants" if E.O. 486 is
implemented. Public respondent thus ruled that the APMP was entitled to the writ as it has a "valuable
stake in the petrochemical industry" and the enforcement of E.O. 486 will adversely affect its members;
and that petitioner violated APMP’s right on the strength of an invalid executive issuance.

Public respondent noted that the Southern Cross case cited by petitioner which ruled that no court is
allowed to grant injunction to restrain the collection of taxes is inapplicable in the present case, since
restraining the implementation of E.O. 486 will not deprive the Government of revenues; instead, it will
result in more revenues as the proposed reduction of rates will be enjoined.

Public respondent thus concluded that there is sufficient basis for the issuance of a writ of preliminary
injunction in favor of APMP.

It is well to emphasize that the grant or denial of a writ of preliminary injunction in a pending case rests
on the sound discretion of the court taking cognizance thereof.9 In the present case, however, where it
is the Government which is being enjoined from implementing an issuance which enjoys the
presumption of validity, such discretion must be exercised with utmost caution. Executive Secretary v.
Court of Appeals,10 enlightens:

In Social Security Commission v. Judge Bayona, we ruled that a law is presumed constitutional until
otherwise declared by judicial interpretation. The suspension of the operation of the law is a matter of
extreme delicacy because it is an interference with the official acts not only of the duly elected
representatives of the people but also of the highest magistrate of the land.

In Younger v. Harris, Jr., the Supreme Court of the United States emphasized, thus:

Federal injunctions against state criminal statutes, either in their entirety or with respect to their
separate and distinct prohibitions, are not to be granted as a matter of course, even if such statutes are
unconstitutional. No citizen or member of the community is immune from prosecution, in good faith, for
his alleged criminal acts. The imminence of such a prosecution even though alleged to be unauthorized
and, hence, unlawful is not alone ground for relief in equity which exerts its extraordinary powers only
to prevent irreparable injury to the plaintiff who seeks its aid. 752 Beal v. Missouri Pacific Railroad Corp.,
312 U.S. 45, 49, 61 S.Ct. 418, 420, 85 L.Ed. 577.

And similarly, in Douglas, supra, we made clear, after reaffirming this rule, that:
"It does not appear from the record that petitioners have been threatened with any injury other than
that incidental to every criminal proceeding brought lawfully and in good faith . . ." 319 U.S., at 164, 63
S.Ct., at 881.

The possible unconstitutionality of a statute, on its face, does not of itself justify an injunction against
good faith attempts to enforce it, unless there is a showing of bad faith, harassment, or any other
unusual circumstance that would call for equitable relief. The "on its face" invalidation of statutes has
been described as "manifestly strong medicine," to be employed "sparingly and only as a last resort,"
and is generally disfavored.

To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to be

unconstitutional, the party must establish that it will suffer irreparable harm in the absence of injunctive
relief and must demonstrate that it is likely to succeed on the merits, or that there are sufficiently
serious questions going to the merits and the balance of hardships tips decidedly in its favor. The higher
standard reflects judicial deference toward "legislation or regulations developed through presumptively
reasoned democratic processes." Moreover, an injunction will alter, rather than maintain, the status
quo, or will provide the movant with substantially all the relief sought and that relief cannot be undone
even if the defendant prevails at a trial on the merits.

Considering that injunction is an exercise of equitable relief and authority, in assessing whether to issue
a preliminary injunction, the courts must sensitively assess all the equities of the situation, including the
public interest. In litigations between governmental and private parties, courts go much further both to
give and withhold relief in furtherance of public interest than they are accustomed to go when only
private interests are involved. Before the plaintiff may be entitled to injunction against future
enforcement, he is burdened to show some substantial hardship. (emphasis supplied)

Indeed, a writ of preliminary injunction is issued precisely to prevent threatened or continuous

irremediable injury to some of the parties before their claims can be thoroughly studied or adjudicated –
to preserve the status quo until the merits of the case can be heard fully. Still, even if it is a temporary
and ancillary remedy, its issuance should not be trifled with, and an applicant must convincingly show its
entitlement to the relief. St. James College of Paranaque v. Equitable PCI Bank,11 explains:

Under Section 3, Rule 58 of the Rules of Court, an application for a writ of preliminary injunction may be
granted if the following grounds are established, thus: virtual law library

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

And following jurisprudence, these requisites must be proved before a writ of preliminary injunction, be
it mandatory or prohibitory, will issue:
(1) The applicant must have a clear and unmistakable right to be protected, that is a right in esse;

(2) There is a material and substantial invasion of such right;

(3) There is an urgent need for the writ to prevent irreparable injury to the applicant; and

(4) No other ordinary, speedy, and adequate remedy exists to prevent the infliction of irreparable injury.
(emphasis supplied)a1a

It is thus ineluctable that for it to be entitled to the writ, the APMP must show that it has a clear and
unmistakable right that is violated and that there is an urgent necessity for its issuance. 12 That APMP
had cause of action and the standing to interpose the action for prohibition did not ipso facto call for
the grant of injunctive relief in its favor without it proving its entitlement thereto.

Transfield Philippines, Inc. v. Luzon Hydro Corporation,13 illuminates on the right of a party to injunctive
relief:

Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint
that there exists a right to be protected and that the acts against which the writ is to be directed are
violative of the said right. It must be shown that the invasion of the right sought to be protected is
material and substantial, that the right of complainant is clear and unmistakable and that there is an
urgent and paramount necessity for the writ to prevent serious damage. Moreover, an injunctive
remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard compensation. (emphasis supplied)

Contrary to public respondent’s ruling, APMP failed to adduce any evidence to prove that it had a clear
and unmistakable right which was or would be violated by the enforcement of E.O. 486. The filing of the
petition at the court a quo was anchored on APMP and its members’ fear of loss or reduction of their
income once E.O. 486 is implemented and imported plastic and similar products flood the domestic
market due to reduced tariff rates. As correctly posited by petitioner, APMP was seeking protection over
"future economic benefits" which, at best, it had an inchoate right to.

More importantly, tariff protection is not a right, but a privilege granted by the government and,
therefore, APMP cannot claim redress for alleged violation thereof. In a similar case wherein the validity
of R.A. 9337 with respect to provisions authorizing the President to increase the value-added tax (VAT)
rates, the Court held:

The input tax is not a property or a property right within the constitutional purview of the due process
clause. A VAT-registered person’s entitlement to the creditable input tax is a mere statutory privilege.

The distinction between statutory privileges and vested rights must be borne in mind for persons have
no vested rights in statutory privileges. The state may change or take away rights, which were created
by the law of the state, although it may not take away property, which was vested by virtue of such
rights.14 (emphasis supplied)1avvphi1

Assuming arguendo that it was upon the government’s assurances that the members of APMP allegedly
"invested hundred of millions of dollars in putting up the necessary infrastructure," that does not vest
upon APMP a right which must be protected.
Respecting the element of "irreparable injury," the landmark case of Social Security Commission v.
Bayona15teaches:

Damages are irreparable within the meaning of the rule relative to the issuance of injunction where
there is no standard by which their amount can be measured with reasonable accuracy (Crouc v. Central
Labor Council, 83 ALR, 193). "An irreparable injury which a court of equity will enjoin includes that
degree of wrong of a repeated and continuing kind which produce hurt, inconvenience, or damage that
can be estimated only by conjecture, and not by any accurate standard of measurement" (Phipps v.
Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction consists of "a
serious charge of, or is destructive to, the property it affects, either physically or in the character in
which it has been held and enjoined, or when the property has some peculiar quality or use, so that its
pecuniary value will not fairly recompense the owner of the loss thereof" (Dunker v. Field and Tub Club,
92 P., 502). (emphasis supplied)

As does the more recent case of Philippine Air Lines v. National Labor Relations Commission:16

An injury is considered irreparable if it is of such constant and frequent recurrence that no fair and
reasonable redress can be had therefor in a court of law, or where there is no standard by which their
amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical
computation. It is considered irreparable injury when it cannot be adequately compensated in damages
due to the nature of the injury itself or the nature of the right or property injured or when there exists
no certain pecuniary standard for the measurement of damages. (emphasis supplied)

In the present case, aside from APMP’s allegations that the reduced tariff rates will adversely affect its
members’ business and may lead to closure, there is no showing what "irreparable injury" it stood to
suffer with the implementation of E.O. 486.

In fine, not only is there no showing of a clear right on the part of APMP which was violated; the injury
sought to be protected is prospective in nature, hence, the injunctive relief should not have been
granted.

WHEREFORE, the petition is PARTLY GRANTED. The Omnibus Order dated February 6, 2007 issued by
public respondent Hon. Judge Jenny Lind R. Aldecoa-Delorino is REVERSED insofar as it granted a Writ of
Preliminary Injunction in favor of private respondent, Association of Petrochemical Manufacturers of the
Philippines (APMP). Accordingly, the Writ is DISSOLVED, and the case REMANDED to the court of origin
for further appropriate proceedings.

SO ORDERED.
G.R. No. 188768 : January 7, 2013

TML GASKET INDUSTRIES, INC., Petitioner, v. BPI FAMILY SAVINGS BANK, INC., Respondents.

RESOLUTION

PEREZ, J.:

We are urged in this petition for review on certiorari to reverse and set aside the Decision1 of the Court
of Appeals in CA-G.R. SP No. 81932 which, in turn, reversed the Orders,2 respectively dated 22 August
2003 and 27 November 2003, of the Regional Trial Court (RTC), Branch 104, Parañaque City in Civil Case
No. 02-0504. The assailed Orders issued a writ of preliminary injunction in favor of petitioner TML
Gasket Industries, Inc. (TML), enjoining respondent BPI Family Savings Bank, Inc.'s (BPI's) extra-judicial
foreclosure of TMLs mortgaged properties, and denied TMLs motion for reconsideration thereof.

The facts are not in dispute.

Sometime in September 1996, TML obtained a loan from the Bank of Southeast Asia, Inc. (BSA), which
TML can avail via a credit facility of P85,000,000.00. As security for the loan, TML executed a real estate
mortgage over commercial and industrial lots located at Dr. A. Santos Avenue, Parañaque City covered
by Transfer Certificate of Title (TCT) Nos. 81278 and 81303 of the Registry of Deeds of Parañaque City.
For additional security, BSA required TML to execute a promissory note for each availment from the
credit facility.

On different dates from September 1996 to 31 July 1997, TML executed several promissory notes (PN),
which provided in pertinent part:cralawlibrary

Since time is of the essence hereof, TML is in default under this Note, without need for notice, demand,
presentment or any other act or deed in any of the following events: a) TML fails to pay when due,
totally or partially, the principal, interest and other charges under this Note x x x.3?r?l1

During the period of the loan, BSA changed its corporate name to DBS Bank Phils. (DBS), which
eventually merged with BPI under the latters corporate name.

TML defaulted in the payment of its loan leading BPI to extra-judicially foreclose the mortgaged
properties. As of 25 June 2002, TMLs indebtedness to BPI amounted to P71,877,930.56, excluding
penalties, charges, attorneys fees and other expenses of foreclosure.

On 24 October 2002, the Ex-Officio Sheriff of RTC, Parañaque City issued a Notice of Extra-judicial
Foreclosure Sale of the mortgaged properties.

Because of the imminent foreclosure sale of its mortgaged properties, TML, on 21 November 2002, filed
a "Complaint for Declaratory Relief, Accounting, Declaration of Nullity of Notice of Extra-Judicial Sale,
Increased (sic) in Interest Rates, Penalty Charges Plus, (sic) Damages, with Prayer for the Issuance of
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction" against BPI and DBS before
the RTC, Branch 194, Parañaque City.

The complaint highlighted the following clause in the PNs signed by TML, to wit:cralawlibrary

If changes in the conditions and/or circumstances occur which, directly or indirectly, increase the overall
costs of money to the Lender, such as but not limited to the following: (i) any change in the laws or
regulations, including any amendments, modifications, interpretations, administrative implementation
or repeal thereof affecting the Lender or its business such as reserve or similar requirement, tax on
income, gross receipts, or the imposition of any levy, fees or other taxes; or (ii) changes in the interest
rate of forbearance of money whether in the prevailing market rates or such other guiding or reference
rates as may be adopted, determined and/or authorized by the CB; (iii) extraordinary inflation or there is
an increase of fifteen percent (15%) in the consumer price index as announced by the CB or the National
Economic Development Authority reckoned from the date of the granting of the loan or the credit line;
or (iv) devaluation, revaluation, or depreciation in real value or purchasing power of the Philippine Peso,
that is, when there has been an adverse change of at least fifteen percent (15%), in the CB Reference
Exchange Rate for the Philippine Peso to the US Dollar and/or such other foreign currencies adopted by
the Philippine Government or its instrumentalities or agencies, as forming part of its international
reserves, reckoned from the date of granting of the loan or credit line; (v) any change in the reserve or
similar requirements as a necessary consequence of obtaining a unibanking license on the part of the
Lender, then the Lender may, at its sole option, correspondingly adjust the interest rate in all
outstanding loans(s) and other obligations under this Note/s and such other documents that may be
thereafter be executed. The adjustment in interest rate shall take effect three (3) days after receipt by
TML of the notice of adjustment.4?r?l1

TML asseverated that BSA made it understand that the stipulation meant that TMLs loan would be
subject to only a 16% interest rate per annum. TML alleged that "despite the odds and difficulties it
encountered, aggravated by the global economic crisis, it tried hard to religiously pay its x x x obligation
to BPI x x x." However, contrary to their actual understanding, BSA "unreasonably, unconscionably and
unilaterally" imposed a 33% interest rate per annum, and ultimately, a penalty of 36% interest on past
due principal and corresponding interest thereon.

TML likewise pointed out that it had demanded an independent accounting and liquidation of its loan
account, which went unheeded. Ultimately, for TML, it cannot be considered in default of an obligation
with an undetermined and unascertained amount. In that regard, TML argued that the intended
foreclosure of TMLs mortgaged properties is unwarranted for being illegal; thus, the foreclosure ought
to be enjoined to prevent TML from suffering grave and irreparable damage, especially since TMLs office
and factory are located at the mortgaged properties.

Refuting TMLs allegations, BPI maintained that the interest rates on TMLs loan obligation were mutually
and voluntarily agreed upon. On TMLs application for the issuance of a writ of preliminary injunction,
BPI countered that it has the absolute right to foreclose the mortgage constituted over TMLs properties
given that TML defaulted on its loan obligation, which had already become due and demandable.

In an Order dated 20 June 2003, the trial court denied TMLs application for the issuance of a preliminary
injunction, ratiocinating thus:cralawlibrary

In resolving whether or not to grant the injunctive writ, this Court is guided by the requisites thereof, as
repeatedly (sic) enunciated by the Supreme Court, to wit: (1) the invasion of a right is material and
substantial; (2) the right of complainant is clear and unmistakable; and (3) there is an urgent and
paramount necessity for the writ to prevent serious damage. x x x.

From the testimony of TMLs witness, Lyman Lozada, it was established that TML is indeed indebted to
BPI and has become delinquent in the payment of the loan obligation; that TML is willing to let go off
(sic) the collaterals, the properties subject matter hereof, by way of dacion en pago. Apparently, the
only concern of TML is the fact that it will be ousted from the properties after the period of redemption
shall have lapsed.

The foregoing testimony of TML casts doubt on its right over the property. The aforementioned
requisites are not obtaining in favor of TML. Moreover, as held by the Supreme Court, "where the
complainants right or title is doubtful or disputed, injunction is not proper. x x x.

Furthermore, TML has in its favor the right of redemption.5?r?l1

On motion for reconsideration, the trial court made a complete turn-around. It ordered the issuance of
the writ in favor of TML, subject to the posting of a bond in the amount of P300,000.00, to
wit:cralawlibrary

While it is admitted that TML has defaulted in the payment of its loan obligation, which thus conferred
upon BPI the right of foreclosure, the Court, after a contemplation of the logical consequence of the
denial of the injunctive writ, is convinced that great and irreparable damages may be caused TML. As
pointed out by TML, it might lead to an absurd scenario of TML winning the case but losing its property
in BPIs favor or in an even worse scenario, in favor of third parties. This is because of the short period
within which TML could exercise its redemption right under the General Banking Act.6?r?l1

BPI moved for reconsideration of the order. However, the trial court maintained its ruling:cralawlibrary

Admittedly, TML has incurred in default in the payment of its obligation but the amount has yet to be
determined, the determination thereof being one of the provinces of the instant complaint, and
considering the brief redemption period under the General Banking Act,the redemption is next to
impossible. Thus, the injury to TML would be very grave if not irreparable.7?r?l1

Posthaste, BPI filed a petition for certiorari under Rule 65 of the Rules of Court before the Court of
Appeals, seeking to annul and set aside the twin Orders of the trial court respectively dated 22 August
2003 and 27 November 2003 which granted the writ of preliminary injunction in favor of

TML and enjoined the foreclosure sale of the mortgaged properties.

The appellate court found grave abuse of discretion in the trial courts issuance of the orders as
demonstrated by the following:cralawlibrary

1. TML signed the PNs which stipulated that TML, as the Borrower, is considered in default when it "fails
to pay, when due, totally or partially, the principal, interest and other charges
thereunder."???ñr?bl?š ??r†??l l?? l?br?rÿ

2. Consistent therewith, the Real Estate Mortgage signed by TML provides that one of the effects of
default of the mortgagor (TML) includes the right of the mortgagee (BPI) to immediately foreclose the
mortgage, which foreclosure may be undertaken judicially or extra-judicially, at the discretion of the
mortgagee (BPI).

3. TML itself admitted in its complaint that it has failed to pay its outstanding loan to BPI.

4. From all three points, BPI has the right to extra-judicially foreclose the mortgaged properties.

5. TML did not demonstrate an actual existing right to be protected.

6. Corollary thereto, there is no threatened or actual violation of TMLs doubtful right to the mortgaged
properties. ???ñr?bl?š ??r†??l l?? l?br?rÿ

The dispositive portion of the appellate courts decision reads, thus:cralawlibrary

WHEREFORE, the Petition is GRANTED. The twin Order(s), dated August 22, 2003 and November 27,
2003, of the Regional Trial Court of Parañaque City, Branch 164 (sic) in Civil Case No. 02-0504, are
hereby REVERSED and SET ASIDE. Accordingly, the writ of preliminary injunction granted in favor of TML
is hereby LIFTED.8?r?l1

TML filed a motion for reconsideration. While the resolution thereof was pending, TML filed a
Supplemental Motion for Reconsideration arguing that BPIs petition for certiorari has become moot and
academic because BPI had supposedly filed an Amended Petition for Extra-judicial Foreclosure of Real
Estate Mortgage under Act No. 3135 before the trial court. For TML, that effectively changed the
amount of its obligation to BPI, which, in turn, rendered BPIs original petition for extra-judicial
foreclosure of mortgage moot and academic.

The appellate court denied the motions and affirmed its original decision:cralawlibrary

WHEREFORE, the instant motion for reconsideration and supplemental motion for reconsideration are
hereby DENIED. Accordingly, Our Decision, dated August 19, 2008, STANDS.9?r?l1

Hence, this petition for review on certiorari positing that the appellate court erred when it reversed and
set aside the twin Orders of the trial court and lifted the injunctive writ.

We subscribe to the appellate courts ruling.

Section 3, Rule 58 of the Rules of Court lists the grounds for the issuance of a writ of preliminary
injunction:cralawlibrary

SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it
is established:cralawlibrary

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment
ineffectual. ???ñr?bl?š ??r†??l l?? l?br?rÿ

As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing
right to be protected during the pendency of the principal action. The requisites of a valid injunction are
the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ,
the right to be protected and the violation against that right must be shown.10?r?l1
In this case, TML anchors its right to the mortgaged properties on its claim that it cannot be considered
in default of its loan obligation to BPI. Consequently, the mortgaged properties cannot be foreclosed.
TML claims it had been religiously paying its loan; however, BPIs unilateral increase of the rate of
interest to 33% prevented TML from further paying the loan. Thus, for TML, while an accounting and
liquidation of the actual amount of its obligation to BPI remains undetermined, it cannot be considered
in default. Ultimately, TML avers that the threatened foreclosure and auction sale of its mortgaged
properties while its loan with BPI subsists is a violation of its right.

We note that TML categorically admitted that it has an existing loan with BPI, secured by a real estate
mortgage and several promissory notes, and that it stopped paying for one reason or another. On that
point, we affirm the appellate courts findings:cralawlibrary

It is settled rule of law that foreclosure is proper when the debtors are in default of the payment of their
obligation. On this note, it must be recalled that the promissory notes executed by TML in favor of BPI
states that the Borrower - in this case, TML is considered in default when it fails to pay when due, totally
or partially, the principal, interest and other charges under the promissory note(s). In conjunction
therewith, the real estate mortgage executed by the parties stipulates, among others, that:cralawlibrary

Sec. 6. Effects of Default by the Mortgagor. xxx

a) The MORTGAGEE shall have the right to immediately foreclose on this Mortgage in accordance with
Sec. 7, hereof;

xxx

Sec. 7. Foreclosure. Foreclosure shall, at the sole discretion of the MORTGAGEE, be either judicial or
extrajudicial, xxx xxx.

In its Complaint, TML admitted that it has not paid its obligation with BPI by reason of the exorbitant
rates of interest unilaterally imposed by the latter. However, regardless of TMLs defenses, the fact that
it has an outstanding obligation with BPI which it failed to pay despite demand remains undisputed.
Verily, TMLs failure to comply with the terms and conditions of its credit agreement with BPI, as
embodied in the real estate mortgage and the promissory notes it issued in favor of the latter, entitles
BPI to extrajudicially foreclose the mortgaged properties.

xxx

To our mind, the grounds relied upon by the trial court, do not justify the issuance of a writ of
preliminary injunction in favor of TML. Under the factual setting of this case, TML has no right to be
protected from the impending foreclosure of its properties. Certainly, the said foreclosure is authorized
under the real estate mortgage and the promissory notes voluntarily executed by TML in favor of BPI.
Needless to say, BPIs exercise of its right to foreclose the subject properties does not, in any way,
constitute a violation of TMLs property rights. On the contrary, the foreclosure of the mortgage is to
enforce the contractual obligation of BPI.11?r?l1

The issuance of a preliminary injunction rests entirely within the discretion of the court taking
cognizance of the case and is generally not interfered with except in cases of manifest abuse. For the
issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the
right sought to be protected is material and substantial, that the right of complainant is clear and
unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious
damage.12 In the absence of a clear legal right, the issuance of a writ of injunction constitutes grave
abuse of discretion.

From the foregoing, it is apparent that the trial court committed grave abuse of discretion when it
revoked its previous order and subsequently issued a writ of preliminary injunction simply on the
following grounds: "(a) that TMLs mortgage debt is unliquidated; (b) that TML stands to suffer great and
irreparable damages if it wins the case but, in the process, loses its mortgaged properties to BPI, or even
worse, to third parties; and, (c) that, considering, the brief redemption period under the General
Banking Act, TMLs chance to redeem its properties would be next to
impossible."???ñr?bl?š ??r†??l l?? l?br?rÿ

In Selegna Management and Development Corporation v. United Coconut Planters Bank,13 we ruled that
the debt is considered liquidated despite the alleged lack of accounting:cralawlibrary

A debt is liquidated when the amount is known or is determinable by inspection of the terms and
conditions of the relevant promissory notes and related documentation. Failure to furnish a debtor a
detailed statement of account does not ipso facto result in an unliquidated obligation.

Petitioners executed a Promissory Note, in which they stated that their principal obligation was in the
amount of P103,909,710.82, subject to an interest rate of 21.75 percent per annum.

Pursuant to the parties' Credit Agreement, petitioners likewise know that any delay in the payment of
the principal obligation will subject them to a penalty charge of one percent per month, computed from
the due date until the obligation is paid in full.

It is in fact clear from the agreement of the parties that when the payment is accelerated due to an
event of default, the penalty charge shall be based on the total principal amount outstanding, to be
computed from the date of acceleration until the obligation is paid in full. Their Credit

Agreement even provides for the application of payments. It appears from the agreements that the
amount of total obligation is known or, at the very least, determinable.

Moreover, when they made their partial payment, petitioners did not question the principal, interest or
penalties demanded from them. They only sought additional time to update their interest payments or
to negotiate a possible restructuring of their account. Hence, there is no basis for their allegation that a
statement of account was necessary for them to know their obligation. We cannot impair respondent's
right to foreclose the properties on the basis of their unsubstantiated allegation of a violation of due
process.14?r?l1

Clearly, the possibility of irreparable damage without proof of actual existing right is no ground for an
injunction. Once again, our holding in Selegna is relevant and sound:cralawlibrary

x x x Injunction is not designed to protect contingent or future rights. It is not proper when the
complainant's right is doubtful or disputed.

xxx

Petitioners do not have any clear right to be protected. As shown in our earlier findings, they failed to
substantiate their allegations that their right to due process had been violated and the maturity of their
obligation forestalled. Since they indisputably failed to meet their obligations in spite of repeated
demands, we hold that there is no legal justification to enjoin respondent from enforcing its undeniable
right to foreclose the mortgaged properties.

In any case, petitioners will not be deprived outrightly of their property. Pursuant to Section 47 of the
General Banking Law of 2000, mortgagors who have judicially or extrajudicially sold their real property
for the full or partial payment of their obligation have the right to redeem the property within one year
after the sale. They can redeem their real estate by paying the amount due, with interest rate specified,
under the mortgage deed; as well as all the costs and expenses incurred by the bank.15?r?l1

Lastly, as the Court of Appeals had done, we clarify that our disposition in this case pertains only to the
propriety of the trial courts Orders issuing a writ of preliminary injunction in favor of TML to enjoin the
foreclosure of TMLs mortgaged properties. We do not dispose herein of the main case pending before
the RTC, Branch 194, Parañaque City docketed as Civil Case No. 02-0504.

All told, there is no reversible error in the appellate courts decision, reversing and setting aside the
Orders dated 22 August 2003 and 27 November 2003 of the trial court and lifting the writ of preliminary
injunction issued in favor of TML.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 81932 is
AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 168584 October 15, 2007

REPUBLIC OF THE PHILIPPINES, represented by THE HONORABLE SECRETARY OF FINANCE, THE

HONORABLE COMMISSIONER OF BUREAU OF INTERNAL REVENUE, THE HONORABLE COMMISSIONER
OF CUSTOMS, and THE COLLECTOR OF CUSTOMS OF THE PORT OF SUBIC, petitioners,
vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, RTC, Third Judicial Region, Olongapo City,
INDIGO DISTRIBUTION CORP., herein represented by ARIEL G. CONSOLACION, W STAR TRADING AND
WAREHOUSING CORP., herein represented by HIERYN R. ECLARINAL, FREEDOM BRANDS PHILS.,
CORP., herein represented by ANA LISA RAMAT, BRANDED WAREHOUSE, INC., herein represented by
MARY AILEEN S. GOZUN, ALTASIA INC., herein represented by ALAN HARROW, TAINAN TRADE
(TAIWAN), INC., herein represented by ELENA RANULLO, SUBIC PARK N’ SHOP, herein represented by
NORMA MANGALINO DIZON, TRADING GATEWAYS INTERNATIONAL PHILS., herein represented by
MA. CHARINA FE C. RODOLFO, DUTY FREE SUPERSTORE (DFS), herein represented by RAJESH R.
SADHWANI, CHJIMES TRADING INC., herein represented by ANGELO MARK M. PICARDAL, PREMIER
FREEPORT, INC., herein represented by ROMMEL P. GABALDON, FUTURE TRADE SUBIC FREEPORT,
INC., herein represented by WILLIE S. VERIDIANO, GRAND COMTRADE INTERNATIONAL CORP., herein
represented by JULIUS MOLINDA, and FIRST PLATINUM INTERNATIONAL, INC., herein represented by
ISIDRO M. MUÑOZ,respondents.

DECISION

CARPIO MORALES, J.:

Petitioners seek via petition for certiorari and prohibition to annul (1) the May 4, 2005 Order1 issued by
public respondent Judge Ramon S. Caguioa of the Regional Trial Court (RTC), Branch 74, Olongapo City,
granting private respondents’ application for the issuance of a writ of preliminary injunction and (2) the
Writ of Preliminary Injunction2that was issued pursuant to such Order, which stayed the implementation
of Republic Act (R.A.) No. 9334, AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND
TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142, 143, 144, 145 AND 288
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED.

Petitioners likewise seek to enjoin, restrain and inhibit public respondent from enforcing the impugned
issuances and from further proceeding with the trial of Civil Case No. 102-0-05.

The relevant facts are as follows:

In 1992, Congress enacted Republic Act (R.A) No. 72273 or the Bases Conversion and Development Act of
1992 which, among other things, created the Subic Special Economic and Freeport Zone (SBF4) and the
Subic Bay Metropolitan Authority (SBMA).

R.A. No. 7227 envisioned the SBF to be developed into a "self-sustaining, industrial, commercial,
financial and investment center to generate employment opportunities in and around the zone and to
attract and promote productive foreign investments."5 In line with this vision, Section 12 of the law
provided:

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory
ensuring free flow or movement of goods and capital within, into and exported out of the Subic
Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw
materials, capital and equipment. However, exportation or removal of goods from the territory of the
Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes,
local and national, shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes,
three percent (3%) of the gross income earned by all businesses and enterprises within the Subic Special
Economic Zone shall be remitted to the National Government, one percent (1%) each to the local
government units affected by the declaration of the zone in proportion to their population area, and
other factors. In addition, there is hereby established a development fund of one percent (1%) of the
gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the City of Olongapo and the Municipality of
Subic, and other municipalities contiguous to be base areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the Subic
Special Economic Zone, the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities
and future shall be allowed and maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks
and other financial institutions within the Subic Special Economic Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of
local commercial banks and offshore banking units of foreign banks with minimum Central Bank
regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less
than Two hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under
twenty-one (21) years of age, shall be granted permanent resident status within the Subic Special
Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special Economic
Zone without any need of special authorization from the Bureau of Immigration and Deportation. The
Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue working visas
renewal every two (2) years to foreign executives and other aliens possessing highly-technical skills
which no Filipino within the Subic Special Economic Zone possesses, as certified by the Department of
Labor and Employment. The names of aliens granted permanent residence status and working visas by
the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation
within thirty (30) days after issuance thereof;

x x x x. (Emphasis supplied)

Pursuant to the law, private respondents Indigo Distribution Corporation, W Star Trading and
Warehousing Corporation, Freedom Brands Philippines Corporation, Branded Warehouse, Inc., Altasia,
Inc., Tainan Trade (Taiwan) Inc., Subic Park ‘N Shop, Incorporated, Trading Gateways International
Philipines, Inc., Duty Free Superstore (DFS) Inc., Chijmes Trading, Inc., Premier Freeport, Inc., Future
Trade Subic Freeport, Inc., Grand Comtrade Int’l., Corp., and First Platinum International, Inc., which are
all domestic corporations doing business at the SBF, applied for and were granted Certificates of
Registration and Tax Exemption6 by the SBMA.

These certificates allowed them to engage in the business either of trading, retailing or wholesaling,
import and export, warehousing, distribution and/or transshipment of general merchandise, including
alcohol and tobacco products, and uniformly granted them tax exemptions for such importations as
contained in the following provision of their respective Certificates:

ARTICLE IV. The Company shall be entitled to tax and duty-free importation of raw materials, capital
equipment, and household and personal items for use solely within the Subic Bay Freeport
Zonepursuant to Sections 12(b) and 12(c) of the Act and Sections 43, 45, 46 and 49 of the Implementing
Rules. All importations by the Company are exempt from inspection by the Societe Generale de
Surveillance if such importations are delivered immediately to and for use solely within the Subic Bay
Freeport Zone. (Emphasis supplied)

Congress subsequently passed R.A. No. 9334, however, effective on January 1, 2005,7 Section 6 of which
provides:

Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as amended, is hereby amended to
read as follows:

Sec. 131. Payment of Excise Taxes on Imported Articles. –

(A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or importer to the
Customs Officers, conformably with the regulations of the Department of Finance and before the
release of such articles from the customshouse or by the person who is found in possession of articles
which are exempt from excise taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies
exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-
exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and
shall be liable for the duty and internal revenue tax due on such importation.

The provision of any special or general law to the contrary notwithstanding, the importation of cigars
and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for
tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes
due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines
brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zone,
created under Republic Act No. 7227; x x x and such other freeports as may hereafter be established or
created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented
liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty
Free Philippines (DFP), shall be exempted from all applicable duties only: x x x Provided, finally, That the
removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar
articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one Freeport
to another Freeport, shall not be deemed an introduction into the Philippine customs territory. x x x.
(Emphasis and underscoring supplied)
On the basis of Section 6 of R.A. No. 9334, SBMA issued on January 10, 2005 a Memorandum 8 declaring
that effective January 1, 2005, all importations of cigars, cigarettes, distilled spirits, fermented liquors
and wines into the SBF, including those intended to be transshipped to other free ports in the
Philippines, shall be treated as ordinary importations subject to all applicable taxes, duties and charges,
including excise taxes.

Meanwhile, on February 3, 2005, former Bureau of Internal Revenue (BIR) Commissioner Guillermo L.
Parayno, Jr. requested then Customs Commissioner George M. Jereos to immediately collect the excise
tax due on imported alcohol and tobacco products brought to the Duty Free Philippines (DFP) and
Freeport zones.9

Accordingly, the Collector of Customs of the port of Subic directed the SBMA Administrator to require
payment of all appropriate duties and taxes on all importations of cigars and cigarettes, distilled spirits,
fermented liquors and wines; and for all transactions involving the said items to be covered from then
on by a consumption entry and no longer by a warehousing entry.10

On February 7, 2005, SBMA issued a Memorandum11 directing the departments concerned to require
locators/importers in the SBF to pay the corresponding duties and taxes on their importations of cigars,
cigarettes, liquors and wines before said items are cleared and released from the freeport. However,
certain SBF locators which were "exclusively engaged in the transshipment of cigarette products for
foreign destinations" were allowed by the SBMA to process their import documents subject to their
submission of an Undertaking with the Bureau of Customs.12

On February 15, 2005, private respondents wrote the offices of respondent Collector of Customs and
the SBMA Administrator requesting for a reconsideration of the directives on the imposition of duties
and taxes, particularly excise taxes, on their shipments of cigars, cigarettes, wines and liquors.13 Despite
these letters, however, they were not allowed to file any warehousing entry for their shipments.

Thus, private respondent enterprises, through their representatives, brought before the RTC of
Olongapo City a special civil action for declaratory relief14 to have certain provisions of R.A. No. 9334
declared as unconstitutional, which case was docketed as Civil Case No. 102-0-05.

In the main, private respondents submitted that (1) R.A. No. 9334 should not be interpreted as altering,
modifying or amending the provisions of R.A. No. 7227 because repeals by implication are not favored;
(2) a general law like R.A. No. 9334 cannot amend R.A. No. 7727, which is a special law; and (3) the
assailed law violates the one bill-one subject rule embodied in Section 26(1), Article VI15 of the
Constitution as well as the constitutional proscription against the impairment of the obligation of
contracts.16

Alleging that great and irreparable loss and injury would befall them as a consequence of the imposition
of taxes on alcohol and tobacco products brought into the SBF, private respondents prayed for the
issuance of a writ of preliminary injunction and/or Temporary Restraining Order (TRO) and preliminary
mandatory injunction to enjoin the directives of herein petitioners.

Petitioners duly opposed the private respondents’ prayer for the issuance of a writ of preliminary
injunction and/or TRO, arguing that (1) tax exemptions are not presumed and even when granted, are
strictly construed against the grantee; (2) an increase in business expense is not the injury contemplated
by law, it being a case of damnum absque injuria; and (3) the drawback mechanism established in the
law clearly negates the possibility of the feared injury.17

Petitioners moreover pointed out that courts are enjoined from issuing a writ of injunction and/or TRO
on the grounds of an alleged nullity of a law, ordinance or administrative regulation or circular or in a
manner that would effectively dispose of the main case. Taxes, they stressed, are the lifeblood of the
government and their prompt and certain availability is an imperious need. They maintained that
greater injury would be inflicted on the public should the writ be granted.

On May 4, 2005, the court a quo granted private respondents’ application for the issuance of a writ of
preliminary injunction, after it found that the essential requisites for the issuance of a preliminary
injunction were present.

As investors duly licensed to operate inside the SBF, the trial court declared that private respondents
were entitled to enjoy the benefits of tax incentives under R.A. No. 7227, particularly the exemption
from local and national taxes under Section 12(c); the aforecited provision of R.A. No. 7227, coupled
with private respondents’ Certificates of Registration and Tax Exemption from the SBMA, vested in them
a clear and unmistakable right or right in esse that would be violated should R.A. No. 9334 be
implemented; and the invasion of such right is substantial and material as private respondents would be
compelled to pay more than what they should by way of taxes to the national government.

The trial court thereafter ruled that the prima facie presumption of validity of R.A. No. 9334 had been
overcome by private respondents, it holding that as a partial amendment of the National Internal
Revenue Code (NIRC) of 1997,18 as amended, R.A. No. 9334 is a general law that could not prevail over a
special statute like R.A. No. 7227 notwithstanding the fact that the assailed law is of later effectivity.

The trial court went on to hold that the repealing provision of Section 10 of R.A. No. 9334 does not
expressly mention the repeal of R. A. No. 7227, hence, its repeal can only be an implied repeal, which is
not favored; and since R.A. No. 9334 imposes new tax burdens, whatever doubts arising therefrom
should be resolved against the taxing authority and in favor of the taxpayer.

The trial court furthermore held that R.A. No. 9334 violates the terms and conditions of private
respondents’ subsisting contracts with SBMA, which are embodied in their Certificates of Registration
and Exemptions in contravention of the constitutional guarantee against the impairment of contractual
obligations; that greater damage would be inflicted on private respondents if the writ of injunction is
not issued as compared to the injury that the government and the general public would suffer from its
issuance; and that the damage that private respondents are bound to suffer once the assailed statute is
implemented – including the loss of confidence of their foreign principals, loss of business opportunity
and unrealized income, and the danger of closing down their businesses due to uncertainty of continued
viability – cannot be measured accurately by any standard.

With regard to the rule that injunction is improper to restrain the collection of taxes under Section
21819 of the NIRC, the trial court held that what is sought to be enjoined is not per se the collection of
taxes, but the implementation of a statute that has been found preliminarily to be unconstitutional.

Additionally, the trial court pointed out that private respondents’ taxes have not yet been assessed, as
they have not filed consumption entries on all their imported tobacco and alcohol products, hence, their
duty to pay the corresponding excise taxes and the concomitant right of the government to collect the
same have not yet materialized.

On May 11, 2005, the trial court issued a Writ of Preliminary Injunction directing petitioners and the
SBMA Administrator as well as all persons assisting or acting for and in their behalf "1) to allow the
operations of [private respondents] in accordance with R.A. No. 7227; 2) to allow [them] to file
warehousing entries instead of consumption entries as regards their importation of tobacco and alcohol
products; and 3) to cease and desist from implementing the pertinent provisions of R.A. No. 9334 by not
compelling [private respondents] to immediately pay duties and taxes on said alcohol and tobacco
products as a condition to their removal from the port area for transfer to the warehouses of [private
respondents]."20

The injunction bond was approved at One Million pesos (P1,000,000).21

Without moving for reconsideration, petitioners have come directly to this Court to question the May 4,
2005 Order and the Writ of Preliminary Injunction which, they submit, were issued by public respondent
with grave abuse of discretion amounting to lack or excess of jurisdiction.

In particular, petitioners contend that public respondent peremptorily and unjustly issued the injunctive
writ despite the absence of the legal requisites for its issuance, resulting in heavy government revenue
losses.22 They emphatically argue that since the tax exemption previously enjoyed by private
respondents has clearly been withdrawn by R.A. No. 9334, private respondents do not have any right in
esse nor can they invoke legal injury to stymie the enforcement of R.A. No. 9334.

Furthermore, petitioners maintain that in issuing the injunctive writ, public respondent showed manifest
bias and prejudice and prejudged the merits of the case in utter disregard of the caveat issued by this
Court in Searth Commodities Corporation, et al. v. Court of Appeals23 and Vera v. Arca.24

Regarding the P1 million injunction bond fixed by public respondent, petitioners argue that the same is
grossly disproportionate to the damages that have been and continue to be sustained by the Republic.

In their Reply25 to private respondents’ Comment, petitioners additionally plead public respondent’s bias
and partiality in allowing the motions for intervention of a number of corporations26 without notice to
them and in disregard of their present pending petition for certiorari and prohibition before this Court.
The injunction bond filed by private respondent Indigo Distribution Corporation, they stress, is not even
sufficient to cover all the original private respondents, much less, intervenor-corporations.

The petition is partly meritorious.

At the outset, it bears emphasis that only questions relating to the propriety of the issuance of the May
4, 2005 Order and the Writ of Preliminary Injunction are properly within the scope of the present
petition and shall be so addressed in order to determine if public respondent committed grave abuse of
discretion. The arguments raised by private respondents which pertain to the constitutionality of R.A.
No. 9334 subject matter of the case pending litigation before the trial court have no bearing in resolving
the present petition.

Section 3 of Rule 58 of the Revised Rules of Court provides:

SEC. 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it
is established.

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

For a writ of preliminary injunction to issue, the plaintiff must be able to establish that (1) there is a
clear and unmistakable right to be protected, (2) the invasion of the right sought to be protected is
material and substantial, and (3) there is an urgent and paramount necessity for the writ to prevent
serious damage.27

Conversely, failure to establish either the existence of a clear and positive right which should be
judicially protected through the writ of injunction, or of the acts or attempts to commit any act which
endangers or tends to endanger the existence of said right, or of the urgent need to prevent serious
damage, is a sufficient ground for denying the preliminary injunction.28

It is beyond cavil that R.A. No. 7227 granted private respondents exemption from local and national
taxes, including excise taxes, on their importations of general merchandise, for which reason they
enjoyed tax-exempt status until the effectivity of R.A. No. 9334.

By subsequently enacting R.A. No. 9334, however, Congress expressed its intention to withdraw private
respondents’ tax exemption privilege on their importations of cigars, cigarettes, distilled spirits,
fermented liquors and wines. Juxtaposed to show this intention are the respective provisions of Section
131 of the NIRC before and after its amendment by R.A. No. 9334:

x x x x.

Sec. 131 of NIRC before R.A. No. 9334 Sec. 131, as amended by R.A. No. 9334

Sec. 131. Payment of Excise Taxes on Sec. 131. Payment of Excise Taxes on
Imported Articles. – Imported Articles. –

(A) Persons Liable. – Excise taxes on
imported articles shall be paid by the
owner or importer to the Customs
Officers, conformably with the regulations
of the Department of Finance and before
the release of such articles from the
customs house or by the person who is
found in possession of articles which are
(A) Persons Liable. – Excise taxes on
imported articles shall be paid by the
owner or importer to the Customs
Officers, conformably with the regulations
of the Department of Finance and before
the release of such articles from the
customs house or by the person who is
found in possession of articles which are
exempt from excise taxes other than those exempt from excise taxes other than those
legally entitled to exemption. legally entitled to exemption.

In the case of tax-free articles brought or In the case of tax-free articles brought or
imported into the Philippines by persons, imported into the Philippines by persons,
entities or agencies exempt from tax entities or agencies exempt from tax
which are subsequently sold, transferred which are subsequently sold, transferred
or exchanged in the Philippines to non- or exchanged in the Philippines to non-
exempt persons or entities, the purchasers exempt persons or entities, the purchasers
or recipients shall be considered the or recipients shall be considered the
importers thereof, and shall be liable for importers thereof, and shall be liable for
the duty and internal revenue tax due on the duty and internal revenue tax due on
such importation. such importation.

The provision of any special or general law The provision of any special or general
to the contrary notwithstanding, the law to the contrary notwithstanding, the
importation of cigars and cigarettes, importation of cigars and cigarettes,
distilled spirits, fermented liquors and distilled spirits, fermented liquors and
wines into the Philippines, even if destined wines into the Philippines, even if
for tax and duty free shops, shall be destined for tax and duty free shops, shall
subject to all applicable taxes, duties, be subject to all applicable taxes, duties,
charges, including excise taxes due charges, including excise taxes due
thereon. Provided, however, That this thereon. This shall apply to cigars and
shall not apply to cigars and cigarettes, cigarettes, distilled spirits, fermented
fermented spirits and wines brought liquors and wines brought directly into
directly into the duly chartered or the duly chartered or legislated freeports
legislated freeports of the Subic Economic of the Subic Economic Freeport Zone,
Freeport Zone, created under Republic created under Republic Act No. 7227; the
Act No. 7227; the Cagayan Special Cagayan Special Economic Zone and
Economic Zone and Freeport, created Freeport, created under Republic Act No.
under Republic Act No. 7922; and the 7922; and the Zamboanga City Special
Zamboanga City Special Economic Zone, Economic Zone, created under Republic
created under Republic Act No. 7903, and Act No. 7903, and such other freeports as
are not transshipped to any other port in may hereafter be established or created
the Philippines: Provided, further, That by law: Provided, further, That
importations of cigars and cigarettes, importations of cigars and cigarettes,
distilled spirits, fermented liquors and distilled spirits, fermented liquors and
wines made directly by a government- wines made directly by a government-
owned and operated duty-free shop, like owned and operated duty-free shop, like
the Duty Free Philippines (DFP), shall be the Duty Free Philippines (DFP), shall be
exempted from all applicable duties, exempted from all applicable duties
charges, including excise tax due only: Provided still further, That such
thereon; Provided still further, That such articles directly imported by a
articles directly imported by a government-owned and operated duty-
government-owned and operated duty- free shop, like the Duty-Free Philippines,
 free shop, like the Duty-Free Philippines, shall be labeled "tax and duty-free" and
shall be labeled "tax and duty-free" and "not for resale": Provided, finally, That the
"not for resale": Provided, still further, removal and transfer of tax and duty-free
That if such articles brought into the duly goods, products, machinery, equipment
chartered or legislated freeports under and other similar articles other than cigars
Republic Acts Nos. 7227, 7922 and 7903 and cigarettes, distilled spirits, fermented
are subsequently introduced into the liquors and wines, from one Freeport to
Philippine customs territory, then such another Freeport, shall not be deemed an
articles shall, upon such introduction, be introduction into the Philippine customs
deemed imported into the Philippines and territory.
shall be subject to all imposts and excise
x x x x.
taxes provided herein and other statutes:
Provided, finally, That the removal and
transfer of tax and duty-free goods,
products, machinery, equipment and
other similar articles, from one freeport to
another freeport, shall not be deemed an
introduction into the Philippine customs
territory.

x x x x.

(Emphasis and underscoring supplied)

To note, the old Section 131 of the NIRC expressly provided that all taxes, duties, charges, including
excise taxes shall not apply to importations of cigars, cigarettes, fermented spirits and wines brought
directly into the duly chartered or legislated freeports of the SBF.

On the other hand, Section 131, as amended by R.A. No. 9334, now provides that such taxes, duties and
charges, including excise taxes, shall apply to importation of cigars and cigarettes, distilled spirits,
fermented liquors and wines into the SBF.

Without necessarily passing upon the validity of the withdrawal of the tax exemption privileges of
private respondents, it behooves this Court to state certain basic principles and observations that should
throw light on the propriety of the issuance of the writ of preliminary injunction in this case.

First. Every presumption must be indulged in favor of the constitutionality of a statute.29 The burden of
proving the unconstitutionality of a law rests on the party assailing the law.30 In passing upon the validity
of an act of a co-equal and coordinate branch of the government, courts must ever be mindful of the
time-honored principle that a statute is presumed to be valid.

Second. There is no vested right in a tax exemption, more so when the latest expression of legislative
intent renders its continuance doubtful. Being a mere statutory privilege,31 a tax exemption may be
modified or withdrawn at will by the granting authority.32

To state otherwise is to limit the taxing power of the State, which is unlimited, plenary, comprehensive
and supreme. The power to impose taxes is one so unlimited in force and so searching in extent, it is
subject only to restrictions which rest on the discretion of the authority exercising it.33
Third. As a general rule, tax exemptions are construed strictissimi juris against the taxpayer and liberally
in favor of the taxing authority.34 The burden of proof rests upon the party claiming exemption to prove
that it is in fact covered by the exemption so claimed.35 In case of doubt, non-exemption is favored.36

Fourth. A tax exemption cannot be grounded upon the continued existence of a statute which precludes
its change or repeal.37 Flowing from the basic precept of constitutional law that no law is irrepealable,
Congress, in the legitimate exercise of its lawmaking powers, can enact a law withdrawing a tax
exemption just as efficaciously as it may grant the same under Section 28(4) of Article VI38 of the
Constitution. There is no gainsaying therefore that Congress can amend Section 131 of the NIRC in a
manner it sees fit, as it did when it passed R.A. No. 9334.

Fifth. The rights granted under the Certificates of Registration and Tax Exemption of private respondents
are not absolute and unconditional as to constitute rights in esse – those clearly founded on or granted
by law or is enforceable as a matter of law.39

These certificates granting private respondents a "permit to operate" their respective businesses are in
the nature of licenses, which the bulk of jurisprudence considers as neither a property nor a property
right.40 The licensee takes his license subject to such conditions as the grantor sees fit to impose,
including its revocation at pleasure.41 A license can thus be revoked at any time since it does not confer
an absolute right.42

While the tax exemption contained in the Certificates of Registration of private respondents may have
been part of the inducement for carrying on their businesses in the SBF, this exemption, nevertheless, is
far from being contractual in nature in the sense that the non-impairment clause of the Constitution can
rightly be invoked.43

Sixth. Whatever right may have been acquired on the basis of the Certificates of Registration and Tax
Exemption must yield to the State’s valid exercise of police power.44 It is well to remember that taxes
may be made the implement of the police power.45

It is not difficult to recognize that public welfare and necessity underlie the enactment of R.A. No. 9334.
As petitioners point out, the now assailed provision was passed to curb the pernicious practice of some
unscrupulous business enterprises inside the SBF of using their tax exemption privileges for smuggling
purposes. Smuggling in whatever form is bad enough; it is worse when the same is allegedly
perpetrated, condoned or facilitated by enterprises hiding behind the cloak of their tax exemption
privileges.

Seventh. As a rule, courts should avoid issuing a writ of preliminary injunction which would in effect
dispose of the main case without trial.46 This rule is intended to preclude a prejudgment of the main
case and a reversal of the rule on the burden of proof since by issuing the injunctive writ, the court
would assume the proposition that petitioners are inceptively duty bound to prove.47

Eighth. A court may issue a writ of preliminary injunction only when the petitioner assailing a statute has
made out a case of unconstitutionality or invalidity strong enough, in the mind of the judge, to
overcome the presumption of validity, in addition to a showing of a clear legal right to the remedy
sought.48
Thus, it is not enough that petitioners make out a case of unconstitutionality or invalidity to overcome
the prima faciepresumption of validity of a statute; they must also be able to show a clear legal right
that ought to be protected by the court. The issuance of the writ is therefore not proper when the
complainant’s right is doubtful or disputed.49

Ninth. The feared injurious effects of the imposition of duties, charges and taxes on imported cigars,
cigarettes, distilled spirits, fermented liquors and wines on private respondents’ businesses cannot
possibly outweigh the dire consequences that the non-collection of taxes, not to mention the unabated
smuggling inside the SBF, would wreak on the government. Whatever damage would befall private
respondents must perforce take a back seat to the pressing need to curb smuggling and raise revenues
for governmental functions.

All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower
court, this Court may and should intervene in a clear case of abuse.50

One such case of grave abuse obtained in this case when public respondent issued his Order of May 4,
2005 and the Writ of Preliminary Injunction on May 11, 200551 despite the absence of a clear and
unquestioned legal right of private respondents.

In holding that the presumption of constitutionality and validity of R.A. No. 9334 was overcome by
private respondents for the reasons public respondent cited in his May 4, 2005 Order, he disregarded
the fact that as a condition sine qua non to the issuance of a writ of preliminary injunction, private
respondents needed also to show a clear legal right that ought to be protected. That requirement is not
satisfied in this case.

To stress, the possibility of irreparable damage without proof of an actual existing right would not justify
an injunctive relief.52

Besides, private respondents are not altogether lacking an appropriate relief under the law. As
petitioners point out in their Petition53 before this Court, private respondents may avail themselves of a
tax refund or tax credit should R.A. No. 9334 be finally declared invalid.

Indeed, Sections 20454 and 22955 of the NIRC provide for the recovery of erroneously or illegally
collected taxes which would be the nature of the excise taxes paid by private respondents should
Section 6 of R.A. No. 9334 be declared unconstitutional or invalid.

It may not be amiss to add that private respondents can also opt not to import, or to import less of,
those items which no longer enjoy tax exemption under R.A. No. 9334 to avoid the payment of taxes
thereon.

The Court finds that public respondent had also ventured into the delicate area which courts are
cautioned from taking when deciding applications for the issuance of the writ of preliminary injunction.
Having ruled preliminarily against the prima facie validity of R.A. No. 9334, he assumed in effect the
proposition that private respondents in their petition for declaratory relief were duty bound to prove,
thereby shifting to petitioners the burden of proving that R.A. No. 9334 is not unconstitutional or
invalid.

In the same vein, the Court finds public respondent to have overstepped his discretion when he
arbitrarily fixed the injunction bond of the SBF enterprises at only P1million.
The alleged sparseness of the testimony of Indigo Corporation’s representative56 on the injury to be
suffered by private respondents may be excused because evidence for a preliminary injunction need not
be conclusive or complete. Nonetheless, considering the number of private respondent enterprises and
the volume of their businesses, the injunction bond is undoubtedly not sufficient to answer for the
damages that the government was bound to suffer as a consequence of the suspension of the
implementation of the assailed provisions of R.A. No. 9334.

Rule 58, Section 4(b) provides that a bond is executed in favor of the party enjoined to answer for all
damages which it may sustain by reason of the injunction. The purpose of the injunction bond is to
protect the defendant against loss or damage by reason of the injunction in case the court finally
decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly.57

Recalling this Court’s pronouncements in Olalia v. Hizon58 that:

x x x [T]here is no power the exercise of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an
injunction. It is the strong arm of equity that should never be extended unless to cases of great injury,
where courts of law cannot afford an adequate or commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the freedom of action of the
defendant and should not be granted lightly or precipitately. It should be granted only when the court is
fully satisfied that the law permits it and the emergency demands it,

it cannot be overemphasized that any injunction that restrains the collection of taxes, which is the
inevitable result of the suspension of the implementation of the assailed Section 6 of R.A. No. 9334, is a
limitation upon the right of the government to its lifeline and wherewithal.

The power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people.59 That the enforcement of tax laws and the
collection of taxes are of paramount importance for the sustenance of government has been repeatedly
observed. Taxes being the lifeblood of the government that should be collected without unnecessary
hindrance,60 every precaution must be taken not to unduly suppress it.

Whether this Court must issue the writ of prohibition, suffice it to stress that being possessed of the
power to act on the petition for declaratory relief, public respondent can proceed to determine the
merits of the main case. To halt the proceedings at this point may be acting too prematurely and would
not be in keeping with the policy that courts must decide controversies on the merits.

Moreover, lacking the requisite proof of public respondent’s alleged partiality, this Court has no ground
to prohibit him from proceeding with the case for declaratory relief. For these reasons, prohibition does
not lie.

WHEREFORE, the Petition is PARTLY GRANTED. The writ of certiorari to nullify and set aside the Order of
May 4, 2005 as well as the Writ of Preliminary Injunction issued by respondent Judge Caguioa on May
11, 2005 is GRANTED. The assailed Order and Writ of Preliminary Injunction are hereby declared NULL
AND VOID and accordingly SET ASIDE. The writ of prohibition prayed for is, however, DENIED.

SO ORDERED.
G.R. No. 169802 June 8, 2007

OVERSEAS WORKERS WELFARE ADMINISTRATION, represented by Administrator Marianito D.

Roque,petitioner,
vs.
ATTY. CESAR L. CHAVEZ, OPHELIA N. ALMENARIO, ELVIRA ADOR, REYNALDO TAYAG, TORIBIO ROBLES,
JR., ROSSANE BAHIA, RACQUEL LLAGAS-KUNTING, MA. STELLA A. DULCE, ROSSANA SIRAY, EDUARDO
MENDOZA, JR., PRISCILLA BARTOLO, ROSE VILLANUEVA, CHERRY MOLINA, MARY ROSE RAMOS, MA.
MINERVA PAISO, RODERIC DELOS REYES, RENATO DELA CRUZ, MARIVIC DIGMA, JESSIE BALLESTEROS,
DONATO DAGDAG, MARK TUMIBAY, CYNTHIA FRUEL, DEMETRIO SORIANO, MILAGROS GUEVARRA,
ANGELITA LACSON, BERT BUQUID, JUN SAMORANAS, TEODORO TUTAY, LEAH YOGYOG, MARIE CRUZ
and CONCEPCION BRAGAS REGALADO, respondents.

DECISION

CHICO-NAZARIO, J.:

The Case

Petitioner Overseas Workers Welfare Administration (OWWA), comes to this Court via the instant
Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the 22 September 2005
Decision1 of the Court of Appeals in CA-G.R. SP No. 87702, which affirmed the Order2 dated 30
September 2004, of the Regional Trial Court (RTC), Pasay City, Branch 117, in Civil Case No. 04-0415-
CFM. The RTC granted the issuance of a writ of preliminary injunction restraining OWWA from
implementing its new organizational structure.

Factual Antecedents

OWWA is a government agency tasked primarily to protect the interest and promote the welfare of
overseas Filipino workers (OFWs).3 OWWA traces its beginnings to 1 May 1977, when the Welfare and
Training Fund for Overseas Workers in the Department of Labor and Employment (DOLE) was created by
virtue of Letter of Instructions No. 537, with the main objective, inter alia, of providing social and
welfare services to OFW, including insurance coverage, social work, legal and placement assistance,
cultural and remittances services, and the like. On 1 May 1980, Presidential Decree No. 1694 was signed
into law, formalizing the operations of a comprehensive Welfare Fund (Welfund), as authorized and
created under Letter of Instructions No. 537. Presidential Decree No. 1694 further authorized that
contributions to the Welfare and Training Fund collected pursuant to Letter of Instructions No. 537 be
transferred to the Welfund. On 16 January 1981, Presidential Decree No. 1809 was promulgated,
amending certain provisions of Presidential Decree No. 1694.4 Subsequently, Executive Order No. 126
was passed which reorganized the Ministry of Labor and Employment. Executive Order No. 126 also
renamed the Welfare Fund as the OWWA.

From the records, it is undisputed that on 9 January 2004, as there was yet no formal OWWA structure
duly approved by the Department of Budget and Management (DBM) and the Civil Service Commission
(CSC), the OWWA Board of Trustees passed Resolution No. 001,5 Series of 2004, bearing the title
"Approving the Structure of the Overseas Workers Welfare Administration," and depicting the
organizational structure and staffing pattern of the OWWA, as approved by Patricia A. Sto. Tomas (Sto.
Tomas), then Chair of the OWWA Board of Trustees and then Secretary of the DOLE. According to
Resolution No. 001, the structuring of the OWWA will stabilize the internal organization and promote
careerism among the employees. It will also ensure a more efficient and effective delivery of programs
and services to member-OFWs. Resolution No. 001 resolved, thus:

RESOLVED therefore, to approve as it is hereby approved, the OWWA Structure which is hereto
attached and made an integral part of this Resolution, comprising mainly of the approved organizational
chart, functional descriptions and staffing pattern, subject to the following:

a. There will be no displacement of existing regular employees;

b. There will be no temporary appointments; and

c. There will be no hiring of casuals, contractuals or consultants in the new structure.

RESOLVED further, that the OWWA Structure be immediately submitted for the appropriate actions of
competent authorities, particularly the DBM and CSC.6

On 24 March 2004, DBM Secretary Emilia T. Boncodin (Boncodin), approved the organizational structure
and staffing pattern of the OWWA.7 In her approval thereof, she stated that the total funding
requirements for the revised organizational structure shall be ₱107,546,379 for four hundred (400)
positions. Moreover, DBM Secretary Boncodin underscored that the funding shall come solely from the
OWWA funds and that no government funds shall be released for the implementation of the changes
made.

On 31 May 2004, OWWA Administrator Virgilio R. Angelo (Angelo), issued Advisory No. 01,8 advising the
officials and employees of the OWWA that the DBM had recently approved OWWA’s organizational
chart, functional statements, and the staffing pattern. Advisory No. 01 also announced that a Placement
Committee will be created to evaluate and recommend placement of all regular/permanent incumbents
of OWWA in the new organizational chart and staffing pattern. All employees were asked to indicate in
writing their interest or preference in any of the approved plantilla item, especially for promotion to the
Human Resources Management Division, not later than 11 June 2004. Further, Advisory No. 01
emphasized that the OWWA Board of Trustees, thru its Resolution No. 001, Series of 2004, had declared
the policy that there will be no displacement of existing regular/permanent employees. Qualified casual
and contractual personnel may apply for any vacant item only after all regular/permanent employees of
OWWA had been placed.

Subsequently, on 3 June 2004, DOLE Secretary Sto. Tomas issued Administrative Order No. 171, Series of
2004, creating a Placement Committee to evaluate qualifications of employees; and to recommend their
appropriate placement in the new organizational chart, functional statements and staffing pattern of
the OWWA. Administrative Order No. 171 was partially amended by Administrative Order No. 171-A,
issued by DOLE Acting Secretary Manuel G. Imson (Imson), authorizing the Placement Committee to
recommend to the OWWA Administrator their evaluations, which shall thereafter be endorsed to the
DOLE Secretary for consideration.9

The Placement Committee was directed to comply with the pertinent CESB/CSC/DBM rules and
regulations on its recommended placement of all personnel of OWWA based on the following
parameters, to wit10 :

1. There would be no diminution nor displacement of permanent/regular employees of OWWA.

2. Qualified casuals and contractual personnel may likewise be considered in the staffing pattern only
after ensuring that the regular(s)/permanent employees of OWWA have already been placed.

3. Decentralization of functions to bring OWWA services closer to the public shall be adopted. Thus,
priority in some promotions shall be given to those who opt to be assigned in the regional offices, aside
from performance.

4. Deployment in the overseas posts shall be made on rotation basis from both the frontline and the
administrative staff, based on performance.

5. Regular/permanent incumbents interested for promotion should indicate their interest in writing to
the Placement Committee: Attn: The Chairperson.

6. Those who may opt to retire should submit to the HRMD, their application for retirement, copy
furnished the Budget Division for budget allocation purposes.

The Placement Committee should complete its task not later than June 30, 2004.

On 8 June 2004, OWWA Administrator Angelo issued Advisory No. 02, inviting OWWA officials and
employees to an orientation on the new structure, functions and staffing pattern of the OWWA.
Moreover, Advisory No. 02 required the holding of elections for the First and Second Level
Representatives who will elect from among themselves the regular official representatives and
alternates in the Placement Committee deliberations. On 11 June 2004, Advisory No. 03 was issued,
announcing the conduct of an election for representatives and alternates representing the employees in
the first [Salary Grades (SG) 1-9] and second level (SG 10-24), pursuant to Administrative Order No. 171,
dated 3 June 2004, as amended by Administrative Order No. 171-A.

On 18 June 2004, DOLE Acting Secretary Imson issued Administrative Order No. 186, Series of
2004,11 prescribing the guidelines on the placement of personnel in the new staffing pattern of the
OWWA.

On 29 June 2004, herein respondents filed with the RTC, a Complaint for Annulment of the
Organizational Structure of the OWWA, as approved by OWWA Board Resolution No. 001, Series of
2004, with Prayer for the Issuance of a Writ of Preliminary Injunction12 against herein petitioner OWWA
and its Board of Trustees.13 The case was docketed as Civil Case No. 04-0415-CFM.

In their Complaint, respondents alleged that the OWWA has around 24 consultants, 29 casual
employees, 76 contractual workers, and 356 officers and employees, which number does not include
the 85 contractual employees in the Office of the Secretariat of the OWWA Medicare.14 Respondents
posited that the approved Organizational Structure and Staffing Pattern of the OWWA increases the
number of regular plantilla positions from 356 to 400; however, the increase of 42 positions will not
absorb the aforementioned consultants and casual and contractual workers. They further averred that
the plantilla positions in the Central Office will be reduced from 250 to 140, while the regional offices
will have an increase of 164 positions. According to the respondents, the resulting decrease in the
number of employees in the Central Office will result in the constructive dismissal of at least 110
employees. Meanwhile, the deployment of the regular central office personnel to the regional offices
will displace the said employees, as well as their families.
Respondents challenged the validity of the new organizational structure of the OWWA. In fine, they
contended that the same is null and void; hence, its implementation should be prohibited.

Respondents prayed for the issuance of a writ of preliminary injunction to restrain petitioners from: 1)
implementing its organizational structure as approved by the OWWA Board of Trustees in its Resolution
dated 9 January 2004; and 2) advertising and proceeding with the recruitment and placement of new
employees under the new organizational structure.15

Further, respondents prayed that after trial on the merits, OWWA’s organizational structure be declared
as unconstitutional and contrary to law; and the OWWA Board of Trustees be declared as having acted
contrary to the Constitution and existing laws, and with grave abuse of discretion in approving
Resolution No. 001, dated 9 January 2004.16

The Ruling of the RTC

On 30 September 2004, the RTC rendered an Order17 granting respondents’ prayer for a writ of
preliminary injunction upon the filing of a bond in the sum of ₱100,000.00. In the grant thereof, the RTC
reasoned that any move to reorganize the structure of the OWWA requires an amendatory law. It
deemed Resolution No. 001 was not merely a "formalization of the organizational structure and staffing
pattern of the OWWA," but a disruption of the existing organization which disturbs and displaces a
number of regular employees, including consultants and casual and contractual employees.

The RTC ratiocinated in this wise:

x x x All told, what is being done now at OWWA is a reorganization of its structure as originally
conceived under P.D. No. 1694 [Organization and Administration of the Welfare for Overseas Workers]
and P.D. No. 1809 [Amending Certain Provisions of Presidential Decree 1694, Creating the "Welfare
Fund for Overseas Workers"]. In the (sic) light of Section 11 of R.A. No. 6656 which provides that "the
executive branch of the government shall implement reorganization schemes within a specified period
of time authorized by law", this court doubts whether a reorganization of OWWA can be effected
without an enabling law.

Further, defendants do not dispute the fact that while the mechanics of the reorganization is still being
forged, the DOLE already processed applications and eventually hired employees not from among the
existing employees of the OWWA. This appears to be in contravention of Section 4 of R.A. No. 6656
which provides:

"Sec. 4. Officers and employees holding permanent appointments shall be given preference for
appointment to the new positions in the approved staffing pattern comparable to their former position
or in case there are not enough comparable positions, to positions next lower in rank.

"No new employees shall be taken in until all permanent officers and employees have been appointed,
including temporary and casual employees who possess the necessary qualification requirements,
among which is the appropriate civil service eligibility for permanent appointment to positions in the
approved staffing pattern, in case there are still positions to be filled, unless such positions are policy-
determining, primarily confidential or highly technical in nature."

Furthermore, defendant’s (sic) do not dispute the fact that the Placement Committee was hastily
constituted, that its members were not educated of their task of job placement, that there was no real
to goodness (sic) personnel evaluation and, finally, the Chairman of the Committee was simply hand-
picked by the DOLE Secretary contrary to the explicit injunction of Section 8 of the Implementing Rules
of R.A .No. 6656 that "the members shall elect their Chairman."18

The RTC also cited the protection afforded by the Constitution to workers, specifically, officers or
employees of the Civil Service in ruling that the existing organization of the OWWA need not be
disturbed in any way and no single worker will be removed or displaced. Thus:

This court entertains no doubt that as workers, plaintiffs enjoy a right that is protected both by the
Constitution and statutes. Thus, "(n)o officer or employee of the civil service shall be removed or
suspended except for cause provided by law. "(Sec. 2, par. 3, Art. IX, Constitution). "No person shall be
deprived of life, liberty, or property without due process of law, nor shall any person be denied the
equal protection of the laws." (Sec. 1, Art. III; ibid.). A person’s job is his property. In many cases, as in
the Philippine setting, one’s job also means one’s life and the lives of those who depended on him.
Hence, it is a policy of the State to "free the people from poverty through policies that provide adequate
social services, promote full employment, a rising standard of living, and an improved quality of life for
all." (Sec. 8, Art. II, ibid.) Any act that, contrary to law, tends to deprive a worker of his work, violates his
rights.19

Finally, the RTC defended its jurisdiction over the controversy despite petitioner’s protestations that
jurisdiction over respondents’ complaint is lodged in the administrative agencies tasked to implement
the new OWWA structure. It ruled that the doctrine of primary jurisdiction is applicable only where the
administrative agency exercises its quasi-judicial or administrative function; but, where what is
challenged is the constitutionality of a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative functions, regular courts have jurisdiction over the matter.20

Therefore, the RTC, in its Order, dated 30 September 2004, granted respondents’ prayer for a writ of
preliminary injunction, to wit:

WHEREFORE, upon plaintiff’s (sic) filing of a bond in the sum of ₱100,000.00, let a writ of preliminary
injunction issue in: 1) restraining the defendants from implementing the new organizational structure of
OWWA approved by the Board of Trustees on January 9, 2004 and 2) restraining the defendants from
advertising and proceeding with the recruitment and placement of new employees under the new
organizational structure.21

Without filing a Motion for Reconsideration, petitioner, thru the Office of the Solicitor General
(OSG),22 filed with the Court of Appeals, a Petition for Certiorari and Prohibition with Prayer for Issuance
of a Temporary Restraining Order and Writ of Preliminary Injunction under Rule 65 of the Rules of Court,
assailing the RTC Order of 30 September 2004.23

The Ruling of the Appellate Court

On 22 September 2005, the Court of Appeals rendered the assailed Decision, which dismissed the
petition. It affirmed the court a quo’s findings that respondents possess a clear and legal right to the
immediate issuance of the writ. It resolved that it was proper for the RTC to restrain, for the meantime,
the implementation of OWWA’s reorganization to prevent injury until after the main case is heard and
decided.24 It found respondents’ allegations sufficient to prove the existence of a right that should be
protected by a writ of preliminary injunction. Thus:
Petitioner averred, too, that majority of the casuals, contractuals and consultants have been employed
for more than ten (10) years, if not twenty (20) years, and were not regularized simply due to lack of
regular positions in the plantilla or the freezing of recruitment thereto.

To be sure, private respondents have convincingly adduced evidence of specific acts to substantiate
their claim of impending injury and not merely allegations of facts and conclusions of law, but factual
evidence of a clear and unmistakable right of being displaced or dismissed by the planned
reorganization. These allegations are substantial enough to prove the right in esse. At best, the anxiety
of being dismissed or displaced is not premature, speculative and purely anticipatory, but based on real
fear which shows a threatened or direct injury[,] it appearing that the reorganization of the OWWA is
already slowly being put into motion.

Apropos, having successfully established a direct and personal injury as a consequence of the new
reorganization[al] structure, it was only proper for the court a quo to grant the writ of preliminary
injunction to restrain, for the meantime, the implementation of the reorganization to prevent injury on
respondents until after the main case is heard and decided. Truly, as correctly observed by the trial
court, private respondents enjoy a right that is protected both by the Constitution and statutes. A
person’s job is not only his property but his very life. The constitutional protection of the right to life is
not just a protection of the right to be alive or to the security of one’s limb against physical harm. The
right to life is also a right to a good life (Bernas, The Constitution of the Republic of the Philippines, A
Commentary, Volume I, First Edition, 1997) which includes the right to earn a living or the right to a
livelihood. A fortiori, the requisites for preliminary injunction to issue have adequately been established:
the existence of a clear and unmistakable right, and the acts violative of said right.

While the evidence to be submitted at the hearing on the motion for preliminary injunction need not be
conclusive and complete, We find that private respondents have adequately shown that they are in
clear danger of being irreparably injured unless the status quo is observed, in the meantime x x x.25

The appellate court was likewise of the opinion that the substantial issues raised before the court a quo
anent the validity of the organizational structure of the OWWA; the alleged lack of authority of the DBM
to approve the same including the alleged violation by the OWWA of relevant statutes; the lack of
consultation prior to the reorganization; and the supposed illegal constitution of the Placement
Committee, are matters which the RTC is behooved to resolve. In finding no error on the part of the RTC,
the Court of Appeals said that without an injunctive relief, any decision that may be rendered in the suit
would already be ineffective, moot and academic.26

Aggrieved, petitioner through the OSG,27 filed the instant petition.

In the instant petition, petitioner prays that the appealed Decision of the Court of Appeals be reversed
and set aside, and that Civil Case No. 04-0415-CFM before the RTC be dismissed for lack of merit.28

The Issue

The issue to be resolved is, whether the court a quo gravely abused its discretion in issuing the writ of
preliminary injunction. Stated otherwise, the issue is whether the Court of Appeals erred in affirming the
RTC in its grant of the assailed writ of preliminary injunction. Clearly, we are thus confined to the matter
of the propriety of the issuance of the writ of preliminary injunction by the trial court, and not to the
merits of the case which is still pending before the latter.
The Case for the Petitioner

First, in support of their petition, petitioner posits that the OWWA has already implemented the new
organizational structure as the advertisement, recruitment, and placement of OWWA employees have
been accomplished; and in the process, none of the respondents have been dismissed. Moreover, the
act sought to be prevented has long been consummated; hence, the remedy of injunction should no
longer be entertained.

Second, petitioner adduces the proposition that the reorganization of the OWWA does not require an
amendatory law contrary to the holding of the court a quo. The OSG maintains that there was no
previous OWWA structure in the first place; and neither did Presidential Decree No. 169429 nor
Presidential Decree No. 1809,30 provide for an organizational structure for the OWWA.

Third, petitioner disputes the existence of the rights of respondents to be protected by the preliminary
injunctive writ sought on the ground that the latter did not shown any legal right which needs the
protection thereof, nor did they show that any such right was violated to warrant the issuance of a
preliminary injunction. Petitioner asserts that respondents did not claim that they are the consultants or
casual or contractual workers who would allegedly be displaced; and neither did respondents show that
there is only one right or cause of action pertaining to all of them. Neither was there a violation of their
rights because respondents have all been given appointments in the new OWWA organizational
structure.31

Finally, on respondents’ allegation that the reorganization of the OWWA will reassign permanent
employees to its regional offices, and consequently, displace them and their families, petitioner
counters that an employee may be reassigned from one organizational unit to another in the same
agency, provided that such reassignment shall not involve a reduction in rank, status or salary.32

The Case for the Respondents

Respondents argue that the petitioner railroaded and raced against time to implement the new OWWA
organizational structure. They claim that in the process, petitioner exhibited manifest bad faith and
injustice. What existed was a hasty reorganization and restructuring of the OWWA without adequate
study and consultation, which was thereafter submitted and immediately approved by the Board of
Trustees. They insist that the creation of an organizational structure of the OWWA would require a
presidential fiat or a legislative enactment pursuant to Republic Act No. 6656.33

Further, respondents maintain that their right in esse was established during the proceedings for the
issuance of the writ of preliminary injunction, as their complaint sufficiently showed the rights and
interests of the parties. They alleged that at no stage in the proceedings did petitioner question such
rights. In fact, petitioner made a waiver in open court to the effect that it was not presenting testimonial
evidence. According to the respondents, such an act was constitutive of an admission by petitioner of
the existence of a right in esse in their favor.

The Ruling of the Court

Section 1, Rule 58 of the Rules of Court, defines a preliminary injunction as an order granted at any stage
of an action prior to the judgment or final order requiring a party or a court, an agency or a person to
refrain from a particular act or acts.34 Section 3, Rule 58 of the Rules of Court, enumerates the grounds
for the issuance of a writ of preliminary injunction as follows:

Sec. 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it
is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.

A preliminary injunction is granted at any stage of an action or proceeding prior to the judgment or final
order.35 It persists until it is dissolved or until the termination of the action without the court issuing a
final injunction.36 To be entitled to an injunctive writ, petitioner must show, inter alia, the existence of a
clear and unmistakable right and an urgent and paramount necessity for the writ to prevent serious
damage.37 A writ of preliminary injunction is generally based solely on initial and incomplete
evidence.38 The evidence submitted during the hearing on an application for a writ of preliminary
injunction is not conclusive or complete for only a "sampling" is needed to give the trial court an idea of
the justification for the preliminary injunction pending the decision of the case on the merits.39 In fact,
the evidence required to justify the issuance of a writ of preliminary injunction in the hearing thereon
need not be conclusive or complete.40 It must also be stressed that it does not necessarily proceed that
when a writ of preliminary injunction is issued, a final injunction will follow.41

Moreover, the grant or denial of a preliminary injunction is discretionary on the part of the trial
court.42 Thus, the rule is, the matter of the issuance of a writ of preliminary injunction is addressed to
the sound discretion of the trial court, unless the court commits grave abuse of discretion.43 In Toyota
Motor Phils. Corporation Workers’ Association (TMPCWA) v. Court of Appeals,44 this Court pronounced
that grave abuse of discretion in the issuance of writs of preliminary injunction implies a capricious and
whimsical exercise of judgment that is equivalent to lack of jurisdiction; or the exercise of power in an
arbitrary or despotic manner by reason of passion, prejudice or personal aversion amounting to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in
contemplation of law. It is clear that the assessment and evaluation of evidence in the issuance of the
writ of preliminary injunction involve findings of facts ordinarily left to the trial court for its conclusive
determination.45 The duty of the court taking cognizance of a prayer for a writ of preliminary injunction
is to determine whether the requisites necessary for the grant of an injunction are present in the case
before it.46 However, as earlier stated, if the court commits grave abuse of its discretion in the issuance
of the writ of preliminary injunction, such that the act amounts to excess or lack of jurisdiction, the same
may be nullified through a writ of certiorari or prohibition.

More significantly, a preliminary injunction is merely a provisional remedy, an adjunct to the main case
subject to the latter’s outcome, the sole objective of which is to preserve the status quo until the trial
court hears fully the merits of the case.47 The status quo should be that existing at the time of the filing
of the case.48 The status quo usually preserved by a preliminary injunction is the last actual, peaceable
and uncontested status which preceded the actual controversy.49 The status quo ante litem is,
ineluctably, the state of affairs which is existing at the time of the filing of the case. Indubitably, the trial
court must not make use of its injunctive power to alter such status.50

We hold that the RTC, in granting the assailed writ of preliminary injunction, committed grave abuse of
discretion amounting to lack of jurisdiction.

In the case at bar, the RTC did not maintain the status quo when it issued the writ of preliminary
injunction. Rather, it effectively restored the situation prior to the status quo, in effect, disposing the
issue of the main case without trial on the merits. What was preserved by the RTC was the state of
affairs before the issuance of Resolution No. 001, which approved the structure of the OWWA, and the
subsequent administrative orders pursuant to its passing. The RTC forgot that what is imperative in
preliminary injunction cases is that the writ can not be effectuated to establish new relations between
the parties. Hence, we find herein an application of the lessons that can be learned from Rualo v.
Pitargue.51 In Rualo, this Court determined, among others, the propriety of the writ of preliminary
injunction which was issued restraining the Bureau of Internal Revenue from further implementing its
reorganization, and enforcing the orders52 pursuant thereto. This Court, in lifting the therein assailed
writ, underscored the legal proscription which states that courts should avoid issuing a writ of
preliminary injunction which would in effect dispose of the main case without trial.53 According to the
Court in Rualo, the trial court, in issuing the writ of preliminary injunction, did not maintain the status
quo but restored the situation before the status quo, that is, the situation before the issuance of the
Revenue Travel Assignment Orders.54 The Court further declared that what existed was an acceptance of
therein respondents’ premise of the illegality of the reorganization, and a prejudgment on the
constitutionality of the assailed issuances.55 As in Rualo, we find herein a similar case where the RTC
admitted hook, line and sinker the mere allegations of respondents that the reorganization as instituted
was unlawful without the benefit of a full trial on the merits. It also did not maintain the status quo but
restored the landscape before the implementation of OWWA’s reorganization. In thus issuing the writ of
preliminary injunction, the substantive issues of the main case were resolved by the trial court. What
was done by the RTC was quite simply a disposition of the case without trial. This is an error in law and
an exercise of grave abuse of discretion. Furthermore, we find that the RTC similarly prejudged the
validity of the issuances released by the OWWA Board of Trustees, as well as the other governmental
bodies (i.e., DBM, DOLE), which approved the organizational structure and staffing pattern of the
OWWA. In Rualo, this Court asserted the presumption of regularity of the therein assailed government
issuances. In this case, we accentuate the same presumption.

Ineluctably, this Court is compelled to rule against the propriety of the grant of the assailed ancillary writ
of preliminary injunction on the material ground that the records do not support respondents’
entitlement thereto.

We do not find attendant the requisites for the issuance of a preliminary injunctive writ. This Court is
not convinced that respondents were able to show a clear and unmistakable legal right to warrant their
entitlement to the writ. A mere blanket allegation that they are all officers and employees of the OWWA
without a showing of how they stand to be directly injured by the implementation of its questioned
organizational structure does not suffice to prove a right in esse. As was aptly raised by the petitioner,
respondents did not show that they were dismissed due to the challenged reorganization. There was no
showing that they are the employees who are in grave danger of being displaced. Respondents were
similarly wanting in proving that they are the consultants and contractual and casual employees, who
will allegedly suffer by reason of the re-organization. This Court is consistently adamant in demanding
that a clear and positive right especially calling for judicial protection must be established.56 As has been
reiterated, injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will
not issue to protect a right not in esse and which may never arise, or to restrain an action which did not
give rise to a cause of action.57 In contrast, the rights of OWWA are accorded to it by law. The
importance of the reorganization within the body and the benefits that will accrue thereto were
accentuated by the Board of Trustees in its Resolution No. 001. The aforesaid resolution declared, inter
alia, that the structuring of the OWWA will stabilize the internal organization and promote careerism
among the employees, as well as ensure a more efficient and effective delivery of programs and services
to member-OFWs’.58 However, we go further to opine that even the question of whether the OWWA
requires an amendatory law for its reorganization is one that should be best threshed out in the
disposition of the merits of the case. Indeed, the question as to the validity of the OWWA reorganization
remains the subject in the main case pending before the trial court. Its annulment is outside the realm
of the instant Petition.

Assuming arguendo that respondents stand to be in danger of being transferred due to the
reorganization, under the law, any employee who questions the validity of his transfer should appeal to
the CSC.59 Even then, administrative remedies must be exhausted before resort to the regular courts can
be had.

Finally, as aptly pointed out by the OSG, the acts sought to be prohibited had been accomplished.
Injunction will not lie where the acts sought to be enjoined have already been accomplished or
consummated.60 The wheels of OWWA’s reorganization started to run upon the approval by the Board
of Trustees of its Resolution No. 001 entitled, "Approving the Structure of the Overseas Workers Welfare
Administration." Subsequently, a series of issuances which approved the organizational structure and
staffing pattern of the agency was issued by the DBM, the OWWA Administrator, and by the DOLE.
Resolution No. 001 has already been implemented. Case law has it that a writ of preliminary injunction
will not issue if the act sought to be enjoined is a fait accompli.1avvphi1

A writ of preliminary injunction being an extraordinary event,61 one deemed as a strong arm of equity or
a transcendent remedy,62 it must be granted only in the face of actual and existing substantial rights. In
the absence of the same, and where facts are shown to be wanting in bringing the matter within the
conditions for its issuance, the ancillary writ must be struck down for having been rendered in grave
abuse of discretion.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals, dated 22 September 2005
in CA-G.R. SP No. 87702, is REVERSED and SET ASIDE. The Writ of Preliminary Injunction issued by the
Regional Trial Court pursuant to its Order, dated 30 September 2004, in Civil Case No. 04-0415-CFM is
LIFTED and SET ASIDE.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice
G.R. No. 139767. August 5, 2003.]

FELIPE SY DUNGOG, Petitioner, v. COURT OF APPEALS, JUAN A. GATO, in his official capacity as RTC
Sheriff, Lapu-Lapu City and CARLOS GOTHONG LINES, INC., Respondents.

DECISION

CARPIO, J.:

The Case

This petition for review on certiorari 1 assails the Decision 2 dated 14 May 1999 of the Court of Appeals
in CA-G.R. SP No. 48788, as well as the Resolution dated 24 August 1999 denying the motion for
reconsideration. The Court of Appeals dismissed outright the petition for certiorari, prohibition and
mandamus filed by petitioner Felipe Sy Dungog ("Felipe") against respondents. The petition questioned
the propriety of the Order 3 dated 14 August 1998 ("Order") and the writ of preliminary injunction
("Writ") dated 18 August 1998 issued by the Regional Trial Court of Cebu, Lapu-Lapu City, Branch 53
("trial court") in Civil Case No. 5020-L.chanrob1es virtua1 1aw 1ibrary

The Antecedents

Tracing the roots of this controversy, Felipe alleges 4 that he and his sister, Fortune, agreed to sell their
lots in Canjulao, Cebu, through their parents, Juan L. Dungog and Emma S. Dungog ("Spouses Dungog").
The Spouses Dungog convinced other lot owners in Canjulao to sell their lots either directly to them or
to Felipe and his sister. On 31 December 1996, the Spouses Dungog entered into a Contract to Sell
("Contract") with private respondent Carlos A. Gothong Lines, Inc. ("Gothong Lines") covering several
lots in Canjulao. The lots which the Spouses Dungog contracted to sell to Gothong Lines belonged to
various individuals as listed in the Contract’s Annex "A" 5 which specified the corresponding
approximate land areas of each lot. Among these was Lot 1031-F registered in the name of Felipe and
covered by Transfer Certificate of Title No. 10359 of the Register of Deeds of Lapu-Lapu City. Under the
Contract, Gothong Lines was to pay on installment basis the purchase price of P65,520,475.00 computed
at P500 per square meter. Thus, Gothong Lines paid a down payment of P12,000,000.00. For the balance
of P53,520,475.00, 6 Gothong Lines issued 15 postdated checks of P3,568,031.00 each beginning on 31
January 1997 as payment for 15 equal monthly installments. Gothong Lines made good all the checks,
except the last 4 checks dated 30 December 1997, 31 January 1998, 28 February 1998 and 30 March
1998, which bounced due to Gothong Lines’ stop payment order.
Felipe alleges further that as of 31 December 1997, his parents had delivered 66 parcels of land to
Gothong Lines with a total area of 101,104.20 square meters valued at P50,552,100.00. Felipe also
states that as of the same date, Gothong Lines had paid P51,248,345.00 in encashed checks plus the
initial down payment of P12,000,000.00. This left an overpayment of P696,245.00 in the hands of the
Spouses Dungog. Felipe claims, however, that despite Gothong Lines’ stop payment order of its last four
checks, the Spouses Dungog still delivered in February 1998, 8 parcels of land with a total land area of
11,590 square meters valued at P5,795,000.00. Among those delivered was Lot 1031-F. The Spouses
Dungog demanded payment for these 8 parcels of land, but Gothong Lines refused to pay. The Spouses
Dungog became frustrated with Gothong Lines’ complete silence on their demands for payment, as well
as the earlier stop payment order on the last 4 checks. Thus, the Spouses Dungog informed Gothong
Lines in a letter dated 18 June 1998 that they would no longer push through with their offer to sell the
remaining lots.chanrob1es virtua1 1aw 1ibrary

On 6 July 1998, Gothong Lines filed a complaint for Specific Performance, Damages with Writ of
Preliminary Mandatory Injunction against the Spouses Dungog to enforce the Contract. Gothong Lines
faulted the Spouses Dungog for non-delivery of some of the parcels of land in breach of the Contract.
Gothong Lines alleged that while the total amount of P51,248,348.26 paid to the Spouses Dungog
corresponds to 102,496.69 square meters, the Spouses Dungog actually delivered to Gothong Lines only
100,613.69 square meters. Gothong Lines claimed that it paid an excess of P941,848.00 7 corresponding
to 1,883 square meters. To protect its interest, Gothong Lines ordered the bank to stop payment on the
remaining postdated checks. Gothong Lines asked the trial court to issue a writ of preliminary injunction
to restrain the Spouses Dungog from canceling the Contract and from preventing its representatives and
vehicles from passing through the properties subject of the Contract. Gothong Lines offered to post a
bond of P500,000.00 and consigned the P4,048,950.00 representing the balance of the purchase price.

Traversing Gothong Lines’ allegations, the Spouses Dungog contended that it was Gothong Lines which
breached the Contract by stopping payment on the last 4 checks. The Spouses Dungog also charged
Gothong Lines with competing with them in acquiring one of the lots subject of the Contract. They
further countered that Gothong Lines violated a verbal agreement between them not to develop the
roads until after 30 June 1998, the last day for the Spouses Dungog to deliver and turn over the lots. The
Spouses Dungog opposed Gothong Lines’ application for a writ of preliminary injunction on the ground
that Gothong Lines violated the terms of the Contract and the other contemporaneous agreements
between them.

Based on the pleadings and affidavits presented by the parties, the trial court granted on 14 August
1998 Gothong Lines’ prayer for injunction. The dispositive portion of the Order reads:chanrob1es virtual
1aw library

WHEREFORE, in the light of the foregoing considerations, plaintiff’s application for the issuance of a writ
of preliminary injunction is GRANTED. Consequently, after the filing and approval of a bond in the
amount of Three Hundred Thousand Pesos (P300,000.00), let a writ of preliminary injunction issue,
enjoining defendants, their representatives, or anyone acting in their behalf; (a) from canceling the
contract to sell dated December 31, 1996; and (b) from disallowing or preventing the entry and exit of
plaintiff’s vehicles and those of its representatives through Lot 1031-F and other undelivered lots
concerned. 8

Based on this Order, the trial court issued the Writ on 18 August 1998 which the sheriff served on the
same date.

Felipe assailed the Order and the Writ in a special civil action for certiorari before the Court of Appeals.
The appellate court, however, dismissed outright Felipe’s petition. The appellate court also denied on 24
August 1999 Felipe’s motion for reconsideration. Thus, Felipe filed the instant petition questioning the
propriety of the writ of preliminary injunction issued by the trial court.chanrob1es virtua1 1aw 1ibrary

The Rulings of the Trial Court and the Court of Appeals

In granting the Writ, the trial court stated —

There is no dispute that plaintiff has already paid defendants the amount of P51,248,348.26 out of the
total consideration of P65,520,475.00. Plaintiff has also deposited with the Office of the Clerk of Court
the amount of P4,048,950.00, leaving a balance of P10,223,176.74.

Plaintiff had already started the road development in the properties delivered to it. In other words, it
has already spent much to develop the properties which form the bulk of the parcels of land subject of
the contract.

Ingress to and egress from plaintiff’s development activities lie on an undelivered parcel of land.
Through it pass the vehicles, equipment, supplies and materials, as well as the workers, required by the
project. The closure of this passage has apparently stymied the development in the area.

About 78% of the properties are in the hands of plaintiff. Access to these properties is under the control
of defendants, the entrance being located in Lot 1031-F, one of the remaining undelivered lots. Since
the entrance gate has been closed by defendants, it strikes the mind of the court that Lot 1031-F and
the other undelivered lots have now, in a manner of speaking, imprisoned the delivered properties.

It is not therefore hard to see that the closure of the entrance gate has worked to the prejudice of
plaintiff and will certainly jeopardize the development work in the delivered properties. Elementary
justice and the spirit of fair play thus dictate that the status quo ante, which is the situation before the
closure when plaintiff’s representatives were able to pass through Lot 1031-F, be restored.

Insofar as defendants threatened cancellation of the contract to sell, the Court has seen that out of the
total area of 131,040.95 square meters covered by the contract, plaintiff had already paid for
102,496.69 square meters, and that it had deposited P4,048,950.00 to pay for some of the undelivered
parcels. It is but fair that such a move be, in the meantime, disallowed. 9

In dismissing outright Felipe’s petition for certiorari, prohibition and mandamus assailing the trial court’s
Order and the Writ, the Court of Appeals stated —
The petition should be dismissed outright, the petitioner has no standing here. He may be the owner of
the lot in question but he is not a party litigant in the case a quo. His being a son of defendant spouse in
the lower court does not give him the capacity to sue. Of course, he is not without legal remedy to
protect his interest. 10

The Issue

In his Memorandum, Felipe narrows the inquiry to —

MAY PETITIONER BE DEPRIVED OF HIS PROPERTY WITHOUT DUE PROCESS OF LAW AND PAYMENT OF
JUST COMPENSATION FOR THE BENEFIT OF PRIVATE RESPONDENT? 11

Felipe laments that the dismissal of his petition resulted in the outright confiscation of his property for
the private use of Gothong Lines, without due process of law and just compensation. Felipe claims that
in dismissing his petition, the Court of Appeals effectively sustained the trial court’s Order divesting him
of his rights over Lot 1031-F.chanrob1es virtua1 1aw 1ibrary

The question of whether Gothong Lines may demand the turn over of the parcels of land listed in Annex
"A" of the Contract is not our concern here. The issue in this petition is whether the Court of Appeals
erred in dismissing Felipe’s petition.

The Court’s Ruling

The petition is bereft of merit.

Dismissal by the Court of Appeals of Felipe’s petition was proper.

Felipe committed a procedural blunder in filing a special civil action for certiorari to assail the Order and
the Writ. Felipe was not a party in Civil Case No. 5020-L. He could not, therefore, assail the writ of
preliminary injunction through a petition for certiorari before the Court of Appeals. As correctly pointed
out by the Court of Appeals, Felipe does not possess the requisite standing to file such suit.

In Ciudad Real v. Court of Appeals, 12 this Court ruled that there is grave abuse of discretion if the
appellate court recognizes the standing of a party, not a litigant in the trial court proceedings, to join a
petition for certiorari. The Court explained:chanrob1es virtual 1aw library

Worse was the ruling of the respondent appellate court sanctioning the standing of Magdiwang Realty
Corporation to join said petition for certiorari. As the records show, Magdiwang filed a Motion for
Intervention on July 18, 1989 invoking its alleged Memorandum of Agreement with Doña Juana
Development Corporation dated July 15, 1982. The trial court, however, denied this motion and
Magdiwang did not question the ruling in the appellate court. The ruling thus, became final. After about
two (2) years or on August 27, 1991, Magdiwang again filed a Motion to Substitute and/or Join as
Party/Plaintiff relying on the same Memorandum of Agreement. The trial court similarly denied the
motion, and the denial also attained finality as Magdiwang did not further challenge its correctness.
Despite the finality of the order denying Magdiwang’s intervention way back in 1989, the respondent
court in its Decision of August 20, 1992 recognized the standing of Magdiwang to assail in the appellate
court the Compromise Agreement. Again, this ruling constitutes grave abuse of discretion for
Magdiwang was not a party in interest in Civil Case No. Q-35393.

The wisdom of this ruling is all too apparent. If a person not a party to an action is allowed to file
a certiorari petition assailing an interlocutory order of the trial court, such as an injunctive order and
writ, proceedings will become unnecessarily complicated, expensive and interminable. Eventually, this
will defeat the policy of our remedial laws to secure party-litigants a speedy and inexpensive disposition
of every action.chanrob1es virtua1 1aw 1ibrary

Felipe could have simply intervened 13 in the trial court proceedings to enable him to protect or
preserve a right or interest which may be affected by such proceedings. A motion to intervene may be
filed at any time before rendition of judgment by the trial court. 14 The purpose of intervention is not to
obstruct or unnecessarily delay the placid operation of the machinery of trial. The purpose is merely to
afford one, not an original party but possessing a certain right or interest in the pending case, the
opportunity to appear and be joined so he could assert or protect such right or interest. 15 Indeed,
Felipe could have easily joined his parents as defendants in resisting the claim of Gothong Lines.

A resolution affirming the Court of Appeals’ outright dismissal of Felipe’s petition for these reasons
would have been sufficient. Nevertheless, we deem it best to address the propriety of the issuance by
the trial court of the writ of preliminary injunction before writing finis to this petition.

Issuance of writ of preliminary injunction was also proper.

Preliminary injunction is an order granted at any stage of an action, prior to the judgment or final order,
requiring a party, court, agency or person to perform or to refrain from performing a particular act or
acts. 16 A preliminary injunction, as the term itself suggests, is merely temporary, subject to the final
disposition of the principal action. Its purpose is to preserve the status quo of the matter subject of the
action to protect the rights of the plaintiff during the pendency of the suit. Otherwise, if no preliminary
injunction is issued, the defendant may, before final judgment, do the act which the plaintiff is seeking
the court to restrain. This will make ineffectual the final judgment that the court may afterwards render
in granting relief to the plaintiff. 17

The issuance of a writ of preliminary injunction rests entirely within the discretion of the court and is
generally not interfered with except in cases of manifest abuse. 18 The assessment and evaluation of
evidence in the issuance of the writ of preliminary injunction involve findings of facts ordinarily left to
the trial court for its conclusive determination. 19

We find that there was adequate justification for the issuance of the assailed writ of preliminary
injunction. There is no dispute that the Spouses Dungog entered into the Contract with Gothong Lines
which included Lot 1031-F owned by Felipe. Felipe admitted that he authorized his parents to sell this
lot. He also admitted that his parents had delivered to Gothong Lines Lot 1031-F along with other
parcels of land. However, the Spouses Dungog threatened to cancel the Contract and to deny Gothong
Lines passage through Lot 1031-F allegedly due to non-payment of the subsequent installments.

In applying for the Writ, Gothong Lines sought to restrain in the meantime the Spouses Dungog from
canceling the Contract in order not to render the judgment ineffectual. Gothong Lines also sought to
preserve its right of way through Lot 1031-F to maintain access to the other parcels of land previously
delivered by the Spouses Dungog to Gothong Lines.chanrob1es virtua1 1aw 1ibrary

A careful reading of the trial court’s assailed Order discloses that the Writ enjoined the cancellation of
the Contract on the basis of Gothong Lines’ substantial performance of the Contract. The trial court also
enjoined the closure of the entrance gate in Lot 1031-F to preserve the status quo ante.

Under Section 3, Rule 58 20 of the 1997 Rules on Civil Procedure, a preliminary injunction is proper
when the plaintiff appears entitled to the relief demanded in the complaint. The trial court found that
Gothong Lines had already paid P51,248,348.26 out of the total consideration of P65,520,475.00.
Gothong Lines also consigned with the court an additional P4,048,950.00 leaving a balance of
P10,223,176.74. The trial court likewise found that 78% of the properties were already in the possession
of Gothong Lines. Moreover, the status quo, which is the last actual peaceable uncontested status that
preceded the controversy, 21 was that Gothong Lines had access to the lots subject of the Contract
through the entrance gate in Lot 1031-F. That is why Gothong Lines commenced construction of its pier
and the development of the roads within the parcels of land covered by the Contract. The issuance of
the Writ would no doubt preserve the status quo between the Spouses Dungog and Gothong Lines that
existed prior to the filing of the case. We agree with the trial court that the status quo should be
maintained until the issue on the parties’ respective rights and obligations under the Contract is
determined after the trial.

Clearly, in issuing the Writ, the trial court did not forthwith deprive Felipe of his ownership of Lot 1031-
F. Neither did the Writ have the effect of ousting Felipe from possession of the lot. The trial court did
not rule on the merits of the case so as to amount to a deprivation or confiscation of property without
due process of law or just compensation. There was no adjudication on the rightful possession or
ownership of the contested parcels of land subject of the Contract. The trial court issued the injunction
only as a preventive remedy to protect during the pendency of the action Gothong Lines’ right to a final
and effective relief.

WHEREFORE, the petition is DENIED for lack of merit.chanrob1es virtua1 1aw 1ibrary

SO ORDERED.
A.C. No. 7430 February 15, 2012

MARTIN LAHM III and JAMES P. CONCEPCION, Complainants,

vs.
LABOR ARBITER JOVENCIO Ll. MAYOR, JR., Respondent.

RESOLUTION

REYES, J.:

Before us is a verified complaint1 filed by Martin Lahm III and James P. Concepcion (complainants)
praying for the disbarment of Labor Arbiter Jovencio Ll. Mayor, Jr. (respondent) for alleged gross
misconduct and violation of lawyer’s oath.

On June 27, 2007, the respondent filed his Comment2 to the complaint.

In a Resolution3 dated July 18, 2007, the Court referred the case to the Integrated Bar of the Philippines
(IBP) for investigation, report and recommendation.

The antecedent facts, as summarized in the Report and Recommendation4 dated September 19, 2008 of
Commissioner Romualdo A. Din, Jr. of the IBP Commission on Bar Discipline, are as follows:

On September 5, 2006 a certain David Edward Toze filed a complaint for illegal dismissal before the
Labor Arbitration Branch of the National Labor Relations Commission against the members of the Board
of Trustees of the International School, Manila. The same was docketed as NLRC-NCR Case No. 00-
07381-06 and raffled to the sala of the respondent. Impleaded as among the party-respondents are the
complainants in the instant case.

On September 7, 2006, David Edward Toze filed a Verified Motion for the Issuance of a Temporary
Restraining Order and/or Preliminary Injunction Against the Respondents. The said Motion was set for
hearing on September 12, 2006 at 10:00 in the morning. A day after, on September 8, 2006, the counsel
for the complainants herein entered its appearance and asked for additional time to oppose and make a
comment to the Verified Motion for the Issuance of a Temporary Restraining Order and/or Preliminary
Injunction Against the Respondents of David Edward Toze.

Thereafter, the respondent issued an Order dated September 14, 2006 that directs the parties in the
said case to maintain the status quo ante. The complainants herein sought the reconsideration of the
Order dated September 14, 200[6] x x x.

xxxx

On account of the Order dated September 14, 2006, David Edward Toze was immediately reinstated and
assumed his former position as superintendent of the International School Manila.

The pending incidents with the above-mentioned illegal dismissal case were not resolved, however, the
scheduled hearing for the issuance of a preliminary injunction on September 20, 2006 and September
27, 2006 was postponed.

On January 19, 2007, the co-respondents of the complainants herein in the said illegal dismissal case
filed a motion for an early resolution of their motion to dismiss the said case, but the respondent
instead issued an Order dated February 6, 2007 requiring the parties to appear in his Office on February
27, 2007 at 10:00 in the morning in order to thresh out David Edward Toze’ claim of moral and
exemplary damages.

xxxx

The respondent on the other maintains that the Order dated September 14, 2006 was issued by him on
account of [the] Verified Motion for the Issuance of a Temporary Restraining Order and/or Preliminary
Injunction Against the Respondents that was filed by David Edward Toze, and of the Entry of Appearance
with Motion for Additional Time to File Comment that was thereafter filed by the counsel for the herein
complainants in the illegal dismissal case pending before the respondent.

The respondent maintains that in order to prevent irreparable damage on the person of David Edward
Toze, and on account of the urgency of [the] Verified Motion for the Issuance of a Temporary
Restraining Order and/or Preliminary Injunction Against the Respondents of David Edward Toze, and
that the counsel for respondents in the illegal dismissal case have asked for a relatively long period of
fifteen days for a resetting, he (respondent) found merit in issuing the Order dated September 14, 2006
that requires the parties to maintain the status quo ante.

xxx

The respondent argues that [the] instant case should be dismissed for being premature since the
aforementioned illegal dismissal case is still pending before the Labor Arbitration Branch of the National
Labor Relations Commission, that the instant case is a subterfuge in order to compel the respondent to
inhibit himself in resolving the said illegal dismissal case because the complainants did not assail the
Order dated September 14, 2006 before the Court of Appeals under Rule 65 of the Rules of Court.5

Based on the foregoing, the Investigating Commissioner concluded that: (1) the grounds cited by the
respondent to justify his issuance of the status quo ante order lacks factual basis and is speculative; (2)
the respondent does not have the authority to issue a temporary restraining order and/or a preliminary
injunction; and (3) the inordinate delay in the resolution of the motion for reconsideration directed
against the September 14, 2006 Order showed an orchestrated effort to keep the status quo ante until
the expiration of David Edward Toze’s employment contract.

Accordingly, the Investigating Commissioner recommended that:

WHEREFORE, it is respectfully recommended that the respondent be SUSPENDED for a period of six (6)
months with a warning that a repetition of the same or similar incident will be dealt with more severe
penalty.6

On December 11, 2008, the IBP Board of Governors issued Resolution No. XVIII-2008-6447 which
adopted and approved the recommendation of the Investigating Commissioner. The said resolution
further pointed out that the Board of Governors had previously recommended the respondent’s
suspension from the practice of law for three years in Administrative Case (A.C.) No. 7314 entitled
"Mary Ann T. Flores v. Atty. Jovencio Ll. Mayor, Jr.".

The respondent sought to reconsider the foregoing disposition,8 but it was denied by the IBP Board of
Governors in its Resolution No. XIX-2011-476 dated June 26, 2011.
The case is now before us for confirmation. We agree with the IBP Board of Governors that the
respondent should be sanctioned.

Section 27, Rule 138 of the Rules of Court provides that a lawyer may be removed or suspended from
the practice of law, inter alia, for gross misconduct and violation of the lawyer’s oath. Thus:

Section 27. Attorneys removed or suspended by Supreme Court on what grounds. – A member of the
bar may be removed or suspended from his office as attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such office, grossly immoral conduct, or by reason of his
conviction of a crime involving moral turpitude, or for any violation of the oath which he is required to
take before the admission to practice, or for a wilful disobedience of any lawful order of a superior
court, or for corruptly or wilful appearing as an attorney for a party to a case without authority so to do.
The practice of soliciting cases at law for the purpose of gain, either personally or through paid agents or
brokers, constitutes malpractice. (emphasis supplied)

A lawyer may be suspended or disbarred for any misconduct showing any fault or deficiency in his moral
character, honesty, probity or good demeanor.9 Gross misconduct is any inexcusable, shameful or
flagrant unlawful conduct on the part of a person concerned with the administration of justice; i.e.,
conduct prejudicial to the rights of the parties or to the right determination of the cause. The motive
behind this conduct is generally a premeditated, obstinate or intentional purpose.10

Intrinsically, the instant petition wants this Court to impose disciplinary sanction against the respondent
as a member of the bar. However, the grounds asserted by the complainants in support of the
administrative charges against the respondent are intrinsically connected with the discharge of the
respondent’s quasi-judicial functions.

Nonetheless, it cannot be discounted that the respondent, as a labor arbiter, is a public officer entrusted
to resolve labor controversies. It is well settled that the Court may suspend or disbar a lawyer for any
conduct on his part showing his unfitness for the confidence and trust which characterize the attorney
and client relations, and the practice of law before the courts, or showing such a lack of personal
honesty or of good moral character as to render him unworthy of public confidence.11

Thus, the fact that the charges against the respondent were based on his acts committed in the
discharge of his functions as a labor arbiter would not hinder this Court from imposing disciplinary
sanctions against him.

The Code of Professional Responsibility does not cease to apply to a lawyer simply because he has
joined the government service. In fact, by the express provision of Canon 6 thereof, the rules governing
the conduct of lawyers "shall apply to lawyers in government service in the discharge of their official
tasks." Thus, where a lawyer’s misconduct as a government official is of such nature as to affect his
qualification as a lawyer or to show moral delinquency, then he may be disciplined as a member of the
bar on such grounds.12

In Atty. Vitriolo v. Atty. Dasig,13 we stressed that:

Generally speaking, a lawyer who holds a government office may not be disciplined as a member of the
Bar for misconduct in the discharge of his duties as a government official. However, if said misconduct as
a government official also constitutes a violation of his oath as a lawyer, then he may be disciplined by
this Court as a member of the Bar.

In this case, the record shows that the respondent, on various occasions, during her tenure as OIC, Legal
Services, CHED, attempted to extort from Betty C. Mangohon, Rosalie B. Dela Torre, Rocella G. Eje, and
Jacqueline N. Ng sums of money as consideration for her favorable action on their pending applications
or requests before her office. The evidence remains unrefuted, given the respondent’s failure, despite
the opportunities afforded her by this Court and the IBP Commission on Bar Discipline to comment on
the charges. We find that respondent’s misconduct as a lawyer of the CHED is of such a character as to
affect her qualification as a member of the Bar, for as a lawyer, she ought to have known that it was
patently unethical and illegal for her to demand sums of money as consideration for the approval of
applications and requests awaiting action by her office.

xxx

A member of the Bar who assumes public office does not shed his professional obligations. Hence, the
Code of Professional Responsibility, promulgated on June 21, 1988, was not meant to govern the
conduct of private practitioners alone, but of all lawyers including those in government service. This is
clear from Canon 6 of said Code. Lawyers in government are public servants who owe the utmost fidelity
to the public service. Thus, they should be more sensitive in the performance of their professional
obligations, as their conduct is subject to the ever-constant scrutiny of the public.

For a lawyer in public office is expected not only to refrain from any act or omission which might tend to
lessen the trust and confidence of the citizenry in government, she must also uphold the dignity of the
legal profession at all times and observe a high standard of honesty and fair dealing. Otherwise said, a
lawyer in government service is a keeper of the public faith and is burdened with high degree of social
responsibility, perhaps higher than her brethren in private practice.14 (emphasis supplied and citations
omitted)

In Tadlip v. Atty. Borres, Jr.,15 we ruled that an administrative case against a lawyer for acts committed in
his capacity as provincial adjudicator of the Department of Agrarian Reform – Regional Arbitration Board
may be likened to administrative cases against judges considering that he is part of the quasi-judicial
system of our government.

This Court made a similar pronouncement in Buehs v. Bacatan16 where the respondent-lawyer was
suspended from the practice of law for acts he committed in his capacity as an accredited Voluntary
Arbitrator of the National Conciliation and Mediation Board.

Here, the respondent, being part of the quasi-judicial system of our government, performs official
functions that are akin to those of judges. Accordingly, the present controversy may be approximated to
administrative cases of judges whose decisions, including the manner of rendering the same, were made
subject of administrative cases.

As a matter of public policy, not every error or mistake of a judge in the performance of his official
duties renders him liable. In the absence of fraud, dishonesty or corruption, the acts of a judge in his
official capacity do not always constitute misconduct although the same acts may be erroneous. True, a
judge may not be disciplined for error of judgment absent proof that such error was made with a
conscious and deliberate intent to cause an injustice.17
While a judge may not always be held liable for ignorance of the law for every erroneous order that he
renders, it is also axiomatic that when the legal principle involved is sufficiently basic, lack of
conversance with it constitutes gross ignorance of the law. Indeed, even though a judge may not always
be subjected to disciplinary action for every erroneous order or decision he renders, that relative
immunity is not a license to be negligent or abusive and arbitrary in performing his adjudicatory
prerogatives.18

When the law is sufficiently basic, a judge owes it to his office to know and to simply apply it. Anything
less would be constitutive of gross ignorance of the law.19

In the case at bench, we find the respondent guilty of gross ignorance of the law.

Acting on the motion for the issuance of a temporary restraining order and/or writ of preliminary
injunction, the respondent issued the September 14, 2006 Order requiring the parties to maintain the
status quo ante until the said motion had been resolved. It should be stressed, however, that at the time
the said motion was filed, the 2005 Rules of Procedure of the National Labor Relations Commission
(NLRC) is already in effect.

Admittedly, under the 1990 Rules of Procedure of the NLRC, the labor arbiter has, in proper cases, the
authority to issue writs of preliminary injunction and/or restraining orders. Section 1, Rule XI of the 1990
Rules of Procedure of the NLRC provides that:

Section 1. Injunction in Ordinary Labor Disputes. – A preliminary injunction or restraining order may be
granted by the Commission through its Divisions pursuant to the provisions of paragraph (e) of Article
218 of the Labor Code, as amended, when it is established on the basis of the sworn allegations in the
petition that the acts complained of involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party.

If necessary, the Commission may require the petitioner to post a bond and writ of preliminary
injunction or restraining order shall become effective only upon the approval of the bond which shall
answer for any damage that may be suffered by the party enjoined, if it is finally determined that the
petitioner is not entitled thereto.

The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident to the cases
pending before them in order to preserve the rights of the parties during the pendency of the case, but
excluding labor disputes involving strike or lockout. (emphasis supplied)

Nevertheless, under the 2005 Rules of Procedure of the NLRC, the labor arbiters no longer has the
authority to issue writs of preliminary injunction and/or temporary restraining orders. Under Section 1,
Rule X of the 2005 Rules of Procedure of the NLRC, only the NLRC, through its Divisions, may issue writs
of preliminary injunction and temporary restraining orders. Thus:

Section 1. Injunction in Ordinary Labor Disputes. - A preliminary injunction or restraining order may be
granted by the Commission through its Divisions pursuant to the provisions of paragraph (e) of Article
218 of the Labor Code, as amended, when it is established on the basis of the sworn allegations in the
petition that the acts complained of involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party. (emphasis supplied)

The role of the labor arbiters, with regard to the issuance of writs of preliminary injunctions and/or writ
of preliminary injunction, at present, is limited to reception of evidence as may be delegated by the
NLRC. Thus, Section 4, Rule X of the 2005 Rules of Procedure of the NLRC provides that:

Section 4. Reception of Evidence; Delegation. - The reception of evidence for the application of a writ of
injunction may be delegated by the Commission to any of its Labor Arbiters who shall conduct such
hearings in such places as he may determine to be accessible to the parties and their witnesses, and
shall thereafter submit his report and recommendation to the Commission within fifteen (15) days from
such delegation. (emphasis supplied)

The foregoing rule is clear and leaves no room for interpretation. However, the respondent, in violation
of the said rule, vehemently insist that he has the authority to issue writs of preliminary injunction
and/or temporary restraining order. On this point, the Investigating Commissioner aptly ruled that:

The respondent should, in the first place, not entertained Edward Toze’s Verified Motion for the
Issuance of a Temporary Restraining Order and/or Preliminary Injunction Against the Respondents. He
should have denied it outright on the basis of Section 1, Rule X of the 2005 Revised Rules of Procedure
of the National Labor Relations Commission.

xxxx

The respondent, being a Labor Arbiter of the Arbitration Branch of the National Labor Relations
Commission, should have been familiar with Sections 1 and 4 of the 2005 Revised Rules of procedure of
the National Labor Relations Commission. The first, states that it is the Commission of the [NLRC] that
may grant a preliminary injunction or restraining order. While the second, states [that] Labor Arbiters
[may] conduct hearings on the application of preliminary injunction or restraining order only in a
delegated capacity.20

What made matters worse is the unnecessary delay on the part of the respondent in resolving the
motion for reconsideration of the September 14, 2006 Order. The unfounded insistence of the
respondent on his supposed authority to issue writs of preliminary injunction and/or temporary
restraining order, taken together with the delay in the resolution of the said motion for reconsideration,
would clearly show that the respondent deliberately intended to cause prejudice to the complainants.

On this score, the Investigating Commissioner keenly observed that:

The Commission is very much disturbed with the effect of the Order dated September 14, 2006 and the
delay in the resolution of the pending incidents in the illegal dismissal case before the respondent.

Conspicuously, Section 3 (Term of Contract) of the Employment Contract between David Edward Toze
and International School Manila provides that David Edward Toze will render work as a superintendent
for the school years August 2005-July 2006 and August 2006-July 2007.

The Order dated September 14, 2006 in effect reinstates David Edward Toze as superintendent of
International School of Manila until the resolution of the former’s Verified Motion for the Issuance of a
Temporary Restraining Order and/or Preliminary Injunction Against the Respondents.
Since the Employment Contract between David Edward Toze and International School Manila is about to
expire or end on August 2007, prudence dictates that the respondent expediently resolved [sic] the
merits of David Edward Toze’s Verified Motion for the Issuance of a Temporary Restraining Order and/or
Preliminary Injunction Against the Respondents because any delay in the resolution thereof would result
to undue benefit in favor of David Edward Toze and unwarranted prejudice to International School
Manila.

xxxx

At the time the respondent inhibited himself from resolving the illegal dismissal case before him, there
are barely four (4) months left with the Employment Contract between David Edward Toze and
International School Manila.

From the foregoing, there is an inordinate delay in the resolution of the reconsideration of the Order
dated September 14, 2006 that does not escape the attention of this Commission. There appears an
orchestrated effort to delay the resolution of the reconsideration of the Order dated September 14,
2006 and keep status quo ante until expiration of David Edward Toze’s Employment Contract with
International School Manila come August 2007, thereby rendering the illegal dismissal case moot and
academic.

xxxx

Furthermore, the procrastination exhibited by the respondent in the resolution of [the] assailed Order x
x x should not be countenanced, specially, under the circumstance that is attendant with the term of the
Employment Contract between David Edward Toze and International School Manila. The respondent’s
lackadaisical attitude in sitting over the pending incident before him for more than five (5) months only
to thereafter inhibit himself therefrom, shows the respondent’s disregard to settled rules and
jurisprudence.1âwphi1 Failure to decide a case or resolve a motion within the reglementary period
constitutes gross inefficiency and warrants the imposition of administrative sanction against the erring
magistrate x x x. The respondent, being a Labor Arbiter, is akin to judges, and enjoined to decide a case
with dispatch. Any delay, no matter how short, in the disposition of cases undermine the people’s faith
and confidence in the judiciary x x x. 21

Indubitably, the respondent failed to live up to his duties as a lawyer in consonance with the strictures
of the lawyer’s oath and the Code of Professional Responsibility, thereby occasioning sanction from this
Court.

In stubbornly insisting that he has the authority to issue writs of preliminary injunction and/or
temporary restraining order contrary to the clear import of the 2005 Rules of Procedure of the NLRC,
the respondent violated Canon 1 of the Code of Professional Responsibility which mandates lawyers to
"obey the laws of the land and promote respect for law and legal processes".

All told, we find the respondent to have committed gross ignorance of the law, his acts as a labor arbiter
in the case below being inexcusable thus unquestionably resulting into prejudice to the rights of the
parties therein.

Having established the foregoing, we now proceed to determine the appropriate penalty to be imposed.
Under Rule 14022 of the Rules of Court, as amended by A.M. No. 01-8-10-SC, gross ignorance of the law
is a serious charge,23 punishable by a fine of more than ₱20,000.00, but not exceeding ₱40,000.00,
suspension from office without salary and other benefits for more than three but not exceeding six
months, or dismissal from the service.24

In Tadlip v. Atty. Borres, Jr., the respondent-lawyer and provincial adjudicator, found guilty of gross
ignorance of the law, was suspended from the practice of law for six months. Additionally, in parallel
cases,25 a judge found guilty of gross ignorance of the law was meted the penalty of suspension for six
months.

Here, the IBP Board of Governors recommended that the respondent be suspended from the practice of
law for six months with a warning that a repetition of the same or similar incident would be dealt with
more severe penalty. We adopt the foregoing recommendation.

This Court notes that the IBP Board of Governors had previously recommended the respondent’s
suspension from the practice of law for three years in A.C. No. 7314, entitled "Mary Ann T. Flores v. Atty.
Jovencio Ll. Mayor, Jr.". This case, however, is still pending.

It cannot be gainsaid that since public office is a public trust, the ethical conduct demanded upon
lawyers in the government service is more exacting than the standards for those in private practice.
Lawyers in the government service are subject to constant public scrutiny under norms of public
accountability. They also bear the heavy burden of having to put aside their private interest in favor of
the interest of the public; their private activities should not interfere with the discharge of their official
functions.26

At this point, the respondent should be reminded of our exhortation in Republic of the Philippines v.
Judge Caguioa,27 thus:

Ignorance of the law is the mainspring of injustice. Judges are called upon to exhibit more than just a
cursory acquaintance with statutes and procedural rules. Basic rules should be at the palm of their
hands. Their inexcusable failure to observe basic laws and rules will render them administratively
liable.1âwphi1 Where the law involved is simple and elementary, lack of conversance with it constitutes
gross ignorance of the law. "Verily, for transgressing the elementary jurisdictional limits of his court,
respondent should be administratively liable for gross ignorance of the law."

"When the inefficiency springs from a failure to consider so basic and elemental a rule, a law or a
principle in the discharge of his functions, a judge is either too incompetent and undeserving of the
position and title he holds or he is too vicious that the oversight or omission was deliberately done in
bad faith and in grave abuse of judicial authority."28 (citations omitted)

WHEREFORE, finding respondent Atty. Jovencio Ll. Mayor, Jr. guilty of gross ignorance of the law in
violation of his lawyer’s oath and of the Code of Professional Responsibility, the Court resolved to
SUSPEND respondent from the practice of law for a period of six (6) months, with a WARNING that
commission of the same or similar offense in the future will result in the imposition of a more severe
penalty.
Let copies of this Resolution be furnished the IBP, as well as the Office of the Bar Confidant and the
Court Administrator who shall circulate it to all courts for their information and guidance and likewise be
entered in the record of the respondent as attorney.

SO ORDERED.

A.C. No. 7430; 15 February 2012

Facts:
On 5 September 2006, a certain David Edward Toze filed a complaint for illegal dismissal before the
Labor Arbitration Branch of the National Labor Relations Commission against the members of the Board
of Trustees of the International School, Manila. The case was raffled to the sala of the respondent, Labor
Arbiter Jovencio Ll. Mayor, Jr. During the proceedings, Toze filed a Verified Motion for the Issuance of a
Temporary Restraining Order and/or Preliminary Injunction, to which the complainants, Martin Lahm III
and James P. Concepcion, opposed. Thereafter, the respondent issued an Order directing the parties in
the said case to maintain the status quo ante, which consequently reinstated Toze to his former position
as superintendent of the International School Manila. Despite the complainants’ motion for an early
resolution of their motion to dismiss the said case, respondent maintained his Order. Thus, the
complaint praying for the respondent’s disbarment for alleged gross misconduct and violation of
lawyer’s oath.

Issue:
Is the respondent guilty for the gross misconduct and violation of lawyer’s oath?

Held:
Yes. The Supreme Court concurred with the conclusion of the Investigating Commissioner of the IBP
Commission on Bar Discipline that respondent guilty for the gross misconduct and violation of lawyer’s
oath. Gross misconduct is any inexcusable, shameful or flagrant unlawful conduct on the part of a
person concerned with the administration of justice; i.e., conduct prejudicial to the rights of the parties
or to the right determination of the cause. The motive behind this conduct is generally a premeditated,
obstinate or intentional purpose.

Under the 2005 Rules of Procedure of the NLRC, the labor arbiters no longer have the authority to issue
writs of preliminary injunction and/or temporary restraining orders. However, the respondent, in
violation of the said rule, vehemently insist that he has the authority to issue writs of preliminary
injunction and/or temporary restraining order.

Further, the unfounded insistence of the respondent on his supposed authority to issue writs of
preliminary injunction and/or temporary restraining order, taken together with the delay in the
resolution of the said motion for reconsideration, would clearly show that the respondent deliberately
intended to cause prejudice to the complainants.

In stubbornly insisting that he has the authority to issue writs of preliminary injunction and/or
temporary restraining order contrary to the clear import of the 2005 Rules of Procedure of the NLRC,
the respondent violated Canon 1 of the Code of Professional Responsibility which mandates lawyers to
obey the laws of the land and promote respect for law and legal processes.
Reference:
Section 27, Rule 138 of the Rules of Court.
Attorneys removed or suspended by Supreme Court on what grounds. A member of the bar may be
removed or suspended from his office as attorney by the Supreme Court for any deceit, malpractice, or
other gross misconduct in such office, grossly immoral conduct, or by reason of his conviction of a crime
involving moral turpitude, or for any violation of the oath which he is required to take before the
admission to practice, or for a wilful disobedience of any lawful order of a superior court, or for
corruptly or wilful appearing as an attorney for a party to a case without authority so to do. The practice
of soliciting cases at law for the purpose of gain, either personally or through paid agents or brokers,
constitutes malpractice.
G.R. No. 131719 May 25, 2004

THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF LABOR AND
EMPLOYMENT, AND THE SECRETARY OF FOREIGN AFFAIRS, OWWA PUNO, ADMINISTRATOR, and
POEA ADMINISTRATOR, petitioners,
vs.
THE HON. COURT OF APPEALS and ASIAN RECRUITMENT COUNCIL PHILIPPINE CHAPTER (ARCO-PHIL.),
INC., representing its members: Worldcare Services Internationale, Inc., Steadfast
International Recruitment Corporation, Dragon International Manpower Services Corporation,
Verdant Manpower Mobilization Corporation, Brent Overseas Personnel, Inc., ARL Manpower
Services, Inc., Dahlzhen International Services, Inc., Interworld Placement Center, Inc., Lakas Tao
Contract Services, Ltd. Co., and SSC Multiservices, respondents.

DECISION

CALLEJO, SR., J.:

In this petition for review on certiorari, the Executive Secretary of the President of the Philippines, the
Secretary of Justice, the Secretary of Foreign Affairs, the Secretary of Labor and Employment, the POEA
Administrator and the OWWA Administrator, through the Office of the Solicitor General, assail the
Decision1 of the Court of Appeals in CA-G.R. SP No. 38815 affirming the Order2 of the Regional Trial
Court of Quezon City dated August 21, 1995 in Civil Case No. Q-95-24401, granting the plea of the
petitioners therein for a writ of preliminary injunction and of the writ of preliminary injunction issued by
the trial court on August 24, 1995.

The Antecedents

Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995,
took effect on July 15, 1995. The Omnibus Rules and Regulations Implementing the Migrant Workers
and Overseas Filipino Act of 1995 was, thereafter, published in the April 7, 1996 issue of the Manila
Bulletin. However, even before the law took effect, the Asian Recruitment Council Philippine Chapter,
Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for declaratory relief under Rule 63 of the Rules of
Court with the Regional Trial Court of Quezon City to declare as unconstitutional Section 2, paragraph
(g), Section 6, paragraphs (a) to (j), (l) and (m), Section 7, paragraphs (a) and (b), and Sections 9 and 10
of the law, with a plea for the issuance of a temporary restraining order and/or writ of preliminary
injunction enjoining the respondents therein from enforcing the assailed provisions of the law.

In a supplement to its petition, the ARCO-Phil. alleged that Rep. Act No. 8042 was self-executory and
that no implementing rules were needed. It prayed that the court issue a temporary restraining order to
enjoin the enforcement of Section 6, paragraphs (a) to (m) on illegal recruitment, Section 7 on penalties
for illegal recruitment, and Section 9 on venue of criminal actions for illegal recruitments, viz:

Viewed in the light of the foregoing discussions, there appears to be urgent an imperative need for this
Honorable Court to maintain the status quo by enjoining the implementation or effectivity of the
questioned provisions of RA 8042, by way of a restraining order otherwise, the member recruitment
agencies of the petitioner will suffer grave or irreparable damage or injury. With the effectivity of RA
8042, a great majority of the duly licensed recruitment agencies have stopped or suspended their
operations for fear of being prosecuted under the provisions of a law that are unjust and
unconstitutional. This Honorable Court may take judicial notice of the fact that processing of
deployment papers of overseas workers for the past weeks have come to a standstill at the POEA and
this has affected thousands of workers everyday just because of the enactment of RA 8042. Indeed, this
has far reaching effects not only to survival of the overseas manpower supply industry and the active
participating recruitment agencies, the country’s economy which has survived mainly due to the dollar
remittances of the overseas workers but more importantly, to the poor and the needy who are in dire
need of income-generating jobs which can only be obtained from abroad. The loss or injury that the
recruitment agencies will suffer will then be immeasurable and irreparable. As of now, even foreign
employers have already reduced their manpower requirements from the Philippines due to their
knowledge that RA 8042 prejudiced and adversely affected the local recruitment agencies.3

On August 1, 1995, the trial court issued a temporary restraining order effective for a period of only
twenty (20) days therefrom.

After the petitioners filed their comment on the petition, the ARCO-Phil. filed an amended petition, the
amendments consisting in the inclusion in the caption thereof eleven (11) other corporations which it
alleged were its members and which it represented in the suit, and a plea for a temporary restraining
order enjoining the respondents from enforcing Section 6 subsection (i), Section 6 subsection (k) and
paragraphs 15 and 16 thereof, Section 8, Section 10, paragraphs 1 and 2, and Sections 11 and 40 of Rep.
Act No. 8042.

The respondent ARCO-Phil. assailed Section 2(g) and (i), Section 6 subsection (a) to (m), Section 7(a) to
(b), and Section 10 paragraphs (1) and (2), quoted as follows:

(g) THE STATE RECOGNIZES THAT THE ULTIMATE PROTECTION TO ALL MIGRANT WORKERS IS THE
POSSESSION OF SKILLS. PURSUANT TO THIS AND AS SOON AS PRACTICABLE, THE GOVERNMENT SHALL
DEPLOY AND/OR ALLOW THE DEPLOYMENT ONLY OF SKILLED FILIPINO WORKERS.4

Sec. 2 subsection (i, 2nd par.)

Nonetheless, the deployment of Filipino overseas workers, whether land-based or sea-based, by local
service contractors and manning agents employing them shall be encourages (sic). Appropriate
incentives may be extended to them.

II. ILLEGAL RECRUITMENT

SEC. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract
services, promising or advertising for employment abroad, whether for profit or not, when undertaken
by a non-licensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the Philippines: Provided, That any such non-
licensee or non-holder who, in any manner, offers or promises for a fee employment abroad to two or
more persons shall be deemed so engaged. It shall, likewise, include the following acts, whether
committed by any person, whether a non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any
amount greater than that actually received by him as a loan or advance;

(b) To furnish or publish any false notice or information or document in relation to recruitment or
employment;

(c) To give any false notice, testimony, information or document or commit any act of misrepresentation
for the purpose of securing a license or authority under the Labor Code;

(d) To induce or attempt to induce a worker already employed to quit his employment in order to offer
him another unless the transfer is designed to liberate a worker from oppressive terms and conditions
of employment;

(e) To influence or attempt to influence any person or entity not to employ any worker who has not
applied for employment through his agency;

(f) To engage in the recruitment or placement of workers in jobs harmful to public health or morality or
to the dignity of the Republic of the Philippines;

(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or by his
duly authorized representative;

(h) To fail to submit reports on the status of employment, placement vacancies, remittance of foreign
exchange earnings, separation from jobs, departures and such other matters or information as may be
required by the Secretary of Labor and Employment;

(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified by
the Department of Labor and Employment from the time of actual signing thereof by the parties up to
and including the period of the expiration of the same without the approval of the Department of Labor
and Employment;

(j) For an officer or agent of a recruitment or placement agency to become an officer or member of the
Board of any corporation engaged in travel agency or to be engaged directly or indirectly in the
management of a travel agency;

(k) To withhold or deny travel documents from applicant workers before departure for monetary or
financial considerations other than those authorized under the Labor Code and its implementing rules
and regulations;

(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and

(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the worker’s fault. Illegal recruitment when committed by a syndicate or in large scale shall be
considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if
committed against three (3) or more persons individually or as a group.

The persons criminally liable for the above offenses are the principals, accomplices and accessories. In
case of juridical persons, the officers having control, management or direction of their business shall be
liable.

SEC. 7. Penalties. –

(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less
than six (6) years and one (1) day but not more than twelve (12) years and a fine of not less than two
hundred thousand pesos (₱200,000.00) nor more than five hundred thousand pesos (₱500,000.00).

(b) The penalty of life imprisonment and a fine of not less than five hundred thousand pesos
(₱500,000.00) nor more than one million pesos (₱1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.

Provided, however, That the maximum penalty shall be imposed if the person illegally recruited is less
than eighteen (18) years of age or committed by a non-licensee or non-holder of authority.

Sec. 8.

Prohibition on Officials and Employees. – It shall be unlawful for any official or employee of the
Department of Labor and Employment, the Philippine Overseas Employment Administration (POEA), or
the Overseas Workers Welfare Administration (OWWA), or the Department of Foreign Affairs, or other
government agencies involved in the implementation of this Act, or their relatives within the fourth civil
degree of consanguinity or affinity, to engage, directly or indirectly, in the business of recruiting migrant
workers as defined in this Act. The penalties provided in the immediate preceding paragraph shall be
imposed upon them. (underscoring supplied)

Sec. 10, pars. 1 & 2.

Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims
or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall themselves be jointly
and solidarily liable with the corporation or partnership for the aforesaid claims and damages.
…

SEC. 11. Mandatory Periods for Resolution of Illegal Recruitment Cases. – The preliminary investigations
of cases under this Act shall be terminated within a period of thirty (30) calendar days from the date of
their filing. Where the preliminary investigation is conducted by a prosecution officer and a prima facie
case is established, the corresponding information shall be filed in court within twenty-four (24) hours
from the termination of the investigation. If the preliminary investigation is conducted by a judge and a
prima facie case is found to exist, the corresponding information shall be filed by the proper prosecution
officer within forty-eight (48) hours from the date of receipt of the records of the case.

The respondent averred that the aforequoted provisions of Rep. Act No. 8042 violate Section 1, Article
III of the Constitution.5 According to the respondent, Section 6(g) and (i) discriminated against unskilled
workers and their families and, as such, violated the equal protection clause, as well as Article II, Section
126 and Article XV, Sections 17 and 3(3) of the Constitution.8 As the law encouraged the deployment of
skilled Filipino workers, only overseas skilled workers are granted rights. The respondent stressed that
unskilled workers also have the right to seek employment abroad. According to the respondent, the
right of unskilled workers to due process is violated because they are prevented from finding
employment and earning a living abroad. It cannot be argued that skilled workers are immune from
abuses by employers, while unskilled workers are merely prone to such abuses. It was pointed out that
both skilled and unskilled workers are subjected to abuses by foreign employers. Furthermore, the
prohibition of the deployment of unskilled workers abroad would only encourage fly-by-night illegal
recruiters.

According to the respondent, the grant of incentives to service contractors and manning agencies to the
exclusion of all other licensed and authorized recruiters is an invalid classification. Licensed and
authorized recruiters are thus deprived of their right to property and due process and to the "equality of
the person." It is understandable for the law to prohibit illegal recruiters, but to discriminate against
licensed and registered recruiters is unconstitutional.

The respondent, likewise, alleged that Section 6, subsections (a) to (m) is unconstitutional because
licensed and authorized recruitment agencies are placed on equal footing with illegal recruiters. It
contended that while the Labor Code distinguished between recruiters who are holders of licenses and
non-holders thereof in the imposition of penalties, Rep. Act No. 8042 does not make any distinction. The
penalties in Section 7(a) and (b) being based on an invalid classification are, therefore, repugnant to the
equal protection clause, besides being excessive; hence, such penalties are violative of Section 19(1),
Article III of the Constitution.9 It was also pointed out that the penalty for officers/officials/employees of
recruitment agencies who are found guilty of economic sabotage or large-scale illegal recruitment under
Rep. Act No. 8042 is life imprisonment. Since recruitment agencies usually operate with a manpower of
more than three persons, such agencies are forced to shut down, lest their officers and/or employees be
charged with large scale illegal recruitment or economic sabotage and sentenced to life imprisonment.
Thus, the penalty imposed by law, being disproportionate to the prohibited acts, discourages the
business of licensed and registered recruitment agencies.

The respondent also posited that Section 6(m) and paragraphs (15) and (16), Sections 8, 9 and 10,
paragraph 2 of the law violate Section 22, Article III of the Constitution10 prohibiting ex-post facto laws
and bills of attainder. This is because the provisions presume that a licensed and registered recruitment
agency is guilty of illegal recruitment involving economic sabotage, upon a finding that it committed any
of the prohibited acts under the law. Furthermore, officials, employees and their relatives are presumed
guilty of illegal recruitment involving economic sabotage upon such finding that they committed any of
the said prohibited acts.

The respondent further argued that the 90-day period in Section 10, paragraph (1) within which a labor
arbiter should decide a money claim is relatively short, and could deprive licensed and registered
recruiters of their right to due process. The period within which the summons and the complaint would
be served on foreign employees and, thereafter, the filing of the answer to the complaint would take
more than 90 days. This would thereby shift on local licensed and authorized recruiters the burden of
proving the defense of foreign employers. Furthermore, the respondent asserted, Section 10, paragraph
2 of the law, which provides for the joint and several liability of the officers and employees, is a bill of
attainder and a violation of the right of the said corporate officers and employees to due process.
Considering that such corporate officers and employees act with prior approval of the board of directors
of such corporation, they should not be liable, jointly and severally, for such corporate acts.

The respondent asserted that the following provisions of the law are unconstitutional:

SEC. 9. Venue. – A criminal action arising from illegal recruitment as defined herein shall be filed with the
Regional Trial Court of the province or city where the offense was committed or where the offended
party actually resides at the time of the commission of the offense: Provided, That the court where the
criminal action is first filed shall acquire jurisdiction to the exclusion of other courts: Provided, however,
That the aforestated provisions shall also apply to those criminal actions that have already been filed in
court at the time of the effectivity of this Act.

SEC. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.

Sec. 40.

The departments and agencies charged with carrying out the provisions of this Act shall, within ninety
(90) days after the effectiviy of this Act, formulate the necessary rules and regulations for its effective
implementation.

According to the respondent, the said provisions violate Section 5(5), Article VIII of the
Constitution11 because they impair the power of the Supreme Court to promulgate rules of procedure.

In their answer to the petition, the petitioners alleged, inter alia, that (a) the respondent has no cause of
action for a declaratory relief; (b) the petition was premature as the rules implementing Rep. Act No.
8042 not having been released as yet; (c) the assailed provisions do not violate any provisions of the
Constitution; and, (d) the law was approved by Congress in the exercise of the police power of the State.
In opposition to the respondent’s plea for injunctive relief, the petitioners averred that:

As earlier shown, the amended petition for declaratory relief is devoid of merit for failure of petitioner
to demonstrate convincingly that the assailed law is unconstitutional, apart from the defect and
impropriety of the petition. One who attacks a statute, alleging unconstitutionality must prove its
invalidity beyond reasonable doubt (Caleon v. Agus Development Corporation, 207 SCRA 748). All
reasonable doubts should be resolved in favor of the constitutionality of a statute (People v. Vera, 65
Phil. 56). This presumption of constitutionality is based on the doctrine of separation of powers which
enjoin upon each department a becoming respect for the acts of the other departments (Garcia vs.
Executive Secretary, 204 SCRA 516 [1991]). Necessarily, the ancillary remedy of a temporary restraining
order and/or a writ of preliminary injunction prayed for must fall. Besides, an act of legislature approved
by the executive is presumed to be within constitutional bounds (National Press Club v. Commission on
Elections, 207 SCRA 1).12

After the respective counsels of the parties were heard on oral arguments, the trial court issued on
August 21, 1995, an order granting the petitioner’s plea for a writ of preliminary injunction upon a bond
of ₱50,000. The petitioner posted the requisite bond and on August 24, 1995, the trial court issued a
writ of preliminary injunction enjoining the enforcement of the following provisions of Rep. Act No.
8042 pending the termination of the proceedings:

… Section 2, subsections (g) and (i, 2nd par.); Section 6, subsections (a) to (m), and pars. 15 & 16; Section
7, subsections (a) & (b); Section 8; Section 9; Section 10; pars. 1 & 2; Section 11; and Section 40 of
Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995. …13

The petitioners filed a petition for certiorari with the Court of Appeals assailing the order and the writ of
preliminary injunction issued by the trial court on the following grounds:

1. Respondent ARCO-PHIL. had utterly failed to show its clear right/s or that of its member-agencies to
be protected by the injunctive relief and/or violation of said rights by the enforcement of the assailed
sections of R.A. 8042;

2. Respondent Judge fixed a ₱50,000 injunction bond which is grossly inadequate to answer for the
damage which petitioner-officials may sustain, should respondent ARCO-PHIL. be finally adjudged as not
being entitled thereto.14

The petitioners asserted that the respondent is not the real party-in-interest as petitioner in the trial
court. It is inconceivable how the respondent, a non-stock and non-profit corporation, could sustain
direct injury as a result of the enforcement of the law. They argued that if, at all, any damage would
result in the implementation of the law, it is the licensed and registered recruitment agencies and/or the
unskilled Filipino migrant workers discriminated against who would sustain the said injury or damage,
not the respondent. The respondent, as petitioner in the trial court, was burdened to adduce
preponderant evidence of such irreparable injury, but failed to do so. The petitioners further insisted
that the petition a quo was premature since the rules and regulations implementing the law had yet to
be promulgated when such petition was filed. Finally, the petitioners averred that the respondent failed
to establish the requisites for the issuance of a writ of preliminary injunction against the enforcement of
the law and the rules and regulations issued implementing the same.

On December 5, 1997, the appellate court came out with a four-page decision dismissing the petition
and affirming the assailed order and writ of preliminary injunction issued by the trial court. The
appellate court, likewise, denied the petitioners’ motion for reconsideration of the said decision.

The petitioners now come to this Court in a petition for review on certiorari on the following grounds:
1. Private respondent ARCO-PHIL. had utterly failed to show its clear right/s or that of its member-
agencies to be protected by the injunctive relief and/or violation of said rights by the enforcement of
the assailed sections of R.A. 8042;

2. The ₱50,000 injunction bond fixed by the court a quo and sustained by the Court of Appeals is grossly
inadequate to answer for the damage which petitioners-officials may sustain, should private respondent
ARCO-PHIL. be finally adjudged as not being entitled thereto.15

On February 16, 1998, this Court issued a temporary restraining order enjoining the respondents from
enforcing the assailed order and writ of preliminary injunction.

The Issues

The core issue in this case is whether or not the trial court committed grave abuse of its discretion
amounting to excess or lack of jurisdiction in issuing the assailed order and the writ of preliminary
injunction on a bond of only ₱50,000 and whether or not the appellate court erred in affirming the trial
court’s order and the writ of preliminary injunction issued by it.

The petitioners contend that the respondent has no locus standi. It is a non-stock, non-profit
organization; hence, not the real party-in-interest as petitioner in the action. Although the respondent
filed the petition in the Regional Trial Court in behalf of licensed and registered recruitment agencies, it
failed to adduce in evidence a certified copy of its Articles of Incorporation and the resolutions of the
said members authorizing it to represent the said agencies in the proceedings. Neither is the suit of the
respondent a class suit so as to vest in it a personality to assail Rep. Act No. 8042; the respondent is
service-oriented while the recruitment agencies it purports to represent are profit-oriented. The
petitioners assert that the law is presumed constitutional and, as such, the respondent was burdened to
make a case strong enough to overcome such presumption and establish a clear right to injunctive relief.

The petitioners bewail the ₱50,000 bond fixed by the trial court for the issuance of a writ of preliminary
injunction and affirmed by the appellate court. They assert that the amount is grossly inadequate to
answer for any damages that the general public may suffer by reason of the non-enforcement of the
assailed provisions of the law. The trial court committed a grave abuse of its discretion in granting the
respondent’s plea for injunctive relief, and the appellate court erred in affirming the order and the writ
of preliminary injunction issued by the trial court.

The respondent, for its part, asserts that it has duly established its locus standi and its right to injunctive
relief as gleaned from its pleadings and the appendages thereto. Under Section 5, Rule 58 of the Rules of
Court, it was incumbent on the petitioners, as respondents in the RTC, to show cause why no injunction
should issue. It avers that the injunction bond posted by the respondent was more than adequate to
answer for any injury or damage the petitioners may suffer, if any, by reason of the writ of preliminary
injunction issued by the RTC. In any event, the assailed provisions of Rep. Act No. 8042 exposed its
members to the immediate and irreparable damage of being deprived of their right to a livelihood
without due process, a property right protected under the Constitution.

The respondent contends that the commendable purpose of the law to eradicate illegal recruiters
should not be done at the expense and to the prejudice of licensed and authorized recruitment
agencies. The writ of preliminary injunction was necessitated by the great number of duly licensed
recruitment agencies that had stopped or suspended their business operations for fear that their
officers and employees would be indicted and prosecuted under the assailed oppressive penal
provisions of the law, and meted excessive penalties. The respondent, likewise, urges that the Court
should take judicial notice that the processing of deployment papers of overseas workers have come to
a virtual standstill at the POEA.

The Court’s Ruling

The petition is meritorious.

The Respondent Has Locus Standi

To File the Petition in the RTC in Representation of the Eleven Licensed and Registered Recruitment
Agencies Impleaded in the Amended Petition

The modern view is that an association has standing to complain of injuries to its members. This view
fuses the legal identity of an association with that of its members.16 An association has standing to file
suit for its workers despite its lack of direct interest if its members are affected by the action. An
organization has standing to assert the concerns of its constituents.17

In Telecommunications and Broadcast Attorneys of the Philippines v. Commission on Elections,18 we held

that standing jus tertii would be recognized only if it can be shown that the party suing has some
substantial relation to the third party, or that the right of the third party would be diluted unless the
party in court is allowed to espouse the third party’s constitutional claims.

In this case, the respondent filed the petition for declaratory relief under Rule 64 of the Rules of Court
for and in behalf of its eleven (11) licensed and registered recruitment agencies which are its members,
and which approved separate resolutions expressly authorizing the respondent to file the said suit for
and in their behalf. We note that, under its Articles of Incorporation, the respondent was organized for
the purposes inter alia of promoting and supporting the growth and development of the manpower
recruitment industry, both in the local and international levels; providing, creating and exploring
employment opportunities for the exclusive benefit of its general membership; enhancing and
promoting the general welfare and protection of Filipino workers; and, to act as the representative of
any individual, company, entity or association on matters related to the manpower recruitment
industry, and to perform other acts and activities necessary to accomplish the purposes embodied
therein. The respondent is, thus, the appropriate party to assert the rights of its members, because it
and its members are in every practical sense identical. The respondent asserts that the assailed
provisions violate the constitutional rights of its members and the officers and employees thereof. The
respondent is but the medium through which its individual members seek to make more effective the
expression of their voices and the redress of their grievances.19

However, the respondent has no locus standi to file the petition for and in behalf of unskilled workers.
We note that it even failed to implead any unskilled workers in its petition. Furthermore, in failing to
implead, as parties-petitioners, the eleven licensed and registered recruitment agencies it claimed to
represent, the respondent failed to comply with Section 2 of Rule 6320 of the Rules of Court.
Nevertheless, since the eleven licensed and registered recruitment agencies for which the respondent
filed the suit are specifically named in the petition, the amended petition is deemed amended to avoid
multiplicity of suits.21
The Assailed Order and Writ of

Preliminary Injunction Is Mooted

By Case Law

The respondent justified its plea for injunctive relief on the allegation in its amended petition that its
members are exposed to the immediate and irreparable danger of being deprived of their right to a
livelihood and other constitutional rights without due process, on its claim that a great number of duly
licensed recruitment agencies have stopped or suspended their operations for fear that (a) their officers
and employees would be prosecuted under the unjust and unconstitutional penal provisions of Rep. Act
No. 8042 and meted equally unjust and excessive penalties, including life imprisonment, for illegal
recruitment and large scale illegal recruitment without regard to whether the recruitment agencies
involved are licensed and/or authorized; and, (b) if the members of the respondent, which are licensed
and authorized, decide to continue with their businesses, they face the stigma and the curse of being
labeled "illegal recruiters." In granting the respondent’s plea for a writ of preliminary injunction, the trial
court held, without stating the factual and legal basis therefor, that the enforcement of Rep. Act No.
8042, pendente lite, would cause grave and irreparable injury to the respondent until the case is
decided on its merits.

We note, however, that since Rep. Act No. 8042 took effect on July 15, 1995, the Court had, in a catena
of cases, applied the penal provisions in Section 6, including paragraph (m) thereof, and the last two
paragraphs therein defining large scale illegal recruitment committed by officers and/or employees of
recruitment agencies by themselves and in connivance with private individuals, and imposed the
penalties provided in Section 7 thereof, including the penalty of life imprisonment.22 The Informations
therein were filed after preliminary investigations as provided for in Section 11 of Rep. Act No. 8042 and
in venues as provided for in Section 9 of the said act. In People v. Chowdury,23 we held that illegal
recruitment is a crime of economic sabotage and must be enforced.

In People v. Diaz,24 we held that Rep. Act No. 8042 is but an amendment of the Labor Code of the
Philippines and is not an ex-post facto law because it is not applied retroactively. In JMM Promotion and
Management, Inc. v. Court of Appeals,25 the issue of the extent of the police power of the State to
regulate a business, profession or calling vis-à-vis the equal protection clause and the non-impairment
clause of the Constitution were raised and we held, thus:

A profession, trade or calling is a property right within the meaning of our constitutional guarantees.
One cannot be deprived of the right to work and the right to make a living because these rights are
property rights, the arbitrary and unwarranted deprivation of which normally constitutes an actionable
wrong.

Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or trade
has always been upheld as a legitimate subject of a valid exercise of the police power by the state
particularly when their conduct affects either the execution of legitimate governmental functions, the
preservation of the State, the public health and welfare and public morals. According to the maxim, sic
utere tuo ut alienum non laedas, it must of course be within the legitimate range of legislative action to
define the mode and manner in which every one may so use his own property so as not to pose injury to
himself or others.
In any case, where the liberty curtailed affects at most the rights of property, the permissible scope of
regulatory measures is certainly much wider. To pretend that licensing or accreditation requirements
violates the due process clause is to ignore the settled practice, under the mantle of the police power, of
regulating entry to the practice of various trades or professions. Professionals leaving for abroad are
required to pass rigid written and practical exams before they are deemed fit to practice their trade.
Seamen are required to take tests determining their seamanship. Locally, the Professional Regulation
Commission has begun to require previously licensed doctors and other professionals to furnish
documentary proof that they had either re-trained or had undertaken continuing education courses as a
requirement for renewal of their licenses. It is not claimed that these requirements pose an
unwarranted deprivation of a property right under the due process clause. So long as professionals and
other workers meet reasonable regulatory standards no such deprivation exists.

Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the
Constitution to support their argument that the government cannot enact the assailed regulatory
measures because they abridge the freedom to contract. In Philippine Association of Service Exporters,
Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution … must yield to the loftier
purposes targeted by the government." Equally important, into every contract is read provisions of
existing law, and always, a reservation of the police power for so long as the agreement deals with a
subject impressed with the public welfare.

A last point. Petitioners suggest that the singling out of entertainers and performing artists under the
assailed department orders constitutes class legislation which violates the equal protection clause of the
Constitution. We do not agree.

The equal protection clause is directed principally against undue favor and individual or class privilege. It
is not intended to prohibit legislation which is limited to the object to which it is directed or by the
territory in which it is to operate. It does not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred and liabilities imposed. We have held,
time and again, that the equal protection clause of the Constitution does not forbid classification for so
long as such classification is based on real and substantial differences having a reasonable relation to the
subject of the particular legislation. If classification is germane to the purpose of the law, concerns all
members of the class, and applies equally to present and future conditions, the classification does not
violate the equal protection guarantee.26

The validity of Section 6 of R.A. No. 8042 which provides that employees of recruitment agencies may be
criminally liable for illegal recruitment has been upheld in People v. Chowdury:27

As stated in the first sentence of Section 6 of RA 8042, the persons who may be held liable for illegal
recruitment are the principals, accomplices and accessories. An employee of a company or corporation
engaged in illegal recruitment may be held liable as principal, together with his employer, if it is shown
that he actively and consciously participated in illegal recruitment. It has been held that the existence of
the corporate entity does not shield from prosecution the corporate agent who knowingly and
intentionally causes the corporation to commit a crime. The corporation obviously acts, and can act,
only by and through its human agents, and it is their conduct which the law must deter. The employee
or agent of a corporation engaged in unlawful business naturally aids and abets in the carrying on of
such business and will be prosecuted as principal if, with knowledge of the business, its purpose and
effect, he consciously contributes his efforts to its conduct and promotion, however slight his
contribution may be. …28

By its rulings, the Court thereby affirmed the validity of the assailed penal and procedural provisions of
Rep. Act No. 8042, including the imposable penalties therefor. Until the Court, by final judgment,
declares that the said provisions are unconstitutional, the enforcement of the said provisions cannot be
enjoined.

The RTC Committed Grave Abuse of Its Discretion Amounting to Excess or Lack of Jurisdiction in Issuing
the Assailed Order and the Writ of Preliminary Injunction

The matter of whether to issue a writ of preliminary injunction or not is addressed to the sound
discretion of the trial court. However, if the court commits grave abuse of its discretion in issuing the
said writ amounting to excess or lack of jurisdiction, the same may be nullified via a writ of certiorari and
prohibition.

In Social Security Commission v. Judge Bayona,29 we ruled that a law is presumed constitutional until
otherwise declared by judicial interpretation. The suspension of the operation of the law is a matter of
extreme delicacy because it is an interference with the official acts not only of the duly elected
representatives of the people but also of the highest magistrate of the land.

In Younger v. Harris, Jr.,30 the Supreme Court of the United States emphasized, thus:

Federal injunctions against state criminal statutes, either in their entirety or with respect to their
separate and distinct prohibitions, are not to be granted as a matter of course, even if such statutes are
unconstitutional. No citizen or member of the community is immune from prosecution, in good faith, for
his alleged criminal acts. The imminence of such a prosecution even though alleged to be unauthorized
and, hence, unlawful is not alone ground for relief in equity which exerts its extraordinary powers only
to prevent irreparable injury to the plaintiff who seeks its aid. 752 Beal v. Missouri Pacific Railroad Corp.,
312 U.S. 45, 49, 61 S.Ct. 418, 420, 85 L.Ed. 577.

And similarly, in Douglas, supra, we made clear, after reaffirming this rule, that:

"It does not appear from the record that petitioners have been threatened with any injury other than
that incidental to every criminal proceeding brought lawfully and in good faith …" 319 U.S., at 164, 63
S.Ct., at 881.31

The possible unconstitutionality of a statute, on its face, does not of itself justify an injunction against
good faith attempts to enforce it, unless there is a showing of bad faith, harassment, or any other
unusual circumstance that would call for equitable relief.32 The "on its face" invalidation of statutes has
been described as "manifestly strong medicine," to be employed "sparingly and only as a last resort,"
and is generally disfavored.33

To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to be

unconstitutional, the party must establish that it will suffer irreparable harm in the absence of injunctive
relief and must demonstrate that it is likely to succeed on the merits, or that there are sufficiently
serious questions going to the merits and the balance of hardships tips decidedly in its favor.34 The
higher standard reflects judicial deference toward "legislation or regulations developed through
presumptively reasoned democratic processes." Moreover, an injunction will alter, rather than maintain,
the status quo, or will provide the movant with substantially all the relief sought and that relief cannot
be undone even if the defendant prevails at a trial on the merits.35 Considering that injunction is an
exercise of equitable relief and authority, in assessing whether to issue a preliminary injunction, the
courts must sensitively assess all the equities of the situation, including the public interest.36 In
litigations between governmental and private parties, courts go much further both to give and withhold
relief in furtherance of public interest than they are accustomed to go when only private interests are
involved.37 Before the plaintiff may be entitled to injunction against future enforcement, he is burdened
to show some substantial hardship.38

The fear or chilling-effect of the assailed penal provisions of the law on the members of the respondent
does not by itself justify prohibiting the State from enforcing them against those whom the State
believes in good faith to be punishable under the laws:

… Just as the incidental "chilling effect" of such statutes does not automatically render them
unconstitutional, so the chilling effect that admittedly can result from the very existence of certain laws
on the statute books does not in itself justify prohibiting the State from carrying out the important and
necessary task of enforcing these laws against socially harmful conduct that the State believes in good
faith to be punishable under its laws and the Constitution.39

It must be borne in mind that subject to constitutional limitations, Congress is empowered to define
what acts or omissions shall constitute a crime and to prescribe punishments therefor.40 The power is
inherent in Congress and is part of the sovereign power of the State to maintain peace and order.
Whatever views may be entertained regarding the severity of punishment, whether one believes in its
efficiency or its futility, these are peculiarly questions of legislative policy.41 The comparative gravity of
crimes and whether their consequences are more or less injurious are matters for the State and
Congress itself to determine.42 Specification of penalties involves questions of legislative policy.43

Due process prohibits criminal stability from shifting the burden of proof to the accused, punishing
wholly passive conduct, defining crimes in vague or overbroad language and failing to grant fair warning
of illegal conduct.44 Class legislation is such legislation which denies rights to one which are accorded to
others, or inflicts upon one individual a more severe penalty than is imposed upon another in like case
offending.45 Bills of attainder are legislative acts which inflict punishment on individuals or members of a
particular group without a judicial trial. Essential to a bill of attainder are a specification of certain
individuals or a group of individuals, the imposition of a punishment, penal or otherwise, and the lack of
judicial trial.46

Penalizing unlicensed and licensed recruitment agencies and their officers and employees and their
relatives employed in government agencies charged with the enforcement of the law for illegal
recruitment and imposing life imprisonment for those who commit large scale illegal recruitment is not
offensive to the Constitution. The accused may be convicted of illegal recruitment and large scale illegal
recruitment only if, after trial, the prosecution is able to prove all the elements of the crime charged.47

The possibility that the officers and employees of the recruitment agencies, which are members of the
respondent, and their relatives who are employed in the government agencies charged in the
enforcement of the law, would be indicted for illegal recruitment and, if convicted sentenced to life
imprisonment for large scale illegal recruitment, absent proof of irreparable injury, is not sufficient on
which to base the issuance of a writ of preliminary injunction to suspend the enforcement of the penal
provisions of Rep. Act No. 8042 and avert any indictments under the law.48The normal course of criminal
prosecutions cannot be blocked on the basis of allegations which amount to speculations about the
future.49

There is no allegation in the amended petition or evidence adduced by the respondent that the officers
and/or employees of its members had been threatened with any indictments for violations of the penal
provisions of Rep. Act No. 8042. Neither is there any allegation therein that any of its members and/or
their officers and employees committed any of the acts enumerated in Section 6(a) to (m) of the law for
which they could be indicted. Neither did the respondent adduce any evidence in the RTC that any or all
of its members or a great number of other duly licensed and registered recruitment agencies had to stop
their business operations because of fear of indictments under Sections 6 and 7 of Rep. Act No. 8042.
The respondent merely speculated and surmised that licensed and registered recruitment agencies
would close shop and stop business operations because of the assailed penal provisions of the law. A
writ of preliminary injunction to enjoin the enforcement of penal laws cannot be based on such
conjectures or speculations. The Court cannot take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the POEA because of the assailed
provisions of Rep. Act No. 8042. The respondent must adduce evidence to prove its allegation, and the
petitioners accorded a chance to adduce controverting evidence.

The respondent even failed to adduce any evidence to prove irreparable injury because of the
enforcement of Section 10(1)(2) of Rep. Act No. 8042. Its fear or apprehension that, because of time
constraints, its members would have to defend foreign employees in cases before the Labor Arbiter is
based on speculations. Even if true, such inconvenience or difficulty is hardly irreparable injury.

The trial court even ignored the public interest involved in suspending the enforcement of Rep. Act No.
8042 vis-à-vis the eleven licensed and registered recruitment agencies represented by the respondent.
In People v. Gamboa,50we emphasized the primary aim of Rep. Act No. 8042:

Preliminarily, the proliferation of illegal job recruiters and syndicates preying on innocent people
anxious to obtain employment abroad is one of the primary considerations that led to the enactment
of The Migrant Workers and Overseas Filipinos Act of 1995. Aimed at affording greater protection to
overseas Filipino workers, it is a significant improvement on existing laws in the recruitment and
placement of workers for overseas employment. Otherwise known as the Magna Carta of OFWs, it
broadened the concept of illegal recruitment under the Labor Code and provided stiffer penalties
thereto, especially those that constitute economic sabotage, i.e., Illegal Recruitment in Large Scale and
Illegal Recruitment Committed by a Syndicate.51

By issuing the writ of preliminary injunction against the petitioners sans any evidence, the trial court
frustrated, albeit temporarily, the prosecution of illegal recruiters and allowed them to continue
victimizing hapless and innocent people desiring to obtain employment abroad as overseas workers, and
blocked the attainment of the salutary policies52 embedded in Rep. Act No. 8042. It bears stressing that
overseas workers, land-based and sea-based, had been remitting to the Philippines billions of dollars
which over the years had propped the economy.

In issuing the writ of preliminary injunction, the trial court considered paramount the interests of the
eleven licensed and registered recruitment agencies represented by the respondent, and capriciously
overturned the presumption of the constitutionality of the assailed provisions on the barefaced claim of
the respondent that the assailed provisions of Rep. Act No. 8042 are unconstitutional. The trial court
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the
assailed order and writ of preliminary injunction. It is for this reason that the Court issued a temporary
restraining order enjoining the enforcement of the writ of preliminary injunction issued by the trial
court.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the appellate court
is REVERSED AND SET ASIDE. The Order of the Regional Trial Court dated August 21, 1995 in Civil Case
No. Q-95-24401 and the Writ of Preliminary Injunction issued by it in the said case on August 24, 1995
are NULLIFIED. No costs.

SO ORDERED.
G.R. No. 179267 June 25, 2013

JESUS C. GARCIA, Petitioner,

vs.
THE HONORABLE RAY ALAN T. DRILON, Presiding Judge, Regional Trial Court-Branch 41, Bacolod City,
and ROSALIE JAYPE-GARCIA, for herself and in behalf of minor children, namely: JO-ANN, JOSEPH
EDUARD, JESSE ANTHONE, all surnamed GARCIA, Respondents.

DECISION

PERLAS-BERNABE, J.:

Hailed as the bastion of Christianity in Asia, the Philippines boasts of 86.8 million Filipinos- or 93 percent
of a total population of 93.3 million – adhering to the teachings of Jesus Christ.1 Yet, the admonition for
husbands to love their wives as their own bodies just as Christ loved the church and gave himself up for
her2 failed to prevent, or even to curb, the pervasiveness of violence against Filipino women. The
National Commission on the Role of Filipino Women (NCRFW) reported that, for the years 2000-2003,
"female violence comprised more than 90o/o of all forms of abuse and violence and more than 90% of
these reported cases were committed by the women's intimate partners such as their husbands and
live-in partners."3

Thus, on March 8, 2004, after nine (9) years of spirited advocacy by women's groups, Congress enacted
Republic Act (R.A.) No. 9262, entitled "An Act Defining Violence Against Women and Their Children,
Providing for Protective Measures for Victims, Prescribing Penalties Therefor, and for Other Purposes." It
took effect on March 27, 2004.4

R.A. 9262 is a landmark legislation that defines and criminalizes acts of violence against women and
their children (VAWC) perpetrated by women's intimate partners, i.e, husband; former husband; or any
person who has or had a sexual or dating relationship, or with whom the woman has a common
child.5 The law provides for protection orders from the barangay and the courts to prevent the
commission of further acts of VAWC; and outlines the duties and responsibilities of barangay officials,
law enforcers, prosecutors and court personnel, social workers, health care providers, and other local
government officials in responding to complaints of VAWC or requests for assistance.

A husband is now before the Court assailing the constitutionality of R.A. 9262 as being violative of the
equal protection and due process clauses, and an undue delegation of judicial power to barangay
officials.

The Factual Antecedents

On March 23, 2006, Rosalie Jaype-Garcia (private respondent) filed, for herself and in behalf of her
minor children, a verified petition6 (Civil Case No. 06-797) before the Regional Trial Court (RTC) of
Bacolod City for the issuance of a Temporary Protection Order (TPO) against her husband, Jesus C.
Garcia (petitioner), pursuant to R.A. 9262. She claimed to be a victim of physical abuse; emotional,
psychological, and economic violence as a result of marital infidelity on the part of petitioner, with
threats of deprivation of custody of her children and of financial support.7

Private respondent's claims

Private respondent married petitioner in 2002 when she was 34 years old and the former was eleven
years her senior. They have three (3) children, namely: Jo-Ann J. Garcia, 17 years old, who is the natural
child of petitioner but whom private respondent adopted; Jessie Anthone J. Garcia, 6 years old; and
Joseph Eduard J. Garcia, 3 years old.8

Private respondent described herself as a dutiful and faithful wife, whose life revolved around her
husband. On the other hand, petitioner, who is of Filipino-Chinese descent, is dominant, controlling, and
demands absolute obedience from his wife and children. He forbade private respondent to pray, and
deliberately isolated her from her friends. When she took up law, and even when she was already
working part time at a law office, petitioner trivialized her ambitions and prevailed upon her to just stay
at home. He was often jealous of the fact that his attractive wife still catches the eye of some men, at
one point threatening that he would have any man eyeing her killed.9

Things turned for the worse when petitioner took up an affair with a bank manager of Robinson's Bank,
Bacolod City, who is the godmother of one of their sons. Petitioner admitted to the affair when private
respondent confronted him about it in 2004. He even boasted to the household help about his sexual
relations with said bank manager. Petitioner told private respondent, though, that he was just using the
woman because of their accounts with the bank.10

Petitioner's infidelity spawned a series of fights that left private respondent physically and emotionally
wounded. In one of their quarrels, petitioner grabbed private respondent on both arms and shook her
with such force that caused bruises and hematoma. At another time, petitioner hit private respondent
forcefully on the lips that caused some bleeding. Petitioner sometimes turned his ire on their daughter,
Jo-Ann, who had seen the text messages he sent to his paramour and whom he blamed for squealing on
him. He beat Jo-Ann on the chest and slapped her many times. When private respondent decided to
leave petitioner, Jo-Ann begged her mother to stay for fear that if the latter leaves, petitioner would
beat her up. Even the small boys are aware of private respondent's sufferings. Their 6-year-old son said
that when he grows up, he would beat up his father because of his cruelty to private respondent.11

All the emotional and psychological turmoil drove private respondent to the brink of despair. On
December 17, 2005, while at home, she attempted suicide by cutting her wrist. She was found by her
son bleeding on the floor. Petitioner simply fled the house instead of taking her to the hospital. Private
respondent was hospitalized for about seven (7) days in which time petitioner never bothered to visit,
nor apologized or showed pity on her. Since then, private respondent has been undergoing therapy
almost every week and is taking anti-depressant medications.12

When private respondent informed the management of Robinson's Bank that she intends to file charges
against the bank manager, petitioner got angry with her for jeopardizing the manager's job. He then
packed his things and told private respondent that he was leaving her for good. He even told private
respondent's mother, who lives with them in the family home, that private respondent should just
accept his extramarital affair since he is not cohabiting with his paramour and has not sired a child with
her.13

Private respondent is determined to separate from petitioner but she is afraid that he would take her
children from her and deprive her of financial support. Petitioner had previously warned her that if she
goes on a legal battle with him, she would not get a single centavo.14
Petitioner controls the family businesses involving mostly the construction of deep wells. He is the
President of three corporations – 326 Realty Holdings, Inc., Negros Rotadrill Corporation, and J-Bros
Trading Corporation – of which he and private respondent are both stockholders. In contrast to the
absolute control of petitioner over said corporations, private respondent merely draws a monthly salary
of ₱20,000.00 from one corporation only, the Negros Rotadrill Corporation. Household expenses
amounting to not less than ₱200,000.00 a month are paid for by private respondent through the use of
credit cards, which, in turn, are paid by the same corporation together with the bills for utilities.15

On the other hand, petitioner receives a monthly salary of ₱60,000.00 from Negros Rotadrill
Corporation, and enjoys unlimited cash advances and other benefits in hundreds of thousands of pesos
from the corporations.16 After private respondent confronted him about the affair, petitioner forbade
her to hold office at JBTC Building, Mandalagan, where all the businesses of the corporations are
conducted, thereby depriving her of access to full information about said businesses. Until the filing of
the petition a quo, petitioner has not given private respondent an accounting of the businesses the
value of which she had helped raise to millions of pesos.17

Action of the RTC of Bacolod City

Finding reasonable ground to believe that an imminent danger of violence against the private
respondent and her children exists or is about to recur, the RTC issued a TPO18 on March 24, 2006
effective for thirty (30) days, which is quoted hereunder:

Respondent (petitioner herein), Jesus Chua Garcia, is hereby:

a) Ordered to remove all his personal belongings from the conjugal dwelling or family home within 24
hours from receipt of the Temporary Restraining Order and if he refuses, ordering that he be removed
by police officers from the conjugal dwelling; this order is enforceable notwithstanding that the house is
under the name of 236 Realty Holdings Inc. (Republic Act No. 9262 states "regardless of ownership"),
this is to allow the Petitioner (private respondent herein) to enter the conjugal dwelling without any
danger from the Respondent.

After the Respondent leaves or is removed from the conjugal dwelling, or anytime the Petitioner decides
to return to the conjugal dwelling to remove things, the Petitioner shall be assisted by police officers
when re-entering the family home.

The Chief of Police shall also give the Petitioner police assistance on Sunday, 26 March 2006 because of
the danger that the Respondent will attempt to take her children from her when he arrives from Manila
and finds out about this suit.

b) To stay away from the petitioner and her children, mother and all her household help and driver from
a distance of 1,000 meters, and shall not enter the gate of the subdivision where the Petitioner may be
temporarily residing.

c) Not to harass, annoy, telephone, contact or otherwise communicate with the Petitioner, directly or
indirectly, or through other persons, or contact directly or indirectly her children, mother and household
help, nor send gifts, cards, flowers, letters and the like. Visitation rights to the children may be subject of
a modified TPO in the future.
d) To surrender all his firearms including a .9MM caliber firearm and a Walther PPK and ordering the
Philippine National Police Firearms and Explosives Unit and the Provincial Director of the PNP to cancel
all the Respondent's firearm licenses. He should also be ordered to surrender any unlicensed firearms in
his possession or control.

e) To pay full financial support for the Petitioner and the children, including rental of a house for them,
and educational and medical expenses.

f) Not to dissipate the conjugal business.

g) To render an accounting of all advances, benefits, bonuses and other cash he received from all the
corporations from 1 January 2006 up to 31 March 2006, which himself and as President of the
corporations and his Comptroller, must submit to the Court not later than 2 April 2006. Thereafter, an
accounting of all these funds shall be reported to the court by the Comptroller, copy furnished to the
Petitioner, every 15 days of the month, under pain of Indirect Contempt of Court.

h) To ensure compliance especially with the order granting support pendente lite, and considering the
financial resources of the Respondent and his threat that if the Petitioner sues she will not get a single
centavo, the Respondent is ordered to put up a BOND TO KEEP THE PEACE in the amount of FIVE
MILLION PESOS, in two sufficient sureties.

On April 24, 2006, upon motion19 of private respondent, the trial court issued an amended
TPO,20 effective for thirty (30) days, which included the following additional provisions:

i) The petitioners (private respondents herein) are given the continued use of the Nissan Patrol and the
Starex Van which they are using in Negros Occidental.

j) The petitioners are given the continued use and occupation of the house in Parañaque, the continued
use of the Starex van in Metro Manila, whenever they go to Manila.

k) Respondent is ordered to immediately post a bond to keep the peace, in two sufficient sureties.

l) To give monthly support to the petitioner provisionally fixed in the sum of One Hundred Fifty
Thousand Pesos (Php 150,000.00) per month plus rental expenses of Fifty Thousand Pesos (Php
50,000.00) per month until the matter of support could be finally resolved.

Two days later, or on April 26, 2006, petitioner filed an Opposition to the Urgent Ex-Parte Motion for
Renewal of the TPO21 seeking the denial of the renewal of the TPO on the grounds that it did not (1)
comply with the three-day notice rule, and (2) contain a notice of hearing. He further asked that the TPO
be modified by (1) removing one vehicle used by private respondent and returning the same to its
rightful owner, the J-Bros Trading Corporation, and (2) cancelling or reducing the amount of the bond
from ₱5,000,000.00 to a more manageable level at ₱100,000.00.

Subsequently, on May 23, 2006, petitioner moved22 for the modification of the TPO to allow him
visitation rights to his children.

On May 24, 2006, the TPO was renewed and extended yet again, but subject only to the following
modifications prayed for by private respondent:
a) That respondent (petitioner herein) return the clothes and other personal belongings of Rosalie and
her children to Judge Jesus Ramos, co-counsel for Petitioner, within 24 hours from receipt of the
Temporary Protection Order by his counsel, otherwise be declared in Indirect Contempt of Court;

b) Respondent shall make an accounting or list of furniture and equipment in the conjugal house in
Pitimini St., Capitolville Subdivision, Bacolod City within 24 hours from receipt of the Temporary
Protection Order by his counsel;

c) Ordering the Chief of the Women's Desk of the Bacolod City Police Headquarters to remove
Respondent from the conjugal dwelling within eight (8) hours from receipt of the Temporary Protection
Order by his counsel, and that he cannot return until 48 hours after the petitioners have left, so that the
petitioner Rosalie and her representatives can remove things from the conjugal home and make an
inventory of the household furniture, equipment and other things in the conjugal home, which shall be
submitted to the Court.

d) Deliver full financial support of Php200,000.00 and Php50,000.00 for rental and Php25,000.00 for
clothes of the three petitioners (sic) children within 24 hours from receipt of the Temporary Protection
Order by his counsel, otherwise be declared in indirect contempt of Court;

e) That respondent surrender his two firearms and all unlicensed firearms to the Clerk of Court within 24
hours from receipt of the Temporary Protection Order by his counsel;

f) That respondent shall pay petitioner educational expenses of the children upon presentation of proof
of payment of such expenses.23

Claiming that petitioner continued to deprive them of financial support; failed to faithfully comply with
the TPO; and committed new acts of harassment against her and their children, private respondent filed
another application24 for the issuance of a TPO ex parte. She alleged inter

alia that petitioner contrived a replevin suit against himself by J-Bros Trading, Inc., of which the latter
was purportedly no longer president, with the end in view of recovering the Nissan Patrol and Starex
Van used by private respondent and the children. A writ of replevin was served upon private respondent
by a group of six or seven policemen with long firearms that scared the two small boys, Jessie Anthone
and Joseph Eduard.25

While Joseph Eduard, then three years old, was driven to school, two men allegedly attempted to kidnap
him, which incident traumatized the boy resulting in his refusal to go back to school. On another
occasion, petitioner allegedly grabbed their daughter, Jo-Ann, by the arm and threatened her.26 The
incident was reported to the police, and Jo-Ann subsequently filed a criminal complaint against her
father for violation of R.A. 7610, also known as the "Special Protection of Children Against Child Abuse,
Exploitation and Discrimination Act."

Aside from the replevin suit, petitioner's lawyers initiated the filing by the housemaids working at the
conjugal home of a complaint for kidnapping and illegal detention against private respondent. This came
about after private respondent, armed with a TPO, went to said home to get her and her children's
belongings. Finding some of her things inside a housemaid's (Sheryl Jamola) bag in the maids' room,
private respondent filed a case for qualified theft against Jamola.27

On August 23, 2006, the RTC issued a TPO,28 effective for thirty (30) days, which reads as follows:
Respondent (petitioner herein), Jesus Chua Garcia, is hereby:

1) Prohibited from threatening to commit or committing, personally or through another, acts of violence
against the offended party;

2) Prohibited from harassing, annoying, telephoning, contacting or otherwise communicating in any

form with the offended party, either directly or indirectly;

3) Required to stay away, personally or through his friends, relatives, employees or agents, from all the
Petitioners Rosalie J. Garcia and her children, Rosalie J. Garcia's three brothers, her mother Primitiva
Jaype, cook Novelita Caranzo, driver Romeo Hontiveros, laundrywoman Mercedita Bornales, security
guard Darwin Gayona and the petitioner's other household helpers from a distance of 1,000 meters, and
shall not enter the gate of the subdivision where the Petitioners are temporarily residing, as well as from
the schools of the three children; Furthermore, that respondent shall not contact the schools of the
children directly or indirectly in any manner including, ostensibly to pay for their tuition or other fees
directly, otherwise he will have access to the children through the schools and the TPO will be rendered
nugatory;

4) Directed to surrender all his firearms including .9MM caliber firearm and a Walther PPK to the Court;

5) Directed to deliver in full financial support of Php200,000.00 a month and Php50,000.00 for rental for
the period from August 6 to September 6, 2006; and support in arrears from March 2006 to August 2006
the total amount of Php1,312,000.00;

6) Directed to deliver educational expenses for 2006-2007 the amount of Php75,000.00 and
Php25,000.00;

7) Directed to allow the continued use of a Nissan Patrol with Plate No. FEW 508 and a Starex van with
Plate No. FFD 991 and should the respondent fail to deliver said vehicles, respondent is ordered to
provide the petitioner another vehicle which is the one taken by J Bros Tading;

8) Ordered not to dissipate, encumber, alienate, sell, lease or otherwise dispose of the conjugal assets,
or those real properties in the name of Jesus Chua Garcia only and those in which the conjugal
partnership of gains of the Petitioner Rosalie J. Garcia and respondent have an interest in, especially the
conjugal home located in No. 14, Pitimini St., Capitolville Subdivision, Bacolod City, and other properties
which are conjugal assets or those in which the conjugal partnership of gains of Petitioner Rosalie J.
Garcia and the respondent have an interest in and listed in Annexes "I," "I-1," and "I-2," including
properties covered by TCT Nos. T-186325 and T-168814;

9) Ordered that the Register of Deeds of Bacolod City and E.B. Magalona shall be served a copy of this
TEMPORARY PROTECTION ORDER and are ordered not to allow the transfer, sale, encumbrance or
disposition of these above-cited properties to any person, entity or corporation without the personal
presence of petitioner Rosalie J. Garcia, who shall affix her signature in the presence of the Register of
Deeds, due to the fear of petitioner Rosalie that her signature will be forged in order to effect the
encumbrance or sale of these properties to defraud her or the conjugal partnership of gains.

In its Order29 dated September 26, 2006, the trial court extended the aforequoted TPO for another ten
(10) days, and gave petitioner a period of five (5) days within which to show cause why the TPO should
not be renewed, extended, or modified. Upon petitioner's manifestation,30 however, that he has not
received a copy of private respondent's motion to modify/renew the TPO, the trial court directed in its
Order31 dated October 6, 2006 that petitioner be furnished a copy of said motion. Nonetheless, an
Order32 dated a day earlier, October 5, had already been issued renewing the TPO dated August 23,
2006. The pertinent portion is quoted hereunder:

xxxx

x x x it appearing further that the hearing could not yet be finally terminated, the Temporary Protection
Order issued on August 23, 2006 is hereby renewed and extended for thirty (30) days and continuously
extended and renewed for thirty (30) days, after each expiration, until further orders, and subject to
such modifications as may be ordered by the court.

After having received a copy of the foregoing Order, petitioner no longer submitted the required
comment to private respondent's motion for renewal of the TPO arguing that it would only be an
"exercise in futility."33

Proceedings before the CA

During the pendency of Civil Case No. 06-797, petitioner filed before the Court of Appeals (CA) a
petition34 for prohibition (CA-G.R. CEB-SP. No. 01698), with prayer for injunction and temporary
restraining order, challenging (1) the constitutionality of R.A. 9262 for being violative of the due process
and the equal protection clauses, and (2) the validity of the modified TPO issued in the civil case for
being "an unwanted product of an invalid law."

On May 26, 2006, the appellate court issued a 60-day Temporary Restraining Order36 (TRO) against the
enforcement of the TPO, the amended TPOs and other orders pursuant thereto.

Subsequently, however, on January 24, 2007, the appellate court dismissed36 the petition for failure of
petitioner to raise the constitutional issue in his pleadings before the trial court in the civil case, which is
clothed with jurisdiction to resolve the same. Secondly, the challenge to the validity

of R.A. 9262 through a petition for prohibition seeking to annul the protection orders issued by the trial
court constituted a collateral attack on said law.

His motion for reconsideration of the foregoing Decision having been denied in the Resolution37 dated
August 14, 2007, petitioner is now before us alleging that –

The Issues

I.

THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON THE THEORY THAT THE ISSUE OF
CONSTITUTIONALITY WAS NOT RAISED AT THE EARLIEST OPPORTUNITY AND THAT, THE PETITION
CONSTITUTES A COLLATERAL ATTACK ON THE VALIDITY OF THE LAW.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN FAILING TO CONCLUDE THAT R.A. 9262 IS
DISCRIMINATORY, UNJUST, AND VIOLATIVE OF THE EQUAL PROTECTION CLAUSE.

III.
THE COURT OF APPEALS COMMITTED GRAVE MISTAKE IN NOT FINDING THAT R.A. 9262 RUNS COUNTER
TO THE DUE PROCESS CLAUSE OF THE CONSTITUTION.

IV.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LAW DOES VIOLENCE TO THE POLICY OF THE
STATE TO PROTECT THE FAMILY AS A BASIC SOCIAL INSTITUTION.

V.

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT DECLARING R.A. No. 9262 AS INVALID AND
UNCONSTITUTIONAL BECAUSE IT ALLOWS AN UNDUE DELEGATION OF JUDICIAL POWER TO THE
BARANGAY OFFICIALS.38

The Ruling of the Court

Before delving into the arguments propounded by petitioner against the constitutionality of R.A. 9262,
we shall first tackle the propriety of the dismissal by the appellate court of the petition for prohibition
(CA-G.R. CEB-SP. No. 01698) filed by petitioner.

As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if
not raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court,
it will not be considered on appeal.39 Courts will not anticipate a question of constitutional law in
advance of the necessity of deciding it.40

In defending his failure to attack the constitutionality of R.A. 9262 before the RTC of Bacolod City,
petitioner argues that the Family Court has limited authority and jurisdiction that is "inadequate to
tackle the complex issue of constitutionality."41

We disagree.

Family Courts have authority and jurisdiction to consider the constitutionality of a statute.

At the outset, it must be stressed that Family Courts are special courts, of the same level as Regional
Trial Courts. Under R.A. 8369, otherwise known as the "Family Courts Act of 1997," family courts have
exclusive original jurisdiction to hear and decide cases of domestic violence against women and
children.42 In accordance with said law, the Supreme Court designated from among the branches of the
Regional Trial Courts at least one Family Court in each of several key cities identified.43 To achieve
harmony with the first mentioned law, Section 7 of R.A. 9262 now provides that Regional Trial Courts
designated as Family Courts shall have original and exclusive jurisdiction over cases of VAWC defined
under the latter law, viz:

SEC. 7. Venue. – The Regional Trial Court designated as a Family Court shall have original and exclusive
jurisdiction over cases of violence against women and their children under this law. In the absence of
such court in the place where the offense was committed, the case shall be filed in the Regional Trial
Court where the crime or any of its elements was committed at the option of the complainant.
(Emphasis supplied)

Inspite of its designation as a family court, the RTC of Bacolod City remains possessed of authority as a
court of general original jurisdiction to pass upon all kinds of cases whether civil, criminal, special
proceedings, land registration, guardianship, naturalization, admiralty or insolvency.44 It is settled that
RTCs have jurisdiction to resolve the constitutionality of a statute,45 "this authority being embraced in
the general definition of the judicial power to determine what are the valid and binding laws by the
criterion of their conformity to the fundamental law."46The Constitution vests the power of judicial
review or the power to declare the constitutionality or validity of a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation not only in this
Court, but in all RTCs.47 We said in J.M. Tuason and Co., Inc. v. CA48 that, "plainly the Constitution
contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any
treaty or law, for it speaks of appellate review of final judgments of inferior courts in cases where such
constitutionality happens to be in issue." Section 5, Article VIII of the 1987 Constitution reads in part as
follows:

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

xxx

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.

xxxx

Thus, contrary to the posturing of petitioner, the issue of constitutionality of R.A. 9262 could have been
raised at the earliest opportunity in his Opposition to the petition for protection order before the RTC of
Bacolod City, which had jurisdiction to determine the same, subject to the review of this Court.

Section 20 of A.M. No. 04-10-11-SC, the Rule on Violence Against Women and Their Children, lays down
a new kind of procedure requiring the respondent to file an opposition to the petition and not an
answer.49 Thus:

SEC. 20. Opposition to petition. – (a) The respondent may file an opposition to the petition which he
himself shall verify. It must be accompanied by the affidavits of witnesses and shall show cause why a
temporary or permanent protection order should not be issued.

(b) Respondent shall not include in the opposition any counterclaim, cross-claim or third-party
complaint, but any cause of action which could be the subject thereof may be litigated in a separate civil
action. (Emphasis supplied)

We cannot subscribe to the theory espoused by petitioner that, since a counterclaim, cross-claim and
third-party complaint are to be excluded from the opposition, the issue of constitutionality cannot
likewise be raised therein. A counterclaim is defined as any claim for money or other relief which a
defending party may have against an opposing party.50 A cross-claim, on the other hand, is any claim by
one party against a co-party arising out of the transaction or occurrence that is the subject matter either
of the original action or of a counterclaim therein.51Finally, a third-party complaint is a claim that a
defending party may, with leave of court, file against a person not a party to the action for contribution,
indemnity, subrogation or any other relief, in respect of his opponent's claim.52As pointed out by Justice
Teresita J. Leonardo-De Castro, the unconstitutionality of a statute is not a cause of action that could be
the subject of a counterclaim, cross-claim or a third-party complaint. Therefore, it is not prohibited from
being raised in the opposition in view of the familiar maxim expressio unius est exclusio alterius.

Moreover, it cannot be denied that this issue affects the resolution of the case a quo because the right
of private respondent to a protection order is founded solely on the very statute the validity of which is
being attacked53 by petitioner who has sustained, or will sustain, direct injury as a result of its
enforcement. The alleged unconstitutionality of R.A. 9262 is, for all intents and purposes, a valid cause
for the non-issuance of a protection order.

That the proceedings in Civil Case No. 06-797 are summary in nature should not have deterred
petitioner from raising the same in his Opposition. The question relative to the constitutionality of a
statute is one of law which does not need to be supported by evidence.54 Be that as it may, Section 25 of
A.M. No. 04-10-11-SC nonetheless allows the conduct of a hearing to determine legal issues, among
others, viz:

SEC. 25. Order for further hearing. - In case the court determines the need for further hearing, it may
issue an order containing the following:

(a) Facts undisputed and admitted;

(b) Factual and legal issues to be resolved;

(c) Evidence, including objects and documents that have been marked and will be presented;

(d) Names of witnesses who will be ordered to present their direct testimonies in the form of affidavits;
and

(e) Schedule of the presentation of evidence by both parties which shall be done in one day, to the
extent possible, within the 30-day period of the effectivity of the temporary protection order issued.
(Emphasis supplied)

To obviate potential dangers that may arise concomitant to the conduct of a hearing when necessary,
Section 26 (b) of A.M. No. 04-10-11-SC provides that if a temporary protection order issued is due to
expire, the trial court may extend or renew the said order for a period of thirty (30) days each time until
final judgment is rendered. It may likewise modify the extended or renewed temporary protection order
as may be necessary to meet the needs of the parties. With the private respondent given ample
protection, petitioner could proceed to litigate the constitutional issues, without necessarily running
afoul of the very purpose for the adoption of the rules on summary procedure.

In view of all the foregoing, the appellate court correctly dismissed the petition for prohibition with
prayer for injunction and temporary restraining order (CA-G.R. CEB - SP. No. 01698). Petitioner may have
proceeded upon an honest belief that if he finds succor in a superior court, he could be granted an
injunctive relief. However, Section 22(j) of A.M. No. 04-10-11-SC expressly disallows the filing of a
petition for certiorari, mandamus or prohibition against any interlocutory order issued by the trial court.
Hence, the 60-day TRO issued by the appellate court in this case against the enforcement of the TPO,
the amended TPOs and other orders pursuant thereto was improper, and it effectively hindered the
case from taking its normal course in an expeditious and summary manner.
As the rules stand, a review of the case by appeal or certiorari before judgment is prohibited. Moreover,
if the appeal of a judgment granting permanent protection shall not stay its enforcement,55 with more
reason that a TPO, which is valid only for thirty (30) days at a time,56 should not be enjoined.

The mere fact that a statute is alleged to be unconstitutional or invalid, does not of itself entitle a
litigant to have the same enjoined.57 In Younger v. Harris, Jr.,58 the Supreme Court of the United States
declared, thus:

Federal injunctions against state criminal statutes, either in their entirety or with respect to their
separate and distinct prohibitions, are not to be granted as a matter of course, even if such statutes are
unconstitutional. No citizen or member of the community is immune from prosecution, in good faith, for
his alleged criminal acts. The imminence of such a prosecution even though alleged to be unauthorized
and, hence, unlawful is not alone ground for relief in equity which exerts its extraordinary powers only
to prevent irreparable injury to the plaintiff who seeks its aid. (Citations omitted)

The sole objective of injunctions is to preserve the status quo until the trial court hears fully the merits
of the case. It bears stressing, however, that protection orders are granted ex parte so as to protect
women and their children from acts of violence. To issue an injunction against such orders will defeat
the very purpose of the law against VAWC.

Notwithstanding all these procedural flaws, we shall not shirk from our obligation to determine novel
issues, or issues of first impression, with far-reaching implications. We have, time and again, discharged
our solemn duty as final arbiter of constitutional issues, and with more reason now, in view of private
respondent's plea in her Comment59 to the instant Petition that we should put the challenge to the
constitutionality of R.A. 9262 to rest. And so we shall.

Intent of Congress in enacting R.A. 9262.

Petitioner claims that since R.A. 9262 is intended to prevent and criminalize spousal and child abuse,
which could very well be committed by either the husband or the wife, gender alone is not enough basis
to deprive the husband/father of the remedies under the law.60

A perusal of the deliberations of Congress on Senate Bill No. 2723,61 which became R.A. 9262, reveals
that while the sponsor, Senator Luisa Pimentel-Ejercito (better known as Senator Loi Estrada), had
originally proposed what she called a "synthesized measure"62 – an amalgamation of two measures,
namely, the "Anti-Domestic Violence Act" and the "Anti-Abuse of Women in Intimate Relationships
Act"63 – providing protection to "all family members, leaving no one in isolation" but at the same time
giving special attention to women as the "usual victims" of violence and abuse,64 nonetheless, it was
eventually agreed that men be denied protection under the same measure. We quote pertinent
portions of the deliberations:

Wednesday, December 10, 2003

Senator Pangilinan. I just wanted to place this on record, Mr. President. Some women's groups have
expressed concerns and relayed these concerns to me that if we are to include domestic violence apart
from against women as well as other members of the household, including children or the husband,
they fear that this would weaken the efforts to address domestic violence of which the main victims or
the bulk of the victims really are the wives, the spouses or the female partners in a relationship. We
would like to place that on record. How does the good Senator respond to this kind of observation?

Senator Estrada. Yes, Mr. President, there is this group of women who call themselves "WIIR" Women in
Intimate Relationship. They do not want to include men in this domestic violence. But plenty of men are
also being abused by women. I am playing safe so I placed here members of the family, prescribing
penalties therefor and providing protective measures for victims. This includes the men, children, live-in,
common-law wives, and those related with the family.65

xxx

Wednesday, January 14, 2004

xxxx

The President Pro Tempore. x x x

Also, may the Chair remind the group that there was the discussion whether to limit this to women and
not to families which was the issue of the AWIR group. The understanding that I have is that we would
be having a broader scope rather than just women, if I remember correctly, Madam sponsor.

Senator Estrada. Yes, Mr. President.

As a matter of fact, that was brought up by Senator Pangilinan during the interpellation period.

I think Senator Sotto has something to say to that.

Senator Legarda. Mr. President, the reason I am in support of the measure. Do not get me wrong.
However, I believe that there is a need to protect women's rights especially in the domestic
environment.

As I said earlier, there are nameless, countless, voiceless women who have not had the opportunity to
file a case against their spouses, their live-in partners after years, if not decade, of battery and abuse. If
we broaden the scope to include even the men, assuming they can at all be abused by the women or
their spouses, then it would not equalize the already difficult situation for women, Mr. President.

I think that the sponsor, based on our earlier conversations, concurs with this position. I am sure that
the men in this Chamber who love their women in their lives so dearly will agree with this
representation. Whether we like it or not, it is an unequal world. Whether we like it or not, no matter
how empowered the women are, we are not given equal opportunities especially in the domestic
environment where the macho Filipino man would always feel that he is stronger, more superior to the
Filipino woman.

xxxx

The President Pro Tempore. What does the sponsor say?

Senator Estrada. Mr. President, before accepting this, the committee came up with this bill because the
family members have been included in this proposed measure since the other members of the family
other than women are also possible victims of violence. While women are most likely the intended
victims, one reason incidentally why the measure focuses on women, the fact remains that in some
relatively few cases, men also stand to be victimized and that children are almost always the helpless
victims of violence. I am worried that there may not be enough protection extended to other family
members particularly children who are excluded. Although Republic Act No. 7610, for instance, more or
less, addresses the special needs of abused children. The same law is inadequate. Protection orders for
one are not available in said law.

I am aware that some groups are apprehensive about granting the same protection to men, fearing that
they may use this law to justify their abusive behavior against women. However, we should also
recognize that there are established procedures and standards in our courts which give credence to
evidentiary support and cannot just arbitrarily and whimsically entertain baseless complaints.

Mr. President, this measure is intended to harmonize family relations and to protect the family as the
basic social institution. Though I recognize the unequal power relations between men and women in our
society, I believe we have an obligation to uphold inherent rights and dignity of both husband and wife
and their immediate family members, particularly children.

While I prefer to focus mainly on women, I was compelled to include other family members as a critical
input arrived at after a series of consultations/meetings with various NGOs, experts, sports groups and
other affected sectors, Mr. President.

Senator Sotto. Mr. President.

The President Pro Tempore. Yes, with the permission of the other senators.

Senator Sotto. Yes, with the permission of the two ladies on the Floor.

The President Pro Tempore. Yes, Sen. Vicente C. Sotto III is recognized.

Senator Sotto. I presume that the effect of the proposed amendment of Senator Legarda would be
removing the "men and children" in this particular bill and focus specifically on women alone. That will
be the net effect of that proposed amendment. Hearing the rationale mentioned by the distinguished
sponsor, Sen. Luisa "Loi" Ejercito Estrada, I am not sure now whether she is inclined to accept the
proposed amendment of Senator Legarda.

I am willing to wait whether she is accepting this or not because if she is going to accept this, I will
propose an amendment to the amendment rather than object to the amendment, Mr. President.

xxxx

Senator Estrada. The amendment is accepted, Mr. President.

The President Pro Tempore. Is there any objection?

xxxx

Senator Sotto. x x x May I propose an amendment to the amendment.

The President Pro Tempore. Before we act on the amendment?

Senator Sotto. Yes, Mr. President.

The President Pro Tempore. Yes, please proceed.

Senator Sotto. Mr. President, I am inclined to believe the rationale used by the distinguished proponent
of the amendment. As a matter of fact, I tend to agree. Kung may maaabuso, mas malamang iyong
babae kaysa sa lalake. At saka iyong mga lalake, puwede na talagang magulpi iyan. Okey lang iyan. But I
cannot agree that we remove the children from this particular measure.

So, if I may propose an amendment –

The President Pro Tempore. To the amendment.

Senator Sotto. – more than the women, the children are very much abused. As a matter of fact, it is not
limited to minors. The abuse is not limited to seven, six, 5-year-old children. I have seen 14, 15-year-old
children being abused by their fathers, even by their mothers. And it breaks my heart to find out about
these things.

Because of the inadequate existing law on abuse of children, this particular measure will update that. It
will enhance and hopefully prevent the abuse of children and not only women.

SOTTO-LEGARDA AMENDMENTS

Therefore, may I propose an amendment that, yes, we remove the aspect of the men in the bill but not
the children.

Senator Legarda. I agree, Mr. President, with the Minority Leader.

The President Pro Tempore. Effectively then, it will be women AND CHILDREN.

Senator Sotto. Yes, Mr. President.

Senator Estrada. It is accepted, Mr. President.

The President Pro Tempore. Is there any objection? [Silence] There being none, the amendment, as
amended, is approved.66

It is settled that courts are not concerned with the wisdom, justice, policy, or expediency of a
statute.67 Hence, we dare not venture into the real motivations and wisdom of the members of Congress
in limiting the protection against violence and abuse under R.A. 9262 to women and children only. No
proper challenge on said grounds may be entertained in this proceeding. Congress has made its choice
and it is not our prerogative to supplant this judgment. The choice may be perceived as erroneous but
even then, the remedy against it is to seek its amendment or repeal by the legislative. By the principle of
separation of powers, it is the legislative that determines the necessity, adequacy, wisdom and
expediency of any law.68 We only step in when there is a violation of the Constitution. However, none
was sufficiently shown in this case.

R.A. 9262 does not violate the guaranty of equal protection of the laws.

Equal protection simply requires that all persons or things similarly situated should be treated alike,
both as to rights conferred and responsibilities imposed. The oft-repeated disquisition in the early case
of Victoriano v. Elizalde Rope Workers' Union69 is instructive:

The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws
upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but
on persons according to the circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in fact be treated in law as
though they were the same. The equal protection clause does not forbid discrimination as to things that
are different. It does not prohibit legislation which is limited either in the object to which it is directed or
by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law, as
in the other departments of knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not invalid because of simple
inequality. The very idea of classification is that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a
valid classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences; that it must be germane to the purpose of the
law; that it must not be limited to existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied if the classification or distinction is
based on a reasonable foundation or rational basis and is not palpably arbitrary. (Emphasis supplied)

Measured against the foregoing jurisprudential yardstick, we find that R.A. 9262 is based on a valid
classification as shall hereinafter be discussed and, as such, did not violate the equal protection clause
by favoring women over men as victims of violence and abuse to whom the State extends its protection.

I. R.A. 9262 rests on substantial distinctions.

The unequal power relationship between women and men; the fact that women are more likely than
men to be victims of violence; and the widespread gender bias and prejudice against women all make
for real differences justifying the classification under the law. As Justice McIntyre succinctly states, "the
accommodation of differences ... is the essence of true equality."70

A. Unequal power relationship between men and women

According to the Philippine Commission on Women (the National Machinery for Gender Equality and
Women's Empowerment), violence against women (VAW) is deemed to be closely linked with the
unequal power relationship between women and men otherwise known as "gender-based violence".
Societal norms and traditions dictate people to think men are the leaders, pursuers, providers, and take
on dominant roles in society while women are nurturers, men's companions and supporters, and take
on subordinate roles in society. This perception leads to men gaining more power over women. With
power comes the need to control to retain that power. And VAW is a form of men's expression of
controlling women to retain power.71

The United Nations, which has long recognized VAW as a human rights issue, passed its Resolution
48/104 on the Declaration on Elimination of Violence Against Women on December 20, 1993 stating
that "violence against women is a manifestation of historically unequal power relations between men
and women, which have led to domination over and discrimination against women by men and to the
prevention of the full advancement of women, and that violence against women is one of the crucial
social mechanisms by which women are forced into subordinate positions, compared with men."72
Then Chief Justice Reynato S. Puno traced the historical and social context of gender-based violence and
developments in advocacies to eradicate VAW, in his remarks delivered during the Joint Launching of
R.A. 9262 and its Implementing Rules last October 27, 2004, the pertinent portions of which are quoted
hereunder:

History reveals that most societies sanctioned the use of violence against women. The patriarch of a
family was accorded the right to use force on members of the family under his control. I quote the early
studies:

Traditions subordinating women have a long history rooted in patriarchy – the institutional rule of men.
Women were seen in virtually all societies to be naturally inferior both physically and intellectually. In
ancient Western societies, women whether slave, concubine or wife, were under the authority of men.
In law, they were treated as property.

The Roman concept of patria potestas allowed the husband to beat, or even kill, his wife if she
endangered his property right over her. Judaism, Christianity and other religions oriented towards the
patriarchal family strengthened the male dominated structure of society.

English feudal law reinforced the tradition of male control over women. Even the eminent Blackstone
has been quoted in his commentaries as saying husband and wife were one and that one was the
husband. However, in the late 1500s and through the entire 1600s, English common law began to limit
the right of husbands to chastise their wives. Thus, common law developed the rule of thumb, which
allowed husbands to beat their wives with a rod or stick no thicker than their thumb.

In the later part of the 19th century, legal recognition of these rights to chastise wives or inflict
corporeal punishment ceased. Even then, the preservation of the family was given more importance
than preventing violence to women.

The metamorphosis of the law on violence in the United States followed that of the English common
law. In 1871, the Supreme Court of Alabama became the first appellate court to strike down the
common law right of a husband to beat his wife:

The privilege, ancient though it may be, to beat one's wife with a stick, to pull her hair, choke her, spit in
her face or kick her about the floor, or to inflict upon her like indignities, is not now acknowledged by
our law... In person, the wife is entitled to the same protection of the law that the husband can invoke
for himself.

As time marched on, the women's advocacy movement became more organized. The temperance
leagues initiated it. These leagues had a simple focus. They considered the evils of alcoholism as the root
cause of wife abuse. Hence, they demonstrated and picketed saloons, bars and their husbands' other
watering holes. Soon, however, their crusade was joined by suffragette movements, expanding the
liberation movement's agenda. They fought for women's right to vote, to own property, and more. Since
then, the feminist movement was on the roll.

The feminist movement exposed the private invisibility of the domestic violence to the public gaze. They
succeeded in transforming the issue into an important public concern. No less than the United States
Supreme Court, in 1992 case Planned Parenthood v. Casey, noted:
In an average 12-month period in this country, approximately two million women are the victims of
severe assaults by their male partners. In a 1985 survey, women reported that nearly one of every eight
husbands had assaulted their wives during the past year. The [American Medical Association] views
these figures as "marked underestimates," because the nature of these incidents discourages women
from reporting them, and because surveys typically exclude the very poor, those who do not speak
English well, and women who are homeless or in institutions or hospitals when the survey is conducted.
According to the AMA, "researchers on family violence agree that the true incidence of partner violence
is probably double the above estimates; or four million severely assaulted women per year."

Studies on prevalence suggest that from one-fifth to one-third of all women will be physically assaulted
by a partner or ex-partner during their lifetime... Thus on an average day in the United States, nearly
11,000 women are severely assaulted by their male partners. Many of these incidents involve sexual
assault... In families where wife beating takes place, moreover, child abuse is often present as well.

Other studies fill in the rest of this troubling picture. Physical violence is only the most visible form of
abuse. Psychological abuse, particularly forced social and economic isolation of women, is also common.

Many victims of domestic violence remain with their abusers, perhaps because they perceive no
superior alternative...Many abused women who find temporary refuge in shelters return to their
husbands, in large part because they have no other source of income... Returning to one's abuser can be
dangerous. Recent Federal Bureau of Investigation statistics disclose that 8.8 percent of all homicide
victims in the United States are killed by their spouses...Thirty percent of female homicide victims are
killed by their male partners.

Finally in 1994, the United States Congress enacted the Violence Against Women Act.

In the International front, the women's struggle for equality was no less successful. The United States
Charter and the Universal Declaration of Human Rights affirmed the equality of all human beings. In
1979, the UN General Assembly adopted the landmark Convention on the Elimination of all Forms of
Discrimination Against Women (CEDAW). In 1993, the UN General Assembly also adopted the
Declaration on the Elimination of Violence Against Women. World conferences on the role and rights of
women have been regularly held in Mexico City, Copenhagen, Nairobi and Beijing. The UN itself
established a Commission on the Status of Women.

The Philippines has been in cadence with the half – and full – steps of all these women's movements. No
less than Section 14, Article II of our 1987 Constitution mandates the State to recognize the role of
women in nation building and to ensure the fundamental equality before the law of women and men.
Our Senate has ratified the CEDAW as well as the Convention on the Rights of the Child and its two
protocols. To cap it all, Congress, on March 8, 2004, enacted Rep. Act No. 9262, entitled "An Act
Defining Violence Against Women and Their Children, Providing for Protective Measures for Victims,
Prescribing Penalties therefor and for other Purposes." (Citations omitted)

B. Women are the "usual" and "most likely"

victims of violence.

At the time of the presentation of Senate Bill No. 2723, official statistics on violence against women and
children show that –
x x x physical injuries had the highest number of cases at 5,058 in 2002 representing 55.63% of total
cases reported (9,903). And for the first semester of 2003, there were 2,381 reported cases out of 4,354
cases which represent 54.31%. xxx (T)he total number of women in especially difficult circumstances
served by the Department of Social Welfare and Development (DSWD) for the year 2002, there are
1,417 physically abused/maltreated cases out of the total of 5,608 cases. xxx (T)here are 1,091 DSWD
cases out of a total number of 3,471 cases for the first semester of 2003. Female violence comprised
more than 90% of all forms of abuse and violence and more than 90% of these reported cases were
committed by the women's intimate partners such as their husbands and live-in partners.73

Recently, the Philippine Commission on Women presented comparative statistics on violence against
women across an eight-year period from 2004 to August of 2011 with violations under R.A. 9262 ranking
first among the different VAW categories since its implementation in 2004,74 thus:

Table 1. Annual Comparative Statistics on Violence Against Women, 2004 - 2011*

Reported
2004 2005 2006 2007 2008 2009 2010 2011
Cases

Rape 997 927 659 837 811 770 1,042 832

Incestuous
38 46 26 22 28 27 19 23
Rape

Attempted
194 148 185 147 204 167 268 201
Rape

Acts of
Lasciviousne 580 536 382 358 445 485 745 625
ss

Physical 3,55 2,33 1,89 1,50 1,30 1,49

2,018 1,588
Injuries 3 5 2 5 7 8

Sexual
53 37 38 46 18 54 83 63
Harassment
 1,26 2,38 3,59 5,28
RA 9262 218 924 9,974 9,021
9 7 9 5

Threats 319 223 199 182 220 208 374 213

Seduction 62 19 29 30 19 19 25 15

Concubinage 121 102 93 109 109 99 158 128

RA 9208 17 11 16 24 34 152 190 62

Abduction
/Kidnapping 16 34 23 28 18 25 22
29

Unjust
90 50 59 59 83 703 183 155
Vexation

6,27 5,37 4,88 5,72 6,90 9,48 15,10 12,94

Total
1 4 1 9 5 5 4 8

*2011 report covers only from January to August

Source: Philippine National Police – Women and Children Protection Center (WCPC)

On the other hand, no reliable estimates may be obtained on domestic abuse and violence against men
in the Philippines because incidents thereof are relatively low and, perhaps, because many men will not
even attempt to report the situation. In the United Kingdom, 32% of women who had ever experienced
domestic violence did so four or five (or more) times, compared with 11% of the smaller number of men
who had ever experienced domestic violence; and women constituted 89% of all those who had
experienced 4 or more incidents of domestic violence.75Statistics in Canada show that spousal violence
by a woman against a man is less likely to cause injury than the other way around (18 percent versus 44
percent). Men, who experience violence from their spouses are much less likely to live in fear of violence
at the hands of their spouses, and much less likely to experience sexual assault. In fact, many cases of
physical violence by a woman against a spouse are in self-defense or the result of many years of physical
or emotional abuse.76

While there are, indeed, relatively few cases of violence and abuse perpetrated against men in the
Philippines, the same cannot render R.A. 9262 invalid.

In a 1960 case involving the violation of a city ordinance requiring drivers of animal-drawn vehicles to
pick up, gather and deposit in receptacles the manure emitted or discharged by their vehicle-drawing
animals in any public highways, streets, plazas, parks or alleys, said ordinance was challenged as
violative of the guaranty of equal protection of laws as its application is limited to owners and drivers of
vehicle-drawing animals and not to those animals, although not utilized, but similarly pass through the
same streets.

The ordinance was upheld as a valid classification for the reason that, while there may be non-vehicle-
drawing animals that also traverse the city roads, "but their number must be negligible and their
appearance therein merely occasional, compared to the rig-drawing ones, as not to constitute a menace
to the health of the community."77 The mere fact that the legislative classification may result in actual
inequality is not violative of the right to equal protection, for every classification of persons or things for
regulation by law produces inequality in some degree, but the law is not thereby rendered invalid.78

C. Gender bias and prejudices

From the initial report to the police through prosecution, trial, and sentencing, crimes against women
are often treated differently and less seriously than other crimes. This was argued by then United States
Senator Joseph R. Biden, Jr., now Vice President, chief sponsor of the Violence Against Women Act
(VAWA), in defending the civil rights remedy as a valid exercise of the U.S. Congress' authority under the
Commerce and Equal Protection Clauses. He stressed that the widespread gender bias in the U.S. has
institutionalized historic prejudices against victims of rape or domestic violence, subjecting them to
"double victimization" – first at the hands of the offender and then of the legal system.79

Our own Senator Loi Estrada lamented in her Sponsorship Speech for Senate Bill No. 2723 that
"(w)henever violence occurs in the family, the police treat it as a private matter and advise the parties to
settle the conflict themselves. Once the complainant brings the case to the prosecutor, the latter is
hesitant to file the complaint for fear that it might later be withdrawn. This lack of response or
reluctance to be involved by the police and prosecution reinforces the escalating, recurring and often
serious nature of domestic violence."80

Sadly, our own courts, as well, have exhibited prejudices and biases against our women.

In a recent case resolved on March 9, 2011, we fined RTC Judge Venancio J. Amila for Conduct
Unbecoming of a Judge. He used derogatory and irreverent language in reference to the complainant in
a petition for TPO and PPO under R.A. 9262, calling her as "only a live-in partner" and presenting her as
an "opportunist" and a "mistress" in an "illegitimate relationship." Judge Amila even called her a
"prostitute," and accused her of being motivated by "insatiable greed" and of absconding with the
contested property.81 Such remarks betrayed Judge Amila's prejudices and lack of gender sensitivity.

The enactment of R.A. 9262 aims to address the discrimination brought about by biases and prejudices
against women. As emphasized by the CEDAW Committee on the Elimination of Discrimination against
Women, addressing or correcting discrimination through specific measures focused on women does not
discriminate against men.82Petitioner's contention,83 therefore, that R.A. 9262 is discriminatory and that
it is an "anti-male," "husband-bashing," and "hate-men" law deserves scant consideration. As a State
Party to the CEDAW, the Philippines bound itself to take all appropriate measures "to modify the social
and cultural patterns of conduct of men and women, with a view to achieving the elimination of
prejudices and customary and all other practices which are based on the idea of the inferiority or the
superiority of either of the sexes or on stereotyped roles for men and women."84 Justice Puno correctly
pointed out that "(t)he paradigm shift changing the character of domestic violence from a private affair
to a public offense will require the development of a distinct mindset on the part of the police, the
prosecution and the judges."85

II. The classification is germane to the purpose of the law.

The distinction between men and women is germane to the purpose of R.A. 9262, which is to address
violence committed against women and children, spelled out in its Declaration of Policy, as follows:

SEC. 2. Declaration of Policy. – It is hereby declared that the State values the dignity of women and
children and guarantees full respect for human rights. The State also recognizes the need to protect the
family and its members particularly women and children, from violence and threats to their personal
safety and security.

Towards this end, the State shall exert efforts to address violence committed against women and
children in keeping with the fundamental freedoms guaranteed under the Constitution and the
provisions of the Universal Declaration of Human Rights, the Convention on the Elimination of All Forms
of Discrimination Against Women, Convention on the Rights of the Child and other international human
rights instruments of which the Philippines is a party.

In 1979, the U.N. General Assembly adopted the CEDAW, which the Philippines ratified on August 5,
1981. Subsequently, the Optional Protocol to the CEDAW was also ratified by the Philippines on October
6, 2003.86 This Convention mandates that State parties shall accord to women equality with men before
the law87 and shall take all appropriate measures to eliminate discrimination against women in all
matters relating to marriage and family relations on the basis of equality of men and women.88 The
Philippines likewise ratified the Convention on the Rights of the Child and its two protocols.89 It is, thus,
bound by said Conventions and their respective protocols.

III. The classification is not limited to existing

conditions only, and apply equally to all members

Moreover, the application of R.A. 9262 is not limited to the existing conditions when it was
promulgated, but to future conditions as well, for as long as the safety and security of women and their
children are threatened by violence and abuse.

R.A. 9262 applies equally to all women and children who suffer violence and abuse. Section 3 thereof
defines VAWC as:

x x x any act or a series of acts committed by any person against a woman who is his wife, former wife,
or against a woman with whom the person has or had a sexual or dating relationship, or with whom he
has a common child, or against her child whether legitimate or illegitimate, within or without the family
abode, which result in or is likely to result in physical, sexual, psychological harm or suffering, or
economic abuse including threats of such acts, battery, assault, coercion, harassment or arbitrary
deprivation of liberty. It includes, but is not limited to, the following acts:

A. "Physical Violence" refers to acts that include bodily or physical harm;

B. "Sexual violence" refers to an act which is sexual in nature, committed against a woman or her child.
It includes, but is not limited to:

a) rape, sexual harassment, acts of lasciviousness, treating a woman or her child as a sex object, making
demeaning and sexually suggestive remarks, physically attacking the sexual parts of the victim's body,
forcing her/him to watch obscene publications and indecent shows or forcing the woman or her child to
do indecent acts and/or make films thereof, forcing the wife and mistress/lover to live in the conjugal
home or sleep together in the same room with the abuser;

b) acts causing or attempting to cause the victim to engage in any sexual activity by force, threat of
force, physical or other harm or threat of physical or other harm or coercion;

c) Prostituting the woman or child.

C. "Psychological violence" refers to acts or omissions causing or likely to cause mental or emotional
suffering of the victim such as but not limited to intimidation, harassment, stalking, damage to property,
public ridicule or humiliation, repeated verbal abuse and marital infidelity. It includes causing or
allowing the victim to witness the physical, sexual or psychological abuse of a member of the family to
which the victim belongs, or to witness pornography in any form or to witness abusive injury to pets or
to unlawful or unwanted deprivation of the right to custody and/or visitation of common children.

D. "Economic abuse" refers to acts that make or attempt to make a woman financially dependent which
includes, but is not limited to the following:

1. withdrawal of financial support or preventing the victim from engaging in any legitimate profession,
occupation, business or activity, except in cases wherein the other spouse/partner objects on valid,
serious and moral grounds as defined in Article 73 of the Family Code;

2. deprivation or threat of deprivation of financial resources and the right to the use and enjoyment of
the conjugal, community or property owned in common;

3. destroying household property;

4. controlling the victims' own money or properties or solely controlling the conjugal money or
properties.

It should be stressed that the acts enumerated in the aforequoted provision are attributable to research
that has exposed the dimensions and dynamics of battery. The acts described here are also found in the
U.N. Declaration on the Elimination of Violence Against Women.90 Hence, the argument advanced by
petitioner that the definition of what constitutes abuse removes the difference between violent action
and simple marital tiffs is tenuous.

There is nothing in the definition of VAWC that is vague and ambiguous that will confuse petitioner in
his defense. The acts enumerated above are easily understood and provide adequate contrast between
the innocent and the prohibited acts. They are worded with sufficient definiteness that persons of
ordinary intelligence can understand what conduct is prohibited, and need not guess at its meaning nor
differ in its application.91 Yet, petitioner insists92that phrases like "depriving or threatening to deprive
the woman or her child of a legal right," "solely controlling the conjugal or common money or
properties," "marital infidelity," and "causing mental or emotional anguish" are so vague that they make
every quarrel a case of spousal abuse. However, we have stressed that the "vagueness" doctrine merely
requires a reasonable degree of certainty for the statute to be upheld – not absolute precision or
mathematical exactitude, as petitioner seems to suggest. Flexibility, rather than meticulous specificity, is
permissible as long as the metes and bounds of the statute are clearly delineated. An act will not be held
invalid merely because it might have been more explicit in its wordings or detailed in its provisions.93

There is likewise no merit to the contention that R.A. 9262 singles out the husband or father as the
culprit. As defined above, VAWC may likewise be committed "against a woman with whom the person
has or had a sexual or dating relationship." Clearly, the use of the gender-neutral word "person" who
has or had a sexual or dating relationship with the woman encompasses even lesbian relationships.
Moreover, while the law provides that the offender be related or connected to the victim by marriage,
former marriage, or a sexual or dating relationship, it does not preclude the application of the principle
of conspiracy under the Revised Penal Code (RPC). Thus, in the case of Go-Tan v. Spouses Tan,94 the
parents-in-law of Sharica Mari L. Go-Tan, the victim, were held to be proper respondents in the case
filed by the latter upon the allegation that they and their son (Go-Tan's husband) had community of
design and purpose in tormenting her by giving her insufficient financial support; harassing and
pressuring her to be ejected from the family home; and in repeatedly abusing her verbally, emotionally,
mentally and physically.

R.A. 9262 is not violative of the

due process clause of the Constitution.

Petitioner bewails the disregard of R.A. 9262, specifically in the issuance of POs, of all protections
afforded by the due process clause of the Constitution. Says he: "On the basis of unsubstantiated
allegations, and practically no opportunity to respond, the husband is stripped of family, property, guns,
money, children, job, future employment and reputation, all in a matter of seconds, without an inkling
of what happened."95

A protection order is an order issued to prevent further acts of violence against women and their
children, their family or household members, and to grant other necessary reliefs. Its purpose is to
safeguard the offended parties from further harm, minimize any disruption in their daily life and
facilitate the opportunity and ability to regain control of their life.96

"The scope of reliefs in protection orders is broadened to ensure that the victim or offended party is
afforded all the remedies necessary to curtail access by a perpetrator to the victim. This serves to
safeguard the victim from greater risk of violence; to accord the victim and any designated family or
household member safety in the family residence, and to prevent the perpetrator from committing acts
that jeopardize the employment and support of the victim. It also enables the court to award temporary
custody of minor children to protect the children from violence, to prevent their abduction by the
perpetrator and to ensure their financial support."97
The rules require that petitions for protection order be in writing, signed and verified by the
petitioner98 thereby undertaking full responsibility, criminal or civil, for every allegation therein. Since
"time is of the essence in cases of VAWC if further violence is to be prevented,"99 the court is authorized
to issue ex parte a TPO after raffle but before notice and hearing when the life, limb or property of the
victim is in jeopardy and there is reasonable ground to believe that the order is necessary to protect the
victim from the immediate and imminent danger of VAWC or to prevent such violence, which is about to
recur.100

There need not be any fear that the judge may have no rational basis to issue an ex parte order. The
victim is required not only to verify the allegations in the petition, but also to attach her witnesses'
affidavits to the petition.101

The grant of a TPO ex parte cannot, therefore, be challenged as violative of the right to due process. Just
like a writ of preliminary attachment which is issued without notice and hearing because the time in
which the hearing will take could be enough to enable the defendant to abscond or dispose of his
property,102 in the same way, the victim of VAWC may already have suffered harrowing experiences in
the hands of her tormentor, and possibly even death, if notice and hearing were required before such
acts could be prevented. It is a constitutional commonplace that the ordinary requirements of
procedural due process must yield to the necessities of protecting vital public interests,103among which
is protection of women and children from violence and threats to their personal safety and security.

It should be pointed out that when the TPO is issued ex parte, the court shall likewise order that notice
be immediately given to the respondent directing him to file an opposition within five (5) days from
service. Moreover, the court shall order that notice, copies of the petition and TPO be served
immediately on the respondent by the court sheriffs. The TPOs are initially effective for thirty (30) days
from service on the respondent.104

Where no TPO is issued ex parte, the court will nonetheless order the immediate issuance and service of
the notice upon the respondent requiring him to file an opposition to the petition within five (5) days
from service. The date of the preliminary conference and hearing on the merits shall likewise be
indicated on the notice.105

The opposition to the petition which the respondent himself shall verify, must be accompanied by the
affidavits of witnesses and shall show cause why a temporary or permanent protection order should not
be issued.106

It is clear from the foregoing rules that the respondent of a petition for protection order should be
apprised of the charges imputed to him and afforded an opportunity to present his side. Thus, the fear
of petitioner of being "stripped of family, property, guns, money, children, job, future employment and
reputation, all in a matter of seconds, without an inkling of what happened" is a mere product of an
overactive imagination. The essence of due process is to be found in the reasonable opportunity to be
heard and submit any evidence one may have in support of one's defense. "To be heard" does not only
mean verbal arguments in court; one may be heard also through pleadings. Where opportunity to be
heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due
process.107
It should be recalled that petitioner filed on April 26, 2006 an Opposition to the Urgent Ex-Parte Motion
for Renewal of the TPO that was granted only two days earlier on April 24, 2006. Likewise, on May 23,
2006, petitioner filed a motion for the modification of the TPO to allow him visitation rights to his
children. Still, the trial court in its Order dated September 26, 2006, gave him five days (5) within which
to show cause why the TPO should not be renewed or extended. Yet, he chose not to file the required
comment arguing that it would just be an "exercise in futility," conveniently forgetting that the renewal
of the questioned TPO was only for a limited period (30 days) each time, and that he could prevent the
continued renewal of said order if he can show sufficient cause therefor. Having failed to do so,
petitioner may not now be heard to complain that he was denied due process of law.

Petitioner next laments that the removal and exclusion of the respondent in the VAWC case from the
residence of the victim, regardless of ownership of the residence, is virtually a "blank check" issued to
the wife to claim any property as her conjugal home.108

The wording of the pertinent rule, however, does not by any stretch of the imagination suggest that this
is so. It states:

SEC. 11. Reliefs available to the offended party. -- The protection order shall include any, some or all of
the following reliefs:

xxxx

(c) Removing and excluding the respondent from the residence of the offended party, regardless of
ownership of the residence, either temporarily for the purpose of protecting the offended party, or
permanently where no property rights are violated. If the respondent must remove personal effects
from the residence, the court shall direct a law enforcement agent to accompany the respondent to the
residence, remain there until the respondent has gathered his things and escort him from the residence;

xxxx

Indubitably, petitioner may be removed and excluded from private respondent's residence, regardless
of ownership, only temporarily for the purpose of protecting the latter. Such removal and exclusion may
be permanent only where no property rights are violated. How then can the private respondent just
claim any property and appropriate it for herself, as petitioner seems to suggest?

The non-referral of a VAWC case

to a mediator is justified.

Petitioner argues that "by criminalizing run-of-the-mill arguments, instead of encouraging mediation and
counseling, the law has done violence to the avowed policy of the State to "protect and strengthen the
family as a basic autonomous social institution."109

Under Section 23(c) of A.M. No. 04-10-11-SC, the court shall not refer the case or any issue thereof to a
mediator. The reason behind this provision is well-explained by the Commentary on Section 311 of the
Model Code on Domestic and Family Violence as follows:110

This section prohibits a court from ordering or referring parties to mediation in a proceeding for an
order for protection. Mediation is a process by which parties in equivalent bargaining positions
voluntarily reach consensual agreement about the issue at hand. Violence, however, is not a subject for
compromise. A process which involves parties mediating the issue of violence implies that the victim is
somehow at fault. In addition, mediation of issues in a proceeding for an order of protection is
problematic because the petitioner is frequently unable to participate equally with the person against
whom the protection order has been sought. (Emphasis supplied)

There is no undue delegation of

judicial power to barangay officials.

Petitioner contends that protection orders involve the exercise of judicial power which, under the
Constitution, is placed upon the "Supreme Court and such other lower courts as may be established by
law" and, thus, protests the delegation of power to barangay officials to issue protection orders.111 The
pertinent provision reads, as follows:

SEC. 14. Barangay Protection Orders (BPOs); Who May Issue and How. – Barangay Protection Orders
(BPOs) refer to the protection order issued by the Punong Barangay ordering the perpetrator to desist
from committing acts under Section 5 (a) and (b) of this Act.1âwphi1 A Punong Barangay who receives
applications for a BPO shall issue the protection order to the applicant on the date of filing after ex parte
determination of the basis of the application. If the Punong Barangay is unavailable to act on the
application for a BPO, the application shall be acted upon by any available Barangay Kagawad. If the BPO
is issued by a Barangay Kagawad, the order must be accompanied by an attestation by the Barangay
Kagawad that the Punong Barangay was unavailable at the time of the issuance of the BPO. BPOs shall
be effective for fifteen (15) days. Immediately after the issuance of an ex parte BPO, the Punong
Barangay or Barangay Kagawad shall personally serve a copy of the same on the respondent, or direct
any barangay official to effect its personal service.

The parties may be accompanied by a non-lawyer advocate in any proceeding before the Punong
Barangay.

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.112 On the other hand, executive power "is generally defined as the
power to enforce and administer the laws. It is the power of carrying the laws into practical operation
and enforcing their due observance."113

As clearly delimited by the aforequoted provision, the BPO issued by the Punong Barangay or, in his
unavailability, by any available Barangay Kagawad, merely orders the perpetrator to desist from (a)
causing physical harm to the woman or her child; and (2) threatening to cause the woman or her child
physical harm. Such function of the Punong Barangay is, thus, purely executive in nature, in pursuance
of his duty under the Local Government Code to "enforce all laws and ordinances," and to "maintain
public order in the barangay."114

We have held that "(t)he mere fact that an officer is required by law to inquire into the existence of
certain facts and to apply the law thereto in order to determine what his official conduct shall be and
the fact that these acts may affect private rights do not constitute an exercise of judicial powers."115

In the same manner as the public prosecutor ascertains through a preliminary inquiry or proceeding
"whether there is reasonable ground to believe that an offense has been committed and the accused is
probably guilty thereof," the Punong Barangay must determine reasonable ground to believe that an
imminent danger of violence against the woman and her children exists or is about to recur that would
necessitate the issuance of a BPO. The preliminary investigation conducted by the prosecutor is,
concededly, an executive, not a judicial, function. The same holds true with the issuance of a BPO.

We need not even belabor the issue raised by petitioner that since barangay officials and other law
enforcement agencies are required to extend assistance to victims of violence and abuse, it would be
very unlikely that they would remain objective and impartial, and that the chances of acquittal are nil. As
already stated, assistance by barangay officials and other law enforcement agencies is consistent with
their duty to enforce the law and to maintain peace and order.

Conclusion

Before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict
with the Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a
manner as to leave no doubt in the mind of the Court. In other words, the grounds for nullity must be
beyond reasonable doubt.116 In the instant case, however, no concrete evidence and convincing
arguments were presented by petitioner to warrant a declaration of the unconstitutionality of R.A.
9262, which is an act of Congress and signed into law by the highest officer of the co-equal executive
department. As we said in Estrada v. Sandiganbayan, 117 courts must assume that the legislature is ever
conscious of the borders and edges of its plenary powers, and passed laws with full knowledge of the
facts and for the purpose of promoting what is right and advancing the welfare of the majority.

We reiterate here Justice Puno's observation that "the history of the women's movement against
domestic violence shows that one of its most difficult struggles was the fight against the violence of law
itself. If we keep that in mind, law will not again be a hindrance to the struggle of women for equality
but will be its fulfillment."118 Accordingly, the constitutionality of R.A. 9262 is, as it should be, sustained.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:
G.R. No. 140058 August 1, 2002

MABAYO FARMS, INC., herein represented by its President MRS. RORAIMA SILVA, petitioner,
vs.
HON. COURT OF APPEALS and ANTONIO SANTOS, respondents.

RESOLUTION

QUISUMBING, J.:

This petition for review seeks to reverse the decision1 promulgated on August 27, 1999, of the Court of
Appeals in CA-G.R. SP No. 51375. The appellate court enjoined the enforcement of the writ of
preliminary injunction dated April 14, 1998, issued by the Regional Trial Court of Balanga, Bataan,
Branch 1, in Civil Case No. 6695 against private respondent, Antonio Santos.

The factual antecedents of this case are as follows:

On August 22, 1969, the Bureau of Lands declared Francisco Domingo, Reynaldo Florida, Cornelio
Pilipino and Severino Vistan, lawful possessors of Lot 1379 of the Morong, Bataan Cadastre. Lot 1379
consists of 144 hectares. Domingo, Florida, Pilipino and Vistan through their forebears and by
themselves had been in open, notorious, and exclusive possession of portions of Lot 1379 since 1933 in
the concept of owners. The Bureau then directed them to confirm their titles over the property by filing
the appropriate applications for the portions of the property respectively occupied by them.1âwphi1.nêt

In October 1970, petitioner bought the respective portions of Domingo, Florida, Pilipino and Vistan,
totaling 69,932 square meters and entered into a compromise settlement with six other persons
occupying the property, whose applications had been rejected by the Bureau. Petitioner then filed an
application for land registration docketed as LRC Cad. Rec. No. N-209 with the then Court of First
Instance of Bataan, Branch 1. The application was contested by several oppositors, among them the
heirs of one Toribio Alejandro.

On December 20, 1991, the trial court decided the land registration case in petitioner’s favor. The losing
parties appealed to the Court of Appeals, where the case was docketed as CA-G.R. CV No. 40452. On
March 14, 2000, the appellate court affirmed the lower court’s decision.2

In June 1997, a group of occupants entered the land, destroyed the fences and drove away livestock
owned by petitioner.

On October 9, 1997, petitioner filed a complaint for injunction with damages, with a prayer for a
temporary restraining order, docketed as Civil Case No. 6695, with the RTC of Balanga, Bataan. Named
as defendants were Juanito Infante, Domingo Infante, Lito Mangalidan, Jaime Aquino, John Doe, Peter
Doe, and Richard Doe.

The trial court issued the temporary restraining order (TRO) and on January 16, 1998, the sheriff served
copies on the defendants. The sheriff accompanied petitioner’s president to the property where they
found five (5) persons cultivating the land. The latter refused to give their names or receive copies of the
TRO. They claimed that they were only farm workers of a certain Antonio Santos who allegedly owned
the land.3
On April 14, 1998, the trial court issued a writ of preliminary injunction restraining the defendants or
persons acting on their behalf from entering and cultivating the disputed property. The aforementioned
writ was also served upon respondent who was occupying a portion of Lot No. 1379.4

On February 24, 1999, private respondent filed a special civil action for certiorari docketed as CA-G.R. SP
No. 51375 with the Court of Appeals. Private respondent averred that he only learned about the writ of
preliminary injunction on February 16, 1999, when he secured a copy of the order. He claimed that he
was an innocent purchaser for value of the property from Francisco, Armando, and Conchita, all
surnamed Alejandro and the injunction prevented him from using his property. He alleged that he was
not a party to Civil Case No. 6695 and that it was grave abuse of discretion for the trial court to enforce
the injunctive writ against him since it did not have jurisdiction over him.

On August 27, 1999, the appellate court decided CA-G.R. SP No. 51375 in private respondent’s favor,
thus:

WHEREFORE, premises considered the instant Petition is hereby GRANTED. Public respondent is
enjoined from imposing the questioned writ of preliminary injunction dated April 14, 199[8] against
petitioner [Santos].

SO ORDERED.5

Hence, the instant petition, submitting the following issues for our consideration:

A. WHETHER [PRIVATE] RESPONDENT WAS DEPRIVED OF HIS CONSTITUTIONAL RIGHT TO BE HEARD.

B. WHETHER RULE 3, SEC. 11 OF THE 1997 RULES OF CIVIL PROCEDURE6 IS APPLICABLE IN THE ABOVE-
ENTITLED CASE.

We find the lone issue to be: Is private respondent bound by the writ of preliminary injunction issued by
the trial court?

First, petitioner contends that the injunctive writ of April 14, 1998 was issued not only against all named
defendants in Civil Case No. 6695, but also against three unnamed "Does." It now argues that the "Does"
in the complaint are all those who violated its rights, including private respondent. Petitioner asks us to
note that the writ of injunction was served not only against the defendants in Civil Case No. 6695, but
also against other persons who were seen entering and cultivating petitioner’s property, including
private respondent. Since the latter personally received the injunctive order on June 5, 1998, he was
already forewarned to intervene in Civil Case No. 6695 if he had any right or interest to protect in the
disputed property. This he failed to do. Since private respondent did not then take the opportunity to
present his side, he cannot now claim that he was denied due process when the writ was enforced
against him.

In his comment, private respondent counters that he was not legally bound nor required by law to file
his pleadings in Civil Case No. 6695 as he was not a party in said case. Likewise, he was not required to
act on or protest the injunctive writ in the aforementioned civil case. Private respondent avers that what
petitioner wants is to have a continuing writ in its favor, to include not only the defendants in Civil Case
No. 6695 but also all those who may subsequently intrude into the land dispute. Private respondent
submits that the court a quo committed no error in describing petitioner’s posture as a violation of the
fundamental rights to notice and hearing.
We have minutely scrutinized the order granting the writ of preliminary injunction and are unable to say
that the writ applied to private respondent. The order merely stated "[L]et a writ of preliminary
injunction be issued enjoining and restraining the defendants or any person or persons acting in their
place or stead from further entering and cultivating the said land of the plaintiff subject matter of this
case until further order from the Court."7 The persons specifically enjoined in the order were the
defendants in Civil Case No. 6695 or persons acting in their stead. Petitioner itself admitted that private
respondent was not a defendant in Civil Case No. 6695 since "at the institution of the case in 1997, he
(private respondent) did not have a right over any portion of petitioner’s lot."8 Neither was he a
trespasser then.9 Also, nothing in the records indicate that private respondent was acting on behalf of
any of the defendants. Taking all these into consideration, we must hold that the writ of preliminary
injunction thus cannot be made to apply to private respondent.

A preliminary injunction is an order granted at any stage of an action prior to final judgment, requiring a
person to refrain from a particular act.10 As an ancillary or preventive remedy, a writ of preliminary
injunction may therefore be resorted to by a party to protect or preserve his rights and for no other
purpose during the pendency of the principal action.11 Its object is to preserve the status quo until the
merits of the case can be heard.12 It is not a cause of action in itself but merely a provisional remedy, an
adjunct to a main suit.13 Thus, a person who is not a party in the main suit, like private respondent in the
instant case, cannot be bound by an ancillary writ, such as the writ of preliminary injunction issued
against the defendants in Civil Case No. 6695. He cannot be affected by any proceeding to which he is a
stranger.14

Second, petitioner contends that the Court of Appeals erred when it observed that petitioner should
have impleaded private respondent as defendant in Civil Case No. 6695 pursuant to Section 11, Rule 3 of
the 1997 Rules of Civil Procedure.15 Instead, private respondent should have intervened in Civil Case No.
6695 to protect his rights. Petitioner avers that at the time the injunctive writ was issued, it had already
rested its case and to require it to amend its complaint to include private respondent was too late.

Private respondent counters that there was no reason why Section 11, Rule 3 of the 1997 Rules of Civil
Procedure should not be made to apply to Civil Case No. 6695. He argues that contrary to petitioner’s
posture, his inclusion as a defendant in Civil Case No. 6695 is procedurally correct since no final
judgment had yet been rendered in said case. Moreover, he avers that petitioner cannot insist that
private respondent be vigilant in protecting his rights by intervening in Civil Case No. 6695.1âwphi1.nêt

We agree with private respondent. First, private respondent had no duty to intervene in the proceedings
in Civil Case No. 6695. Intervention in an action is neither compulsory nor mandatory but only optional
and permissive.16Second, to warrant intervention, two requisites must concur: (a) the movant has a legal
interest in the matter in litigation,17 and (b) intervention must not unduly delay or prejudice the
adjudication of the rights of the parties18 nor should the claim of the intervenor be capable of being
properly decided in a separate proceeding.19 The interest, which entitles a person to intervene in a suit,
must involve the matter in litigation and of such direct and immediate character that the intervenor will
either gain or lose by the direct legal operation and effect of the judgment.20 Civil Case No. 6695 was an
action for permanent injunction and damages. As a stranger to the case, private respondent had neither
legal interest in a permanent injunction nor an interest on the damages to be imposed, if any, in Civil
Case No. 6695. To allow him to intervene would have unnecessarily complicated and prolonged the
case.
We agree with the Court of Appeals that to make the injunctive writ applicable against private
respondent, petitioner should have impleaded the latter as an additional defendant in Civil Case No.
6695. Petitioner’s insistence that it had rested its case and hence was too late to include defendant finds
no support in Section 11. The rule categorically provides that "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 (stress
supplied) and on such terms as are just."21 We find it inexplicable why petitioner pointedly resisted the
advice of the appellate court to implead private respondent as an additional defendant in Civil Case No.
6695.

WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals in CA-G.R.
SP No. 51375 AFFIRMED. No pronouncement as to costs.

SO ORDERED.
G.R. No. 136760. July 29, 2003

THE SENATE BLUE RIBBON COMMITTEE, represented by its Chairman, SENATOR AQUILINO Q.
PIMENTEL, JR., petitioner, vs. HON. JOSE B. MAJADUCON, Presiding Judge of Branch 23, Regional Trial
Court of General Santos City, and ATTY. NILO J. FLAVIANO, respondents.

[G.R. No. 138378. July 29, 2003

AQUILINO Q. PIMENTEL, JR., Petitioner, vs. THE HONORABLE JOSE S. MAJADUCON, in his capacity as
Presiding Judge of Branch 23, Regional Trial Court, General Santos City, respondent.

DECISION

YNARES-SANTIAGO, J.:

For resolution are two consolidated petitions: (a) G.R. No. 136760, for certiorari, prohibition,
mandamus and preliminary injunction, assailing the resolution dated November 11, 1998 of Judge
Jose S. Majaducon of the Regional Trial Court of General Santos City, Branch 23, which denied the
Senate Blue Ribbon Committees motion to dismiss the petition for prohibition, injunction with writ of
preliminary injunction filed by private respondent Atty. Nilo J. Flaviano; and (b) G.R. No. 138378, for
review of the resolution dated April 15, 1999 of respondent Judge Majaducon declaring petitioner
Senator Aquilino Q. Pimentel, Jr. guilty of indirect contempt of court.

The antecedent facts are as follows:

G.R. No. 136760:

On August 28, 1998, Senator Blas F. Ople filed Senate Resolution No. 157 directing the Committee on
National Defense and Security to conduct an inquiry, in aid of legislation, into the charges of then
Defense Secretary Orlando Mercado that a group of active and retired military officers were
organizing a coup detat to prevent the administration of then President Joseph Estrada from probing
alleged fund irregularities in the Armed Forces of the Philippines.1cräläwvirtualibräry

On the same date, Senator Vicente C. Sotto III also filed Resolution No. 160, directing the appropriate
senate committee to conduct an inquiry, in aid of legislation, into the alleged mismanagement of the
funds and investment portfolio of the Armed Forces Retirement and Separation Benefits System (AFP-
RSBS) xxx. 2cräläwvirtualibräry

The Senate President referred the two resolutions to the Committee on Accountability of Public
Officers and Investigations (Blue Ribbon Committee) and the Committee on National Defense and
Security.

During the public hearings conducted by the Senate Blue Ribbon Committee (hereafter called the
Committee), it appeared that the AFP-RSBS purchased a lot in General Santos City, designated as Lot
X, MR-1160, for P10,500.00 per square meter from private respondent Atty. Nilo J. Flaviano. However,
the deed of sale filed with the Register of Deeds indicated that the purchase price of the lot was only
P3,000.00 per square meter.

The Committee thereafter caused the service of a subpoena to respondent Atty. Flaviano, directing
him to appear and testify before it. Respondent refused to appear at the hearing. Instead, he filed a
petition for prohibition and preliminary injunction with prayer for temporary restraining order with
the Regional Trial Court of General Santos City, Branch 23, which was docketed as SP Civil Case No.
496.

On October 21, 1998, the trial court issued a Temporary Restraining Order directing the Committee to
CEASE and DESIST from proceeding with the inquiry in P.S. 160 particularly in General Santos City
and/or anywhere in Region XI or Manila on matters affecting the patenting/titling and sale of Lot X,
MR-1160-D to AFP-RSBS, and from issuing subpoenas to witnesses from Region XI, particularly from
General Santos City, pending the hearing of the petition for prohibition and
injunction.3cräläwvirtualibräry

On November 5, 1998, the Committee filed a motion to dismiss the petition on the grounds of (a) lack
of jurisdiction, and (b) failure to state a valid cause of action. It further argued that the issuance of the
Temporary Restraining Order was invalid for violating the rule against ex-parte issuance thereof; and
that the same was not enforceable beyond the territorial jurisdiction of the trial court.

On November 11, 1998, the trial court denied petitioners motion to dismiss and granted the writ of
preliminary injunction, thus:

WHEREFORE, PREMISES CONSIDERED, the motion to dismiss is DENIED, and the WRIT OF
PRELIMINARY INJUNCTION is hereby issued against respondent. It is enjoined from enforcing its
subpoenas to petitioner in Region XI to appear and testify before it in any of its inquiry or
investigation anywhere in the Philippines regarding the acquisition by the AFP-RSBS of Lot X, MR-
1160-D, located in General Santos City. The bond of petitioner filed on October 21, 1998, for
P500,000.00 for the TRO also serves as his bond in this injunction.

SO ORDERED.4cräläwvirtualibräry

Hence, the instant petition for certiorari which was docketed as G.R. No. 136760, alleging that
respondent Judge Majaducon committed grave abuse of discretion and/or acted without or in excess
of jurisdiction when he:

I. DENIED PETITIONERS MOTION TO DISMISS THE PETITION FOR PROHIBITION AND PRELIMINARY
INJUNCTION FILED BY PRIVATE RESPONDENT, ATTY. NILO J. FLAVIANO, AGAINST THE PETITIONER IN
SP. CIVIL CASE NO. 496.

II. ISSUED (1) A TEMPORARY RESTRAINING ORDER EX-PARTE FOR A PERIOD OF TWENTY (20) DAYS
AGAINST THE PETITIONER ON OCTOBER 21, 1998, AND (2) A WRIT OF PRELIMINARY INJUNCTION ON
NOVEMBER 11, 1998 ENJOINING THE PETITIONER FROM ENFORCING ITS SUBPOENAS TO PRIVATE
RESPONENT IN REGION XI.

III. APPLIED THE RULING OF BENGZON VS. SENATE BLUE RIBBON IN GRANTING INJUNCTIVE RELIEF TO
PRIVATE RESPONDENT.5cräläwvirtualibräry

G.R. No. 138378:

On January 13, 1999, the newspaper, The Philippine Star published a news report on the filing by the
Committee with this Court of the petition for certiorari which was docketed as G.R. No. 136760. The
news report quoted portions of the petition filed by the Committee, alleging that Regional Trial Court
Judge Majaducon was guilty of gross ignorance of the rules and procedures when he issued the
temporary restraining order and the writ of preliminary injunction because, under the principle of
separation of powers, courts cannot interfere with the exercise by the legislature of its authority to
conduct investigations in aid of legislation.6cräläwvirtualibräry

Reacting to the aforesaid news report, respondent Judge Majaducon motu proprio initiated a charge
for indirect contempt of court against Senator Aquilino Q. Pimentel, Jr., news reporter Perseus
Echeminada, Philippine Star publisher Maximo Soliven, editor-in-chief Ramon J. Farolan, and
executive editor Bobby G. dela Cruz, which was docketed as Special Civil Case No. 496. Judge
Majaducon averred that the news report created in the minds of the reader the impression that he
violated the separation of powers clause of the Constitution and that he was guilty of gross ignorance
of the rules and procedures.

After the respondents submitted their respective answers, a decision was rendered on April 15, 1999
finding petitioner Pimentel guilty of indirect contempt.

Hence, the instant petition based on the following grounds:

I. THE EXPRESSION GROSS IGNORANCE OF THE RULES OF PROCEDURE OR GROSS IGNORANCE OF THE
LAW IN REFERENCE TO THE RESPONDENTS EX-PARTE ISSUANCE OF INJUNCTIVE RELIEF IS NOT
PEJORATIVE AS TO CONSTITUTE A GROUND FOR INDIRECT CONTEMPT.

II. THIS HONORABLE COURT ITSELF USES GROSS IGNORANCE OF THE LAW AND OTHER EXPRESSIONS
OF SIMILAR FORCEFUL IMPORT IN DESCRIBING GROSS AND PALPABLE ERRORS OF JUDGES.

III. BY UPHOLDING HIS CONTEMPT CHARGE AGAINST THE PETITIONER, THE RESPONDENT JUDGE HAS,
IN EFFECT, PREEMPTED THIS HONORABLE COURT IN RESOLVING THE ISSUES RAISED AGAINST HIM IN
G.R. NO. 136760.

IV. THE PUBLICATION BY PHILIPPINE STAR OF THE BLUE RIBBON PETITION IN G.R. NO. 136760, OR
EXCERPTS THEREOF WAS A LEGITIMATE EXERCISE OF FREEDOM OF EXPRESSION AND OF THE PRESS.

The two petitions, namely, G.R. No. 136760 and G.R. No. 138378, were ordered consolidated on
December 11, 2000.

The issues for resolution in these joint petitions are: (a) whether or not respondent Judge Jose
Majaducon committed grave abuse of discretion when he dismissed petitioners motion to dismiss the
petition for prohibition and issued the writ of preliminary injunction; and (b) whether or not
respondent Judge erred in convicting petitioner Pimentel of indirect contempt of court.

On the first issue, petitioner Committee contends that courts have no jurisdiction to restrain Congress
from performing its constitutionally vested function to conduct investigations in aid of legislation,
following the principle of separation of powers. Moreover, the petition filed by respondent Flaviano
before the trial court failed to state a cause of action considering that the legislative inquiry did not
deal with the issuance of the patent and title to Lot X, MR-1160-D in the name of AFP-RSBS, which is
well within the courts jurisdiction, but with the anomaly in the purchase thereof, which falls squarely
within the ambit of Senate Resolutions Nos. 1577 and 160.8cräläwvirtualibräry
On the other hand, respondent Flaviano contends that the trial court may properly intervene into
investigations by Congress pursuant to the power of judicial review vested in it by the Constitution.
He avers that he has a valid cause of action to file the petition for prohibition considering that the
Committees investigation will delve into the validity of the patenting and titling of Lot X, MR-1160-D
which, as admitted by petitioner, falls within the competence of judicial courts. In fact, the validity of
the purchase by AFP-RSBS of the subject lot is already the subject of a pending action before the
Regional Trial Court of General Santos City and the Ombudsman of Mindanao. Finally, he cites the
case of Bengzon v. Senate Blue Ribbon Committee,9 and argues that preliminary injunction may issue
in cases pending before administrative bodies such as the Ombudsman or the Office of the Prosecutor
as long as the right to self-incrimination guaranteed by the Bill of Rights is in danger. Furthermore, an
information against him has been filed with the Sandiganbayan.

We find for petitioner. There is grave abuse of discretion when the respondent acts in a capricious,
whimsical, arbitrary or despotic manner in the exercise of his judgment, as when the assailed order is
bereft of any factual and legal justification.10In this case, the assailed resolution of respondent Judge
Majaducon was issued without legal basis.

The principle of separation of powers essentially means that legislation belongs to Congress,
execution to the Executive, and settlement of legal controversies to the Judiciary. Each is prevented
from invading the domain of the others.11 When the Senate Blue Ribbon Committee served subpoena
on respondent Flaviano to appear and testify before it in connection with its investigation of the
alleged misuse and mismanagement of the AFP-RSBS funds, it did so pursuant to its authority to
conduct inquiries in aid of legislation. This is clearly provided in Article VI, Section 21 of the
Constitution, thus:

The Senate or the House of Representatives or any of its respective committees may conduct inquiries
in aid of legislation in accordance with its duly published rules of procedure. The rights of persons
appearing in or affected by such inquiries shall be respected.

Hence, the Regional Trial Court of General Santos City, or any court for that matter, had no authority
to prohibit the Committee from requiring respondent to appear and testify before it.

The ruling in Bengzon, cited by respondent, does not apply in this case. We agree with petitioner
Committee that the factual circumstances therein are different from those in the case at bar.
In Bengzon, no intended legislation was involved and the subject matter of the inquiry was more
within the province of the courts rather than of the legislature. More specifically, the investigation in
the said case was an offshoot of the privilege speech of then Senator Enrile, who urged the Senate to
look into a possible violation of the Anti-Graft and Corrupt Practices Act by the relatives of then
President Corazon Aquino, particularly Mr. Ricardo Lopa, in connection with the alleged sale of 36 to
39 corporations belonging to Benjamin Romualdez. On the other hand, there was in this case a clear
legislative purpose, as stated in Senate Resolution No. 160, and the appropriate Senate Committee
was directed to look into the reported misuse and mismanagement of the AFP-RSBS funds, with the
intention of enacting appropriate legislation to protect the rights and interests of the officers and
members of the Armed Forces of the Philippines. Further, in Bengzon, the validity of the sale of
Romualdezs corporations was pending with the Sandiganbayan when the Senate Blue Ribbon
Committee decided to conduct its investigation. In short, the issue had already been pre-empted by
the court.
In the instant case, the complaint against respondent Flaviano regarding the anomaly in the sale of Lot
X, MR-1160 was still pending before the Office of the Ombudsman when the Committee served
subpoena on him. In other words, no court had acquired jurisdiction over the matter. Thus, there was
as yet no encroachment by the legislature into the exclusive jurisdiction of another branch of the
government. Clearly, there was no basis for the respondent Judge to apply the ruling
in Bengzon. Hence, the denial of petitioners motion to dismiss the petition for prohibition amounted
to grave abuse of discretion.

In G.R. No. 138378, Petitioner, Senator Aquilino Pimentel, Jr., contends that respondent judge erred in
finding him, as representative of the Committee, guilty of indirect contempt of court under Rule 71,
Section 3(d) of the 1997 Rules of Civil Procedure. According to Pimentel, the phrase gross ignorance of
the rules of law and procedure, which the Committee used in the petition, is not depreciatory, but
merely a description of normal usage in petitions where the acts of lower courts are challenged before
higher judicial bodies. In fact, this Court often uses the phrase in its decisions to describe judges who
commit gross and palpable mistakes in their interpretation and application of the law. Petitioner
further maintains that when the Committee used the phrase, it did so without malice. Rather, it was
only to stress the unfamiliarity of or disregard by the respondent Judge of a basic rule of procedure,
and to buttress its arguments in support of its petition for certiorari.

Petitioner Pimentel also contends that he had no participation in the publication in the Philippine Star
of excerpts from the Committees petition for certiorari. Even assuming arguendo that it was within
his control, he pointed out that he could not have prevented the editors and writers of the newspaper
from publishing the same, lest he violate their constitutional right of free expression. Indeed, the
report by the Philippine Star of the filing of the petition and the reproduction of its contents was a
legitimate exercise of press freedom.

Respondent Judge counters that Pimentel was guilty of indirect contempt of court, first, for causing
the publication of the Committees petition in the Philippine Star notwithstanding that the same
was sub judice; second, for making derogatory remarks in the petition itself which affected the honor
and integrity of the respondent judge and degraded the administration of justice; and third, for
making it appear that an administrative complaint was filed against respondent Judge for gross
ignorance of the law. These, he said, constituted malicious and false report which obstructed the
administration of justice.

Rule 71, Section 3(d) of the 1997 Rules of Civil Procedure provides:

Section 3. Indirect contempt to be punished after charge and hearing. After a charge in writing has
been filed, and an opportunity given to the respondent to comment thereon within such period as
may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the
following acts may be punished for indirect contempt:

xxx

d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice; x x x.

After deliberating on the parties arguments, we find that petitioner Pimentel is not guilty of improper
conduct which obstructs or degrades the administration of justice.
Verily, it does not appear that Pimentel caused the publication in the Philippine Star of the fact of
filing of the petition for certiorari by the Committee and the reproduction of excerpts thereof. He had
no right to choose which news articles will see print in the newspaper. Rather, it is the publisher
thereof which decides which news events will be reported in the broadsheet. In doing so, it is allowed
the widest latitude of choice as to what items should see the light of day so long as they are relevant
to a matter of public interest, pursuant to its right of press freedom.12cräläwvirtualibräry

Respondent Judges allegation that petitioner made it appear that an administrative complaint was
filed against him is without basis. From a careful perusal of the records, it appears that while the
Committee prayed for the imposition of administrative sanctions against respondent Judge
Majaducon for gross ignorance of the law, no formal administrative complaint was instituted
separately from the petition for certiorari.

Finally, the statement that respondent Judge was grossly ignorant of the rules of law and procedure
does not constitute improper conduct that tends to impede, obstruct or degrade the administration of
justice. As correctly argued by petitioner, the phrase gross ignorance of the rules of law and procedure
is ordinarily found in administrative complaints and is a necessary description to support a petition
which seeks the annulment of an order of a judge wherein basic legal principles are disregarded.

In Spouses Bacar v. Judge De Guzman, Jr.,13 it was held that when the law is so elementary, not to
know it or to act as if a judge does not know it, constitutes gross ignorance of the law. In this case,
there was no showing that petitioner Pimentel, as representative of the Committee, used the phrase
to malign the trial court. Rather, it was used to express what he believed as a violation of the basic
principle of separation of powers.

In this connection, it bears stressing that the power to declare a person in contempt of court must be
exercised on the preservative, not vindictive principle, and on the corrective and not retaliatory idea
of punishment.14 This was aptly expressed in the case of Nazareno v. Barnes:15cräläwvirtualibräry

A judge, as a public servant, should not be so thin-skinned or sensitive as to feel hurt or offended if a
citizen expresses an honest opinion about him which may not altogether be flattering to him. After all,
what matters is that a judge performs his duties in accordance with the dictates of his conscience and
the light that God has given him. A judge should never allow himself to be moved by pride, prejudice,
passion, or pettiness in the performance of his duties. He should always bear in mind that the power
of the court to punish for contempt should be exercised for purposes that are impersonal, because
that power is intended as a safeguard not for the judges as persons but for the functions that they
exercise.

WHEREFORE, in view of the foregoing, the petitions docketed as G.R. Nos. 136760 and 138378 are
GRANTED. The resolution of the Regional Trial Court of General Santos City, Branch 23, in Special Civil
Case No. 496 dated November 11, 1998, which denied the Senate Blue Ribbon Committees motion to
dismiss, is REVERSED and SET ASIDE. The Writ of Preliminary Injunction issued by the trial court on
November 11, 1998 is DISSOLVED. The resolution dated April 15, 1999, which declared Senator
Aquilino Q. Pimentel, Jr. guilty of indirect contempt of court, is REVERSED and SET ASIDE. The petition
for indirect contempt is ordered DISMISSED.

SO ORDERED.
G.R. No. 158540 July 8, 2004

SOUTHERN CROSS CEMENT CORPORATION, petitioner,

vs.
THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE SECRETARY OF THE DEPARTMENT OF TRADE &
INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE, and THE COMMISSIONER OF THE
BUREAU OF CUSTOMS, respondents.

DECISION

TINGA, J.:

"Good fences make good neighbors," so observed Robert Frost, the archetype of traditional New
England detachment. The Frost ethos has been heeded by nations adjusting to the effects of the
liberalized global market.1The Philippines, for one, enacted Republic Act (Rep. Act) No. 8751 (on the
imposition of countervailing duties), Rep. Act No. 8752 (on the imposition of anti-dumping duties) and,
finally, Rep. Act No. 8800, also known as the Safeguard Measures Act ("SMA")2 soon after it joined the
General Agreement on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.3

The SMA provides the structure and mechanics for the imposition of emergency measures, including
tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict
serious injury on them.4 The wisdom of the policies behind the SMA, however, is not put into question
by the petition at bar. The questions submitted to the Court relate to the means and the procedures
ordained in the law to ensure that the determination of the imposition or non-imposition of a safeguard
measure is proper.

Antecedent Facts

Petitioner Southern Cross Cement Corporation ("Southern Cross") is a domestic corporation engaged in
the business of cement manufacturing, production, importation and exportation. Its principal
stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest
cement manufacturers in Japan.5

Private respondent Philippine Cement Manufacturers Corporation6 ("Philcemcor") is an association of

domestic cement manufacturers. It has eighteen (18) members,7 per Record. While Philcemcor heralds
itself to be an association of domestic cement manufacturers, it appears that considerable equity
holdings, if not controlling interests in at least twelve (12) of its member-corporations, were acquired by
the three largest cement manufacturers in the world, namely Financiere Lafarge S.A. of France, Cemex
S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then
Holderfin B.V.).8

On 22 May 2001, respondent Department of Trade and Industry ("DTI") accepted an application from
Philcemcor, alleging that the importation of gray Portland cement9 in increased quantities has caused
declines in domestic production, capacity utilization, market share, sales and employment; as well as
caused depressed local prices. Accordingly, Philcemcor sought the imposition at first of provisional, then
later, definitive safeguard measures on the import of cement pursuant to the SMA. Philcemcor filed the
application in behalf of twelve (12) of its member-companies.10

After preliminary investigation, the Bureau of Import Services of the DTI, determined that critical
circumstances existed justifying the imposition of provisional measures.11 On 7 November 2001, the DTI
issued an Order, imposing a provisional measure equivalent to Twenty Pesos and Sixty Centavos
(P20.60) per forty (40) kilogram bag on all importations of gray Portland cement for a period not
exceeding two hundred (200) days from the date of issuance by the Bureau of Customs (BOC) of the
implementing Customs Memorandum Order.12 The corresponding Customs Memorandum Order was
issued on 10 December 2001, to take effect that same day and to remain in force for two hundred (200)
days.13

In the meantime, the Tariff Commission, on 19 November 2001, received a request from the DTI for a
formal investigation to determine whether or not to impose a definitive safeguard measure on imports
of gray Portland cement, pursuant to Section 9 of the SMA and its Implementing Rules and Regulations.
A notice of commencement of formal investigation was published in the newspapers on 21 November
2001. Individual notices were likewise sent to concerned parties, such as Philcemcor, various importers
and exporters, the Embassies of Indonesia, Japan and Taiwan, contractors/builders associations,
industry associations, cement workers' groups, consumer groups, non-government organizations and
concerned government agencies.14 A preliminary conference was held on 27 November 2001, attended
by several concerned parties, including Southern Cross.15 Subsequently, the Tariff Commission received
several position papers both in support and against Philcemcor's application.16 The Tariff Commission
also visited the corporate offices and manufacturing facilities of each of the applicant companies, as well
as that of Southern Cross and two other cement importers.17

On 13 March 2002, the Tariff Commission issued its Formal Investigation Report ("Report"). Among the
factors studied by the Tariff Commission in its Report were the market share of the domestic
industry,18 production and sales,19 capacity utilization,20 financial performance and profitability,21 and
return on sales.22 The Tariff Commission arrived at the following conclusions:

1. The circumstances provided in Article XIX of GATT 1994 need not be demonstrated since the product
under consideration (gray Portland cement) is not the subject of any Philippine obligation or tariff
concession under the WTO Agreement. Nonetheless, such inquiry is governed by the national legislation
(R.A. 8800) and the terms and conditions of the Agreement on Safeguards.

2. The collective output of the twelve (12) applicant companies constitutes a major proportion of the
total domestic production of gray Portland cement and blended Portland cement.

3. Locally produced gray Portland cement and blended Portland cement (Pozzolan) are "like" to
imported gray Portland cement.

4. Gray Portland cement is being imported into the Philippines in increased quantities, both in absolute
terms and relative to domestic production, starting in 2000. The increase in volume of imports is recent,
sudden, sharp and significant.
5. The industry has not suffered and is not suffering significant overall impairment in its condition, i.e.,
serious injury.

6. There is no threat of serious injury that is imminent from imports of gray Portland cement.

7. Causation has become moot and academic in view of the negative determination of the elements of
serious injury and imminent threat of serious injury.23

Accordingly, the Tariff Commission made the following recommendation, to wit:

The elements of serious injury and imminent threat of serious injury not having been established, it is
hereby recommended that no definitive general safeguard measure be imposed on the importation of
gray Portland cement.24

The DTI received the Report on 14 March 2002. After reviewing the report, then DTI Secretary Manuel
Roxas II ("DTI Secretary") disagreed with the conclusion of the Tariff Commission that there was no
serious injury to the local cement industry caused by the surge of imports.25 In view of this
disagreement, the DTI requested an opinion from the Department of Justice ("DOJ") on the DTI
Secretary's scope of options in acting on the Commission's recommendations. Subsequently, then DOJ
Secretary Hernando Perez rendered an opinion stating that Section 13 of the SMA precluded a review by
the DTI Secretary of the Tariff Commission's negative finding, or finding that a definitive safeguard
measure should not be imposed.26

On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the conclusions of the Tariff
Commission, the DTI Secretary noted the DTI's disagreement with the conclusions. However, he also
cited the DOJ Opinion advising the DTI that it was bound by the negative finding of the Tariff
Commission. Thus, he ruled as follows:

The DTI has no alternative but to abide by the [Tariff] Commission's recommendations.

IN VIEW OF THE FOREGOING, and in accordance with Section 13 of RA 8800 which states:

"In the event of a negative final determination; or if the cash bond is in excess of the definitive
safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a
written instruction to the Commissioner of Customs, authorizing the return of the cash bond or the
remainder thereof, as the case may be, previously collected as provisional general safeguard measure
within ten (10) days from the date a final decision has been made; Provided, that the government
shall not be liable for any interest on the amount to be returned. The Secretary shall not accept for
consideration another petition from the same industry, with respect to the same imports of the
product under consideration within one (1) year after the date of rendering such a decision."

The DTI hereby issues the following:

The application for safeguard measures against the importation of gray Portland cement filed by
PHILCEMCOR (Case No. 02-2001) is hereby denied.27 (Emphasis in the original)

Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of
Appeals a Petition for Certiorari, Prohibition and Mandamus28 seeking to set aside the DTI Decision, as
well as the Tariff Commission's Report. Philcemcor likewise applied for a Temporary Restraining
Order/Injunction to enjoin the DTI and the BOC from implementing the questioned Decision and Report.
It prayed that the Court of Appeals direct the DTI Secretary to disregard the Report and to render
judgment independently of the Report. Philcemcor argued that the DTI Secretary, vested as he is under
the law with the power of review, is not bound to adopt the recommendations of the Tariff Commission;
and, that the Report is void, as it is predicated on a flawed framework, inconsistent inferences and
erroneous methodology.29

On 10 June 2002, Southern Cross filed its Comment.30 It argued that the Court of Appeals had no
jurisdiction over Philcemcor's Petition, for it is on the Court of Tax Appeals ("CTA") that the SMA
conferred jurisdiction to review rulings of the Secretary in connection with the imposition of a safeguard
measure. It likewise argued that Philcemcor's resort to the special civil action of certiorari is improper,
considering that what Philcemcor sought to rectify is an error of judgment and not an error of
jurisdiction or grave abuse of discretion, and that a petition for review with the CTA was available as a
plain, speedy and adequate remedy. Finally, Southern Cross echoed the DOJ Opinion that Section 13 of
the SMA precludes a review by the DTI Secretary of a negative finding of the Tariff Commission.

After conducting a hearing on 19 June 2002 on Philcemcor's application for preliminary injunction, the
Court of Appeals' Twelfth Division31 granted the writ sought in its Resolution dated 21 June 2002.32 Seven
days later, on 28 June 2002, the two-hundred (200)-day period for the imposition of the provisional
measure expired. Despite the lapse of the period, the BOC continued to impose the provisional measure
on all importations of Portland cement made by Southern Cross. The uninterrupted assessment of the
tariff, according to Southern Cross, worked to its detriment to the point that the continued imposition
would eventually lead to its closure.33

Southern Cross timely filed a Motion for Reconsideration of the Resolution on 9 September 2002.
Alleging that Philcemcor was not entitled to provisional relief, Southern Cross likewise sought a
clarificatory order as to whether the grant of the writ of preliminary injunction could extend the earlier
imposition of the provisional measure beyond the two hundred (200)-day limit imposed by law. The
appeals' court failed to take immediate action on Southern Cross's motion despite the four (4) motions
for early resolution the latter filed between September of 2002 and February of 2003. After six (6)
months, on 19 February 2003, the Court of Appeals directed Philcemcor to comment on Southern
Cross's Motion for Reconsideration.34 After Philcemcor filed its Opposition35 on 13 March 2003, Southern
Cross filed another set of four (4) motions for early resolution.

Despite the efforts of Southern Cross, the Court of Appeals failed to directly resolve the Motion for
Reconsideration. Instead, on 5 June 2003, it rendered a Decision,36 granting in part Philcemcor's petition.
The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave
abuse of discretion. It refused to annul the findings of the Tariff Commission, citing the rule that factual
findings of administrative agencies are binding upon the courts and its corollary, that courts should not
interfere in matters addressed to the sound discretion and coming under the special technical
knowledge and training of such agencies.37 Nevertheless, it held that the DTI Secretary is not bound by
the factual findings of the Tariff Commission since such findings are merely recommendatory and they
fall within the ambit of the Secretary's discretionary review. It determined that the legislative intent is to
grant the DTI Secretary the power to make a final decision on the Tariff Commission's
recommendation.38 The dispositive portion of the Decision reads:

WHEREFORE, based on the foregoing premises, petitioner's prayer to set aside the findings of the Tariff
Commission in its assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed April
5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE.
Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and
Industry for a final decision in accordance with RA 8800 and its Implementing Rules and Regulations.

SO ORDERED.39

On 23 June 2003, Southern Cross filed the present petition, assailing the appellate court's Decision for
departing from the accepted and usual course of judicial proceedings, and not deciding the substantial
questions in accordance with law and jurisprudence. The petition argues in the main that the Court of
Appeals has no jurisdiction over Philcemcor's petition, the proper remedy being a petition for review
with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the
existence or non-existence conditions warranting the imposition of general safeguard measures are
binding upon the DTI Secretary.

The timely filing of Southern Cross's petition before this Court necessarily prevented the Court of
Appeals Decisionfrom becoming final.40 Yet on 25 June 2003, the DTI Secretary issued a new Decision,
ruling this time that that in light of the appellate court's Decision there was no longer any legal
impediment to his deciding Philcemcor's application for definitive safeguard measures.41 He made a
determination that, contrary to the findings of the Tariff Commission, the local cement industry had
suffered serious injury as a result of the import surges.42 Accordingly, he imposed a definitive safeguard
measure on the importation of gray Portland cement, in the form of a definitive safeguard duty in the
amount of P20.60/40 kg. bag for three years on imported gray Portland Cement.43

On 7 July 2003, Southern Cross filed with the Court a "Very Urgent Application for a Temporary
Restraining Order and/or A Writ of Preliminary Injunction" ("TRO Application"), seeking to enjoin the DTI
Secretary from enforcing his Decision of 25 June 2003 in view of the pending petition before this Court.
Philcemcor filed an opposition, claiming, among others, that it is not this Court but the CTA that has
jurisdiction over the application under the law.

On 1 August 2003, Southern Cross filed with the CTA a Petition for Review, assailing the DTI Secretary's
25 June 2003 Decision which imposed the definite safeguard measure. Prescinding from this action,
Philcemcor filed with this Court a Manifestation and Motion to Dismiss in regard to Southern Cross's
petition, alleging that it deliberately and willfully resorted to forum-shopping. It points out that
Southern Cross's TRO Application seeks to enjoin the DTI Secretary's second decision, while
its Petition before the CTA prays for the annulment of the same decision.44

Reiterating its Comment on Southern Cross's Petition for Review, Philcemcor also argues that the CTA,
being a special court of limited jurisdiction, could only review the ruling of the DTI Secretary when a
safeguard measure is imposed, and that the factual findings of the Tariff Commission are not binding on
the DTI Secretary.45

After giving due course to Southern Cross's Petition, the Court called the case for oral argument on 18
February 2004.46 At the oral argument, attended by the counsel for Philcemcor and Southern Cross and
the Office of the Solicitor General, the Court simplified the issues in this wise: (i) whether the Decision of
the DTI Secretary is appealable to the CTA or the Court of Appeals; (ii) assuming that the Court of
Appeals has jurisdiction, whether its Decision is in accordance with law; and, (iii) whether a Temporary
Restraining Order is warranted.47
During the oral arguments, counsel for Southern Cross manifested that due to the imposition of the
general safeguard measures, Southern Cross was forced to cease operations in the Philippines in
November of 2003.48

Propriety of the Temporary Restraining Order

Before the merits of the Petition, a brief comment on Southern Cross's application for provisional relief.
It sought to enjoin the DTI Secretary from enforcing the definitive safeguard measure he imposed in his
25 June 2003 Decision. The Court did not grant the provisional relief for it would be tantamount to
enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned upon,49 unless
there is a clear statutory basis for it.50 In that regard, Section 218 of the Tax Reform Act of 1997 prohibits
any court from granting an injunction to restrain the collection of any national internal revenue tax, fee
or charge imposed by the internal revenue code.51 A similar philosophy is expressed by Section 29 of the
SMA, which states that the filing of a petition for review before the CTA does not stop, suspend, or
otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other
appropriate safeguard measures.52 This evinces a clear legislative intent that the imposition of safeguard
measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely
appeal of the imposition.

The Forum-Shopping Issue

In the same breath, we are not convinced that the allegation of forum-shopping has been duly proven,
or that sanction should befall upon Southern Cross and its counsel. The standard by Section 5, Rule 7 of
the 1997 Rules of Civil Procedure in order that sanction may be had is that "the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping."53 The standard implies a malicious
intent to subvert procedural rules, and such state of mind is not evident in this case.

The Jurisdictional Issue

On to the merits of the present petition.

In its assailed Decision, the Court of Appeals, after asserting only in brief that it had jurisdiction over
Philcemcor's Petition, discussed the issue of whether or not the DTI Secretary is bound to adopt the
negative recommendation of the Tariff Commission on the application for safeguard measure. The Court
of Appeals maintained that it had jurisdiction over the petition, as it alleged grave abuse of discretion on
the part of the DTI Secretary, thus:

A perusal of the instant petition reveals allegations of grave abuse of discretion on the part of the DTI
Secretary in rendering the assailed April 5, 2002 Decision wherein it was ruled that he had no alternative
but to abide by the findings of the Commission on the matter of safeguard measures for the local
cement industry. Abuse of discretion is admittedly within the ambit of certiorari.

Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction. It is alleged that, in the assailed Decision, the DTI Secretary gravely abused his
discretion in wantonly evading to discharge his duty to render an independent determination or
decision in imposing a definitive safeguard measure.54

We do not doubt that the Court of Appeals' certiorari powers extend to correcting grave abuse of
discretion on the part of an officer exercising judicial or quasi-judicial functions.55 However, the special
civil action of certiorari is available only when there is no plain, speedy and adequate remedy in the
ordinary course of law.56 Southern Cross relies on this limitation, stressing that Section 29 of the SMA is
a plain, speedy and adequate remedy in the ordinary course of law which Philcemcor did not avail of.
The Section reads:

Section 29. Judicial Review. – Any interested party who is adversely affected by the ruling of the
Secretary in connection with the imposition of a safeguard measure may file with the CTA, a petition
for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing
of such petition for review shall not in any way stop, suspend or otherwise toll the imposition or
collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures, as
the case may be.

The petition for review shall comply with the same requirements and shall follow the same rules of
procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings
on tax matters to the Court of Appeals.57 (Emphasis supplied)

It is not difficult to divine why the legislature singled out the CTA as the court with jurisdiction to review
the ruling of the DTI Secretary in connection with the imposition of a safeguard measure. The Court has
long recognized the legislative determination to vest sole and exclusive jurisdiction on matters involving
internal revenue and customs duties to such a specialized court.58 By the very nature of its function, the
CTA is dedicated exclusively to the study and consideration of tax problems and has necessarily
developed an expertise on the subject.59

At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a
case should be clearly conferred and should not be deemed to exist on mere implication.60 Concededly,
Rep. Act No. 1125, the statute creating the CTA, does not extend to it the power to review decisions of
the DTI Secretary in connection with the imposition of safeguard measures.61 Of course, at that time
which was before the advent of trade liberalization the notion of safeguard measures or safety nets was
not yet in vogue.

Undeniably, however, the SMA expanded the jurisdiction of the CTA by including review of the rulings of
the DTI Secretary in connection with the imposition of safeguard measures. However, Philcemcor and
the public respondents agree that the CTA has appellate jurisdiction over a decision of the DTI Secretary
imposing a safeguard measure, but not when his ruling is not to impose such measure.

In a related development, Rep. Act No. 9282, enacted on 30 March 2004, expressly vests unto the CTA
jurisdiction over "[d]ecisions of the Secretary of Trade and Industry, in case of nonagricultural product,
commodity or article xxx involving xxx safeguard measures under Republic Act No. 8800, where either
party may appeal the decision to impose or not to impose said duties."62 Had Rep. Act No. 9282 already
been in force at the beginning of the incidents subject of this case, there would have been no need to
make any deeper inquiry as to the extent of the CTA's jurisdiction. But as Rep. Act No. 9282 cannot be
applied retroactively to the present case, the question of whether such jurisdiction extends to a decision
not to impose a safeguard measure will have to be settled principally on the basis of the SMA.

Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over
the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the
petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must
be in connection with the imposition of a safeguard measure. The first two requisites are clearly
present. The third requisite deserves closer scrutiny.

Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary
decides not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision.
The reasons are as follows:

First. Split jurisdiction is abhorred.

Essentially, respondents' position is that judicial review of the DTI Secretary's ruling is exercised by two
different courts, depending on whether or not it imposes a safeguard measure, and in either case the
court exercising jurisdiction does so to the exclusion of the other. Thus, if the DTI decision involves the
imposition of a safeguard measure it is the CTA which has appellate jurisdiction; otherwise, it is the
Court of Appeals. Such setup is as novel and unusual as it is cumbersome and unwise. Essentially,
respondents advocate that Section 29 of the SMA has established split appellate jurisdiction over rulings
of the DTI Secretary on the imposition of safeguard measure.

This interpretation cannot be favored, as the Court has consistently refused to sanction split
jurisdiction.63 The power of the DTI Secretary to adopt or withhold a safeguard measure emanates from
the same statutory source, and it boggles the mind why the appeal modality would be such that one
appellate court is qualified if what is to be reviewed is a positive determination, and it is not if what is
appealed is a negative determination. In deciding whether or not to impose a safeguard measure,
provisional or general, the DTI Secretary would be evaluating only one body of facts and applying them
to one set of laws. The reviewing tribunal will be called upon to examine the same facts and the same
laws, whether or not the determination is positive or negative.

In short, if we were to rule for respondents we would be confirming the exercise by two judicial bodies
of jurisdiction over basically the same subject matter¾precisely the split-jurisdiction situation which is
anathema to the orderly administration of justice.64 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 without mention of any
other court that may exercise corollary or ancillary jurisdiction in relation to the SMA. The provision
refers to the Court of Appeals but only in regard to procedural rules and dispositions of appeals from the
CTA to the Court of Appeals.65

The principle enunciated in Tejada v. Homestead Property Corporation66 is applicable to the case at bar:

The Court agrees with the observation of the [that] when an administrative agency or body is conferred
quasi-judicial functions, all controversies relating to the subject matter pertaining to its specialization
are deemed to be included within the jurisdiction of said administrative agency or body. Split
jurisdiction is not favored.67

Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate
jurisdiction on the CTA.

A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from
reviewing a negative determination by the DTI Secretary nor conferred on the Court of Appeals such
review authority. Respondents note, on the other hand, that neither did the law expressly grant to the
CTA the power to review a negative determination. However, under the clear text of the law, the CTA is
vested with jurisdiction to review the ruling of the DTI Secretary "in connection with the imposition of a
safeguard measure." Had the law been couched instead to incorporate the phrase "the ruling imposing a
safeguard measure," then respondent's claim would have indisputable merit. Undoubtedly, the phrase
"in connection with" not only qualifies but clarifies the succeeding phrase "imposition of a safeguard
measure." As expounded later, the phrase also encompasses the opposite or converse ruling which is
the non-imposition of a safeguard measure.

In the American case of Shaw v. Delta Air Lines, Inc.,68 the United States Supreme Court, in interpreting a
key provision of the Employee Retirement Security Act of 1974, construed the phrase "relates to" in its
normal sense which is the same as "if it has connection with or reference to."69 There is no serious
dispute that the phrase "in connection with" is synonymous to "relates to" or "reference to," and that all
three phrases are broadly expansive. This is affirmed not just by jurisprudential fiat, but also the
acquired connotative meaning of "in connection with" in common parlance. Consequently, with the use
of the phrase "in connection with," Section 29 allows the CTA to review not only the ruling imposing a
safeguard measure, but all other rulings related or have reference to the application for such measure.

Now, let us determine the maximum scope and reach of the phrase "in connection with" as used in
Section 29 of the SMA. A literalist reading or linguistic survey may not satisfy. Even the US Supreme
Court in New York State Blue Cross Plans v. Travelers Ins.70 conceded that the phrases "relate to" or "in
connection with" may be extended to the farthest stretch of indeterminacy for, universally, relations or
connections are infinite and stop nowhere.71 Thus, in the case the US High Court, examining the same
phrase of the same provision of law involved in Shaw, resorted to looking at the statute and its
objectives as the alternative to an "uncritical literalism."72 A similar inquiry into the other provisions of
the SMA is in order to determine the scope of review accorded therein to the CTA.73

The authority to decide on the safeguard measure is vested in the DTI Secretary in the case of non-
agricultural products, and in the Secretary of the Department of Agriculture in the case of agricultural
products.74 Section 29 is likewise explicit that only the rulings of the DTI Secretary or the Agriculture
Secretary may be reviewed by the CTA.75 Thus, the acts of other bodies that were granted some powers
by the SMA, such as the Tariff Commission, are not subject to direct review by the CTA.

Under the SMA, the Department Secretary concerned is authorized to decide on several matters. Within
thirty (30) days from receipt of a petition seeking the imposition of a safeguard measure, or from the
date he made motu proprio initiation, the Secretary shall make a preliminary determination on whether
the increased imports of the product under consideration substantially cause or threaten to cause
serious injury to the domestic industry.76 Such ruling is crucial since only upon the Secretary's positive
preliminary determination that a threat to the domestic industry exists shall the matter be referred to
the Tariff Commission for formal investigation, this time, to determine whether the general safeguard
measure should be imposed or not.77 Pursuant to a positive preliminary determination, the Secretary
may also decide that the imposition of a provisional safeguard measure would be warranted under
Section 8 of the SMA.78 The Secretary is also authorized to decide, after receipt of the report of the Tariff
Commission, whether or not to impose the general safeguard measure, and if in the affirmative, what
general safeguard measures should be applied.79 Even after the general safeguard measure is imposed,
the Secretary is empowered to extend the safeguard measure,80 or terminate, reduce or modify his
previous rulings on the general safeguard measure.81
With the explicit grant of certain powers involving safeguard measures by the SMA on the DTI Secretary,
it follows that he is empowered to rule on several issues. These are the issues which arise in connection
with, or in relation to, the imposition of a safeguard measure. They may arise at different stages – the
preliminary investigation stage, the post-formal investigation stage, or the post-safeguard measure
stage – yet all these issues do become ripe for resolution because an initiatory action has been taken
seeking the imposition of a safeguard measure. It is the initiatory action for the imposition of a
safeguard measure that sets the wheels in motion, allowing the Secretary to make successive rulings,
beginning with the preliminary determination.

Clearly, therefore, the scope and reach of the phrase "in connection with," as intended by Congress,
pertain to all rulings of the DTI Secretary or Agriculture Secretary which arise from the time an
application or motu proprioinitiation for the imposition of a safeguard measure is taken. Indeed, the
incidents which require resolution come to the fore only because there is an initial application or action
seeking the imposition of a safeguard measure. From the legislative standpoint, it was a matter of sense
and practicality to lump up the questions related to the initiatory application or action for safeguard
measure and to assign only one court and; that is the CTA to initially review all the rulings related to
such initiatory application or action. Both directions Congress put in place by employing the phrase "in
connection with" in the law.

Given the relative expanse of decisions subject to judicial review by the CTA under Section 29, we do not
doubt that a negative ruling refusing to impose a safeguard measure falls within the scope of its
jurisdiction. On a literal level, such negative ruling is "a ruling of the Secretary in connection with the
imposition of a safeguard measure," as it is one of the possible outcomes that may result from the initial
application or action for a safeguard measure. On a more critical level, the rulings of the DTI Secretary in
connection with a safeguard measure, however diverse the outcome may be, arise from the same grant
of jurisdiction on the DTI Secretary by the SMA.82 The refusal by the DTI Secretary to grant a safeguard
measure involves the same grant of authority, the same statutory prescriptions, and the same degree of
discretion as the imposition by the DTI Secretary of a safeguard measure.

The position of the respondents is one of "uncritical literalism"83 incongruent with the animus of the law.
Moreover, a fundamentalist approach to Section 29 is not warranted, considering the absurdity of the
consequences.

Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.84

Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a
negative ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would
cause inconvenience and absurdity.85 Adopting the respondents' position favoring the CTA's minimal
jurisdiction would unnecessarily lead to illogical and onerous results.

Indeed, it is illiberal to assume that Congress had intended to provide appellate relief to rulings imposing
a safeguard measure but not to those declining to impose the measure. Respondents might argue that
the right to relief from a negative ruling is not lost since the applicant could, as Philcemcor did, question
such ruling through a special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure,
in lieu of an appeal to the CTA. Yet these two reliefs are of differing natures and gravamen. While an
appeal may be predicated on errors of fact or errors of law, a special civil action for certiorari is
grounded on grave abuse of discretion or lack of or excess of jurisdiction on the part of the decider. For
a special civil action for certiorari to succeed, it is not enough that the questioned act of the respondent
is wrong. As the Court clarified in Sempio v. Court of Appeals:

A tribunal, board or officer acts without jurisdiction if it/he does not have the legal power to determine
the case. There is excess of jurisdiction where, being clothed with the power to determine the case, the
tribunal, board or officer oversteps its/his authority as determined by law. And there is grave abuse of
discretion where the tribunal, board or officer acts in a capricious, whimsical, arbitrary or despotic
manner in the exercise of his judgment as to be said to be equivalent to lack of jurisdiction. Certiorari is
often resorted to in order to correct errors of jurisdiction. Where the error is one of law or of fact, which
is a mistake of judgment, appeal is the remedy.86

It is very conceivable that the DTI Secretary, after deliberate thought and careful evaluation of the
evidence, may either make a negative preliminary determination as he is so empowered under Section 7
of the SMA, or refuse to adopt the definitive safeguard measure under Section 13 of the same law.
Adopting the respondents' theory, this negative ruling is susceptible to reversal only through a special
civil action for certiorari, thus depriving the affected party the chance to elevate the ruling on appeal on
the rudimentary grounds of errors in fact or in law. Instead, and despite whatever indications that the
DTI Secretary acted with measure and within the bounds of his jurisdiction are, the aggrieved party will
be forced to resort to a gymnastic exercise, contorting the straight and narrow in an effort to
discombobulate the courts into believing that what was within was actually beyond and what was
studied and deliberate actually whimsical and capricious. What then would be the remedy of the party
aggrieved by a negative ruling that simply erred in interpreting the facts or the law? It certainly cannot
be the special civil action for certiorari, for as the Court held in Silverio v. Court of Appeals: "Certiorari is
a remedy narrow in its scope and inflexible in its character. It is not a general utility tool in the legal
workshop."87

Fortunately, this theoretical quandary need not come to pass. Section 29 of the SMA is worded in such a
way that it places under the CTA's judicial review all rulings of the DTI Secretary, which are connected
with the imposition of a safeguard measure. This is sound and proper in light of the specialized
jurisdiction of the CTA over tax matters. In the same way that a question of whether to tax or not to tax
is properly a tax matter, so is the question of whether to impose or not to impose a definitive safeguard
measure.

On another note, the second paragraph of Section 29 similarly reveals the legislative intent that rulings
of the DTI Secretary over safeguard measures should first be reviewed by the CTA and not the Court of
Appeals. It reads:

The petition for review shall comply with the same requirements and shall follow the same rules of
procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings
on tax matters to the Court of Appeals.

This is the only passage in the SMA in which the Court of Appeals is mentioned. The express wish of
Congress is that the petition conform to the requirements and procedure under Rule 43 of the Rules of
Civil Procedure. Since Congress mandated that the form and procedure adopted be analogous to a
review of a CTA ruling by the Court of Appeals, the legislative contemplation could not have been that
the appeal be directly taken to the Court of Appeals.
Issue of Binding Effect of Tariff
Commission's Factual Determination
on DTI Secretary.

The next issue for resolution is whether the factual determination made by the Tariff Commission under
the SMA is binding on the DTI Secretary. Otherwise stated, the question is whether the DTI Secretary
may impose general safeguard measures in the absence of a positive final determination by the Tariff
Commission.

The Court of Appeals relied upon Section 13 of the SMA in ruling that the findings of the Tariff
Commission do not necessarily constitute a final decision. Section 13 details the procedure for the
adoption of a safeguard measure, as well as the steps to be taken in case there is a negative final
determination. The implication of the Court of Appeals' holding is that the DTI Secretary may adopt a
definitive safeguard measure, notwithstanding a negative determination made by the Tariff
Commission.

Undoubtedly, Section 13 prescribes certain limitations and restrictions before general safeguard
measures may be imposed. However, the most fundamental restriction on the DTI Secretary's power in
that respect is contained in Section 5 of the SMA¾that there should first be a positive final
determination of the Tariff Commission¾which the Court of Appeals curiously all but ignored. Section 5
reads:

Sec. 5. Conditions for the Application of General Safeguard Measures. – The Secretary shall apply a
general safeguard measure upon a positive final determination of the [Tariff] Commission that a
product is being imported into the country in increased quantities, whether absolute or relative to the
domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic
industry; however, in the case of non-agricultural products, the Secretary shall first establish that the
application of such safeguard measures will be in the public interest. (emphasis supplied)

The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a
"positive final determination." This power lodged in the Tariff Commission, must be distinguished from
the power to impose the general safeguard measure which is properly vested on the DTI Secretary.88

All in all, there are two condition precedents that must be satisfied before the DTI Secretary may impose
a general safeguard measure on grey Portland cement. First, there must be a positive final
determination by the Tariff Commission that a product is being imported into the country in increased
quantities (whether absolute or relative to domestic production), as to be a substantial cause of serious
injury or threat to the domestic industry. Second, in the case of non-agricultural products the Secretary
must establish that the application of such safeguard measures is in the public interest.89 As Southern
Cross argues, Section 5 is quite clear-cut, and it is impossible to finagle a different conclusion even
through overarching methods of statutory construction. There is no safer nor better settled canon of
interpretation that when language is clear and unambiguous it must be held to mean what it plainly
expresses:90 In the quotable words of an illustrious member of this Court, thus:

[I]f a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied
without attempted interpretation. The verba legis or plain meaning rule rests on the valid presumption
that the words employed by the legislature in a statute correctly express its intent or will and preclude
the court from construing it differently. The legislature is presumed to know the meaning of the words,
to have used words advisedly, and to have expressed its intent by the use of such words as are found in
the statute.91

Moreover, Rule 5 of the Implementing Rules and Regulations of the SMA,92 which interprets Section 5 of
the law, likewise requires a positive final determination on the part of the Tariff Commission before the
application of the general safeguard measure.

The SMA establishes a distinct allocation of functions between the Tariff Commission and the DTI
Secretary. The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to
make a "positive final determination." This power, which belongs to the Tariff Commission, must be
distinguished from the power to impose general safeguard measure properly vested on the DTI
Secretary. The distinction is vital, as a "positive final determination" clearly antecedes, as a condition
precedent, the imposition of a general safeguard measure. At the same time, a positive final
determination does not necessarily result in the imposition of a general safeguard measure. Under
Section 5, notwithstanding the positive final determination of the Tariff Commission, the DTI Secretary is
tasked to decide whether or not that the application of the safeguard measures is in the public interest.

It is also clear from Section 5 of the SMA that the positive final determination to be undertaken by the
Tariff Commission does not entail a mere gathering of statistical data. In order to arrive at such
determination, it has to establish causal linkages from the statistics that it compiles and evaluates: after
finding there is an importation in increased quantities of the product in question, that such importation
is a substantial cause of serious threat or injury to the domestic industry.

The Court of Appeals relies heavily on the legislative record of a congressional debate during
deliberations on the SMA to assert a purported legislative intent that the findings of the Tariff
Commission do not bind the DTI Secretary.93 Yet as explained earlier, the plain meaning of Section 5
emphasizes that only if the Tariff Commission renders a positive determination could the DTI Secretary
impose a safeguard measure. Resort to the congressional records to ascertain legislative intent is not
warranted if a statute is clear, plain and free from ambiguity. The legislature is presumed to know the
meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such
words as are found in the statute.94

Indeed, the legislative record, if at all to be availed of, should be approached with extreme caution, as
legislative debates and proceedings are powerless to vary the terms of the statute when the meaning is
clear.95 Our holding in Civil Liberties Union v. Executive Secretary96 on the resort to deliberations of the
constitutional convention to interpret the Constitution is likewise appropriate in ascertaining statutory
intent:

While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional
convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may
be had only when other guides fail as said proceedings are powerless to vary the terms of the
Constitution when the meaning is clear. Debates in the constitutional convention "are of value as
showing the views of the individual members, and as indicating the reasons for their votes, but they give
us no light as to the views of the large majority who did not talk xxx. We think it safer to construe the
constitution from what appears upon its face."97
Moreover, it is easy to selectively cite passages, sometimes out of their proper context, in order to
assert a misleading interpretation. The effect can be dangerous. Minority or solitary views, anecdotal
ruminations, or even the occasional crude witticisms, may improperly acquire the mantle of legislative
intent by the sole virtue of their publication in the authoritative congressional record. Hence, resort to
legislative deliberations is allowable when the statute is crafted in such a manner as to leave room for
doubt on the real intent of the legislature.

Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power to impose a general
safeguard measure by preconditioning such imposition on a positive determination by the Tariff
Commission. Such legislative intent should be given full force and effect, as the executive power to
impose definitive safeguard measures is but a delegated power¾the power of taxation, by nature and
by command of the fundamental law, being a preserve of the legislature.98 Section 28(2), Article VI of the
1987 Constitution confirms the delegation of legislative power, yet ensures that the prerogative of
Congress to impose limitations and restrictions on the executive exercise of this power:

The Congress may, by law, authorize the President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts within the framework of the national development program
of the Government.99

The safeguard measures which the DTI Secretary may impose under the SMA may take the following
variations, to wit: (a) an increase in, or imposition of any duty on the imported product; (b) a decrease in
or the imposition of a tariff-rate quota on the product; (c) a modification or imposition of any
quantitative restriction on the importation of the product into the Philippines; (d) one or more
appropriate adjustment measures, including the provision of trade adjustment assistance; and (e) any
combination of the above-described actions. Except for the provision of trade adjustment assistance,
the measures enumerated by the SMA are essentially imposts, which precisely are the subject of
delegation under Section 28(2), Article VI of the 1987 Constitution.100

This delegation of the taxation power by the legislative to the executive is authorized by the
Constitution itself.101 At the same time, the Constitution also grants the delegating authority (Congress)
the right to impose restrictions and limitations on the taxation power delegated to the President.102 The
restrictions and limitations imposed by Congress take on the mantle of a constitutional command, which
the executive branch is obliged to observe.

The SMA empowered the DTI Secretary, as alter ego of the President,103 to impose definitive general
safeguard measures, which basically are tariff imposts of the type spoken of in the Constitution.
However, the law did not grant him full, uninhibited discretion to impose such measures. The DTI
Secretary authority is derived from the SMA; it does not flow from any inherent executive power. Thus,
the limitations imposed by Section 5 are absolute, warranted as they are by a constitutional fiat.104

Philcemcor cites our 1912 ruling in Lamb v. Phipps105 to assert that the DTI Secretary, having the final
decision on the safeguard measure, has the power to evaluate the findings of the Tariff Commission and
make an independent judgment thereon. Given the constitutional and statutory limitations governing
the present case, the citation is misplaced. Lamb pertained to the discretion of the Insular Auditor of the
Philippine Islands, whom, as the Court recognized, "[t]he statutes of the United States require[d] xxx to
exercise his judgment upon the legality xxx [of] provisions of law and resolutions of Congress providing
for the payment of money, the means of procuring testimony upon which he may act."106

Thus in Lamb, while the Court recognized the wide latitude of discretion that may have been vested on
the Insular Auditor, it also recognized that such latitude flowed from, and is consequently limited by,
statutory grant. However, in this case, the provision of the Constitution in point expressly recognizes the
authority of Congress to prescribe limitations in the case of tariffs, export/import quotas and other such
safeguard measures. Thus, the broad discretion granted to the Insular Auditor of the Philippine Islands
cannot be analogous to the discretion of the DTI Secretary which is circumscribed by Section 5 of the
SMA.

For that matter, Cariño v. Commissioner on Human Rights,107 likewise cited by Philcemcor, is also
inapplicable owing to the different statutory regimes prevailing over that case and the present petition.
In Cariño, the Court ruled that the constitutional power of the Commission on Human Rights (CHR) to
investigate human rights' violations did not extend to adjudicating claims on the merits.108 Philcemcor
claims that the functions of the Tariff Commission being "only investigatory," it could neither decide nor
adjudicate.109

The applicable law governing the issue in Cariño is Section 18, Article XIII of the Constitution, which
delineates the powers and functions of the CHR. The provision does not vest on the CHR the power to
adjudicate cases, but only to investigate all forms of human rights violations.110 Yet, without modifying
the thorough disquisition of the Court in Cariño on the general limitations on the investigatory power,
the precedent is inapplicable because of the difference in the involved statutory frameworks. The
Constitution does not repose binding effect on the results of the CHR's investigation.111 On the other
hand, through Section 5 of the SMA and under the authority of Section 28(2), Article VI of the
Constitution, Congress did intend to bind the DTI Secretary to the determination made by the Tariff
Commission.112 It is of no consequence that such determination results from the exercise of
investigatory powers by the Tariff Commission since Congress is well within its constitutional mandate
to limit the authority of the DTI Secretary to impose safeguard measures in the manner that it sees fit.

The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and Rule 13 of the SMA's
Implementing Rules in support of the view that the DTI Secretary may decide independently of the
determination made by the Tariff Commission. Admittedly, there are certain infelicities in the language
of Section 13 and Rule 13. But reliance should not be placed on the textual imprecisions. Rather, Section
13 and Rule 13 must be viewed in light of the fundamental prescription imposed by Section 5. 113

Section 13 of the SMA lays down the procedure to be followed after the Tariff Commission renders its
report. The provision reads in full:

SEC. 13. Adoption of Definitive Measures. — Upon its positive determination, the Commission shall
recommend to the Secretary an appropriate definitive measure, in the form of:

(a) An increase in, or imposition of, any duty on the imported product;

(b) A decrease in or the imposition of a tariff-rate quota (MAV) on the product;

(c) A modification or imposition of any quantitative restriction on the importation of the product into
the Philippines;
(d) One or more appropriate adjustment measures, including the provision of trade adjustment
assistance;

(e) Any combination of actions described in subparagraphs (a) to (d).

The Commission may also recommend other actions, including the initiation of international
negotiations to address the underlying cause of the increase of imports of the product, to alleviate the
injury or threat thereof to the domestic industry, and to facilitate positive adjustment to import
competition.

The general safeguard measure shall be limited to the extent of redressing or preventing the injury and
to facilitate adjustment by the domestic industry from the adverse effects directly attributed to the
increased imports: Provided, however, That when quantitative import restrictions are used, such
measures shall not reduce the quantity of imports below the average imports for the three (3) preceding
representative years, unless clear justification is given that a different level is necessary to prevent or
remedy a serious injury.

A general safeguard measure shall not be applied to a product originating from a developing country if
its share of total imports of the product is less than three percent (3%): Provided, however, That
developing countries with less than three percent (3%) share collectively account for not more than nine
percent (9%) of the total imports.

The decision imposing a general safeguard measure, the duration of which is more than one (1) year,
shall be reviewed at regular intervals for purposes of liberalizing or reducing its intensity. The industry
benefiting from the application of a general safeguard measure shall be required to show positive
adjustment within the allowable period. A general safeguard measure shall be terminated where the
benefiting industry fails to show any improvement, as may be determined by the Secretary.

The Secretary shall issue a written instruction to the heads of the concerned government agencies to
implement the appropriate general safeguard measure as determined by the Secretary within fifteen
(15) days from receipt of the report.

In the event of a negative final determination, or if the cash bond is in excess of the definitive safeguard
duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written
instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder
thereof, as the case may be, previously collected as provisional general safeguard measure within ten
(10) days from the date a final decision has been made: Provided, That the government shall not be
liable for any interest on the amount to be returned. The Secretary shall not accept for consideration
another petition from the same industry, with respect to the same imports of the product under
consideration within one (1) year after the date of rendering such a decision.

When the definitive safeguard measure is in the form of a tariff increase, such increase shall not be
subject or limited to the maximum levels of tariff as set forth in Section 401(a) of the Tariff and Customs
Code of the Philippines.

To better comprehend Section 13, note must be taken of the distinction between the investigatory and
recommendatory functions of the Tariff Commission under the SMA.
The word "determination," as used in the SMA, pertains to the factual findings on whether there are
increased imports into the country of the product under consideration, and on whether such increased
imports are a substantial cause of serious injury or threaten to substantially cause serious injury to the
domestic industry.114 The SMA explicitly authorizes the DTI Secretary to make a preliminary
determination,115 and the Tariff Commission to make the final determination.116 The distinction is
fundamental, as these functions are not interchangeable. The Tariff Commission makes its
determination only after a formal investigation process, with such investigation initiated only if there is
a positive preliminary determination by the DTI Secretary under Section 7 of the SMA.117 On the other
hand, the DTI Secretary may impose definitive safeguard measure only if there is a positive final
determination made by the Tariff Commission.118

In contrast, a "recommendation" is a suggested remedial measure submitted by the Tariff Commission

under Section 13 after making a positive final determination in accordance with Section 5. The Tariff
Commission is not empowered to make a recommendation absent a positive final determination on its
part.119 Under Section 13, the Tariff Commission is required to recommend to the [DTI] Secretary an
"appropriate definitive measure."120 The Tariff Commission "may also recommend other actions,
including the initiation of international negotiations to address the underlying cause of the increase of
imports of the products, to alleviate the injury or threat thereof to the domestic industry and to
facilitate positive adjustment to import competition."121

The recommendations of the Tariff Commission, as rendered under Section 13, are not obligatory on the
DTI Secretary. Nothing in the SMA mandates the DTI Secretary to adopt the recommendations made by
the Tariff Commission. In fact, the SMA requires that the DTI Secretary establish that the application of
such safeguard measures is in the public interest, notwithstanding the Tariff Commission's
recommendation on the appropriate safeguard measure based on its positive final determination.122 The
non-binding force of the Tariff Commission's recommendations is congruent with the command of
Section 28(2), Article VI of the 1987 Constitution that only the President may be empowered by the
Congress to impose appropriate tariff rates, import/export quotas and other similar measures.123 It is the
DTI Secretary, as alter ego of the President, who under the SMA may impose such safeguard measures
subject to the limitations imposed therein. A contrary conclusion would in essence unduly arrogate to
the Tariff Commission the executive power to impose the appropriate tariff measures. That is why the
SMA empowers the DTI Secretary to adopt safeguard measures other than those recommended by the
Tariff Commission.

Unlike the recommendations of the Tariff Commission, its determination has a different effect on the
DTI Secretary. Only on the basis of a positive final determination made by the Tariff Commission under
Section 5 can the DTI Secretary impose a general safeguard measure. Clearly, then the DTI Secretary
is bound by the determinationmade by the Tariff Commission.

Some confusion may arise because the sixth paragraph of Section 13124 uses the variant word
"determined" in a different context, as it contemplates "the appropriate general safeguard measure as
determined by the Secretary within fifteen (15) days from receipt of the report." Quite plainly, the word
"determined" in this context pertains to the DTI Secretary's power of choice of the appropriate
safeguard measure, as opposed to the Tariff Commission's power to determine the existence of
conditions necessary for the imposition of any safeguard measure. In relation to Section 5, such choice
also relates to the mandate of the DTI Secretary to establish that the application of safeguard measures
is in the public interest, also within the fifteen (15) day period. Nothing in Section 13 contradicts the
instruction in Section 5 that the DTI Secretary is allowed to impose the general safeguard measures only
if there is a positive determination made by the Tariff Commission.

Unfortunately, Rule 13.2 of the Implementing Rules of the SMA is captioned "Final Determination by the
Secretary." The assailed Decision and Philcemcor latch on this phraseology to imply that the factual
determination rendered by the Tariff Commission under Section 5 may be amended or reversed by the
DTI Secretary. Of course, implementing rules should conform, not clash, with the law that they seek to
implement, for a regulation which operates to create a rule out of harmony with the statute is a
nullity.125 Yet imperfect draftsmanship aside, nothing in Rule 13.2 implies that the DTI Secretary can set
aside the determination made by the Tariff Commission under the aegis of Section 5. This can be seen
by examining the specific provisions of Rule 13.2, thus:

RULE 13.2. Final Determination by the Secretary

RULE 13.2.a. Within fifteen (15) calendar days from receipt of the Report of the Commission, the
Secretary shall make a decision, taking into consideration the measures recommended by the
Commission.

RULE 13.2.b. If the determination is affirmative, the Secretary shall issue, within two (2) calendar days
after making his decision, a written instruction to the heads of the concerned government agencies to
immediately implement the appropriate general safeguard measure as determined by him. Provided,
however, that in the case of non-agricultural products, the Secretary shall first establish that the
imposition of the safeguard measure will be in the public interest.

RULE 13.2.c. Within two (2) calendar days after making his decision, the Secretary shall also order its
publication in two (2) newspapers of general circulation. He shall also furnish a copy of his Order to the
petitioner and other interested parties, whether affirmative or negative. (Emphasis supplied.)

Moreover, the DTI Secretary does not have the power to review the findings of the Tariff Commission
for it is not subordinate to the Department of Trade and Industry ("DTI"). It falls under the supervision,
not of the DTI nor of the Department of Finance (as mistakenly asserted by Southern Cross),126 but of
the National Economic Development Authority, an independent planning agency of the government of
co-equal rank as the DTI.127 As the supervision and control of a Department Secretary is limited to the
bureaus, offices, and agencies under him,128 the DTI Secretary generally cannot exercise review authority
over actions of the Tariff Commission. Neither does the SMA specifically authorize the DTI Secretary to
alter, amend or modify in any way the determination made by the Tariff Commission. The most that the
DTI Secretary could do to express displeasure over the Tariff Commission's actions is to ignore its
recommendation, but not its determination.

The word "determination" as used in Rule 13.2 of the Implementing Rules is dissonant with the same
word as employed in the SMA, which in the latter case is undeviatingly in reference to the
determination made by the Tariff Commission. Beyond the resulting confusion, however, the divergent
use in Rule 13.2 is explicable as the Rule textually pertains to the power of the DTI Secretary to review
the recommendations of the Tariff Commission, not the latter's determination. Indeed, an examination
of the specific provisions show that there is no real conflict to reconcile. Rule 13.2 respects the logical
order imposed by the SMA. The Rule does not remove the essential requirement under Section 5 that a
positive final determination be made by the Tariff Commission before a definitive safeguard measure
may be imposed by the DTI Secretary.

The assailed Decision characterizes the findings of the Tariff Commission as merely recommendatory
and points to the DTI Secretary as the authority who renders the final decision.129 At the same time,
Philcemcor asserts that the Tariff Commission's functions are merely investigatory, and as such do not
include the power to decide or adjudicate. These contentions, viewed in the context of the fundamental
requisite set forth by Section 5, are untenable. They run counter to the statutory prescription that a
positive final determination made by the Tariff Commission should first be obtained before the
definitive safeguard measures may be laid down.

Was it anomalous for Congress to have provided for a system whereby the Tariff Commission may
preclude the DTI, an office of higher rank, from imposing a safeguard measure? Of course, this Court
does not inquire into the wisdom of the legislature but only charts the boundaries of powers and
functions set in its enactments. But then, it is not difficult to see the internal logic of this statutory
framework.

For one, as earlier stated, the DTI cannot exercise review powers over the Tariff Commission which is
not its subordinate office.

Moreover, the mechanism established by Congress establishes a measure of check and balance
involving two different governmental agencies with disparate specializations. The matter of safeguard
measures is of such national importance that a decision either to impose or not to impose then could
have ruinous effects on companies doing business in the Philippines. Thus, it is ideal to put in place a
system which affords all due deliberation and calls to fore various governmental agencies exercising
their particular specializations.

Finally, if this arrangement drawn up by Congress makes it difficult to obtain a general safeguard
measure, it is because such safeguard measure is the exception, rather than the rule. The Philippines is
obliged to observe its obligations under the GATT, under whose framework trade liberalization, not
protectionism, is laid down. Verily, the GATT actually prescribes conditions before a member-country
may impose a safeguard measure. The pertinent portion of the GATT Agreement on Safeguards reads:

2. A Member may only apply a safeguard measure to a product only if that member has determined,
pursuant to the provisions set out below, that such product is being imported into its territory in such
increased quantities, absolute or relative to domestic production, and under such conditions as to cause
or threaten to cause serious injury to the domestic industry that produces like or directly competitive
products.130

3. (a) A Member may apply a safeguard measure only following an investigation by the competent
authorities of that Member pursuant to procedures previously established and made public in
consonance with Article X of the GATT 1994. This investigation shall include reasonable public notice to
all interested parties and public hearings or other appropriate means in which importers, exporters and
other interested parties could present evidence and their views, including the opportunity to respond to
the presentations of other parties and to submit their views, inter alia, as to whether or not the
application of a safeguard measure would be in the public interest. The competent authorities shall
publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of
fact and law.131

The SMA was designed not to contradict the GATT, but to complement it. The two requisites laid down
in Section 5 for a positive final determination are the same conditions provided under the GATT
Agreement on Safeguards for the application of safeguard measures by a member country. Moreover,
the investigatory procedure laid down by the SMA conforms to the procedure required by the GATT
Agreement on Safeguards. Congress has chosen the Tariff Commission as the competent authority to
conduct such investigation. Southern Cross stresses that applying the provision of the GATT Agreement
on Safeguards, the Tariff Commission is clearly empowered to arrive at binding conclusions.132 We agree:
binding on the DTI Secretary is the Tariff Commission's determinations on whether a product is
imported in increased quantities, absolute or relative to domestic production and whether any such
increase is a substantial cause of serious injury or threat thereof to the domestic industry.133

Satisfied as we are with the proper statutory paradigm within which the SMA should be analyzed, the
flaws in the reasoning of the Court of Appeals and in the arguments of the respondents become
apparent. To better understand the dynamics of the procedure set up by the law leading to the
imposition of definitive safeguard measures, a brief step-by-step recount thereof is in order.

1. After the initiation of an action involving a general safeguard measure,134 the DTI Secretary makes a
preliminary determination whether the increased imports of the product under consideration
substantially cause or threaten to substantially cause serious injury to the domestic industry,135 and
whether the imposition of a provisional measure is warranted under Section 8 of the SMA.136 If the
preliminary determination is negative, it is implied that no further action will be taken on the
application.

2. When his preliminary determination is positive, the Secretary immediately transmits the records
covering the application to the Tariff Commission for immediate formal investigation.137

3. The Tariff Commission conducts its formal investigation, keyed towards making a final determination.
In the process, it holds public hearings, providing interested parties the opportunity to present evidence
or otherwise be heard.138 To repeat, Section 5 enumerates what the Tariff Commission is tasked to
determine: (a) whether a product is being imported into the country in increased quantities, irrespective
of whether the product is absolute or relative to the domestic production; and (b) whether the
importation in increased quantities is such that it causes serious injury or threat to the domestic
industry.139 The findings of the Tariff Commission as to these matters constitute the final determination,
which may be either positive or negative.

4. Under Section 13 of the SMA, if the Tariff Commission makes a positive determination, the Tariff
Commission "recommends to the [DTI] Secretary an appropriate definitive measure." The Tariff
Commission "may also recommend other actions, including the initiation of international negotiations to
address the underlying cause of the increase of imports of the products, to alleviate the injury or threat
thereof to the domestic industry, and to facilitate positive adjustment to import competition."140

5. If the Tariff Commission makes a positive final determination, the DTI Secretary is then to decide,
within fifteen (15) days from receipt of the report, as to what appropriate safeguard measures should he
impose.
6. However, if the Tariff Commission makes a negative final determination, the DTI Secretary cannot
impose any definitive safeguard measure. Under Section 13, he is instructed instead to return whatever
cash bond was paid by the applicant upon the initiation of the action for safeguard measure.

The Effect of the Court's Decision

The Court of Appeals erred in remanding the case back to the DTI Secretary, with the instruction that
the DTI Secretary may impose a general safeguard measure even if there is no positive final
determination from the Tariff Commission. More crucially, the Court of Appeals could not have acquired
jurisdiction over Philcemcor's petition for certiorari in the first place, as Section 29 of the SMA properly
vests jurisdiction on the CTA. Consequently, the assailed Decision is an absolute nullity, and we declare it
as such.

What is the effect of the nullity of the assailed Decision on the 5 June 2003 Decision of the DTI Secretary
imposing the general safeguard measure? We have recognized that any initial judicial review of a DTI
ruling in connection with the imposition of a safeguard measure belongs to the CTA. At the same time,
the Court also recognizes the fundamental principle that a null and void judgment cannot produce any
legal effect. There is sufficient cause to establish that the 5 June 2003 Decision of the DTI Secretary
resulted from the assailed Court of Appeals Decision, even if the latter had not yet become final.
Conversely, it can be concluded that it was because of the putative imprimatur of the Court of
Appeals' Decision that the DTI Secretary issued his ruling imposing the safeguard measure. Since the 5
June 2003 Decision derives its legal effect from the void Decision of the Court of Appeals, this ruling of
the DTI Secretary is consequently void. The spring cannot rise higher than the source.

The DTI Secretary himself acknowledged that he drew stimulating force from the appellate
court's Decision for in his own 5 June 2003 Decision, he declared:

From the aforementioned ruling, the CA has remanded the case to the DTI Secretary for a final decision.
Thus, there is no legal impediment for the Secretary to decide on the application.141

The inescapable conclusion is that the DTI Secretary needed the assailed Decision of the Court of
Appeals to justify his rendering a second Decision. He explicitly invoked the Court of Appeals' Decision as
basis for rendering his 5 June 2003 ruling, and implicitly recognized that without such Decision he would
not have the authority to revoke his previous ruling and render a new, obverse ruling.

It is clear then that the 25 June 2003 Decision of the DTI Secretary is a product of the void Decision, it
being an attempt to carry out such null judgment. There is therefore no choice but to declare it void as
well, lest we sanction the perverse existence of a fruit from a non-existent tree. It does not even matter
what the disposition of the 25 June 2003 Decision was, its nullity would be warranted even if the DTI
Secretary chose to uphold his earlier ruling denying the application for safeguard measures.

It is also an unfortunate spectacle to behold the DTI Secretary, seeking to enforce a judicial decision
which is not yet final and actually pending review on appeal. Had it been a judge who attempted to
enforce a decision that is not yet final and executory, he or she would have readily been subjected to
sanction by this Court. The DTI Secretary may be beyond the ambit of administrative review by this
Court, but we are capacitated to allocate the boundaries set by the law of the land and to exact fealty to
the legal order, especially from the instrumentalities and officials of government.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is DECLARED NULL
AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL
AND VOID and SET ASIDE. No Costs.

SO ORDERED.
G.R. No. 118216 March 9, 2000

DELTAVENTURES RESOURCES, INC., petitioner,

vs.
HON. FERNANDO P. CABATO, Presiding Judge Regional Trial Court, La Trinidad, Benguet, Branch 62;
HON. GELACIO L. RIVERA, JR., Executive Labor Arbiter, NLRC-CAR, Baguio City, ADAM P. VENTURA,
Deputy-Sheriff, NLRC-CAR, Baguio City; ALEJANDRO BERNARDINO, AUGUSTO GRANADOS, PILANDO
TANGAY, NESTOR RABANG, RAY DAYAP, MYRA BAYAONA, VIOLY LIBAO, AIDA LIBAO, JESUS GATCHO
and GREGORIO DULAY, respondents.

QUISUMBING, J.:

This special civil action for certiorari seeks to annual the Order dated November 7, 1994,1 of respondent
Judge Fernando P. Cabato of the Regional Trial Court of La Trinidad, Benguet, Branch 62, in Civil Case No.
94-CV-0948, dismissing petitioner's amended third-party complaint, as well as the Order dated
December 14, 1994,2 denying motion for reconsideration.

On July 15, 1992, a Decision3 was rendered by Executive Labor Arbiter Norma Olegario, National Labor
Relations Commission — Regional Arbitration Board, Cordillera Autonomous Region (Commission), in
NLRC Case No. 01-08-0165-89 entitled "Alejandro Bernardino, et al, vs. Green Mountain Farm, Roberto
Ongpin and Almus Alabe", the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered declaring the respondents guilty of Illegal Dismissal and
Unfair Labor Practice and ordering them to pay the complainants, in solidum, in the amount herein
below listed:

1. Violy Libao P131,368.07

2. Myra Bayaona 121,470.23

3. Gregorio Dulay 128,362.17

4. Jesus Gatcho 126,475.17

5. Alejandro Bernardino 110,158.20

6. Pilando Tangay 107,802.66

7. Aida Libao 129,967.34

8. Rey Dayap 123,289.21

9. Nestor Rabang 90,611.69

10. Augusto Granados 108,106.03

plus attorney's fees in the amount of P10.000.00.

Respondent Almus Alabe is also ordered to answer in exemplary damages in the amount of P5,00.00
each to all the complainants.

xxx xxx xxx

SO ORDERED. 4

On May 19, 1994, complainants in the abovementioned labor case filed before the Commission a
motion for the issuance of a writ of execution as respondent's appeal to the Commission and this
Court5 were respectively denied.

On June 16, 1994, Executive Labor Arbiter Gelacio C. Rivera, Jr. to whom the case was reassigned in view
of Labor Arbiter Olegario's transfer, issued a writ of execution6 directing NLRC Deputy Sheriff Adam
Ventura to execute the judgment against respondents, Green Mountain Farm, Roberto Ongpin and
Almus Alabe Sheriff Ventura then proceeded to enforce the writ by garnishing certain personal
properties of respondents. Findings that said judgment debtors do not have sufficient personal
properties to satisfy the monetary award, Sheriff Ventura proceeded to levy upon a real property
covered by Tax Declaration No. 9697, registered in the name of Roberto Ongpin, one of the respondents
in the labor case. Thereafter, Sheriff Ventura caused the publication on the July 17, 1994 edition of the
Baguio Midland Courier the date of the public auction of said real property.

On July 27, 1994, a month before the scheduled auction sale, herein petitioner filed before the
Commission a third-party claim7 asserting ownership over the property levied upon and subject of the
Sheriff notice of sale. Labor Arbiter Rivera thus issued an order directing the suspension of the auction
sale until the merits of petitioner's claim has been resolved.8

However, on August 16, 1994, petitioner filed with the Regional Trial Court of La Trinidad, Benguet a
complaint for injunction and damages, with a prayer for the issuance of a temporary retraining order
against Sheriff Ventura, reiterating the same allegations it raised in the third party claim it field with the
Commission. The petition was docketed as Civil Case No. 94-CV-0948, entitled "Deltaventures
Resources, Inc., petitioner vs. Adam P. Ventura, etal., defendants." The next day, August 17, 1994,
respondent Judge Cabato issued a temporary restraining order, enjoining respondents in the civil case
before him to hold in abeyance any action relative to the enforcement of the decision in the labor case.9

Petitioner likewise filed on August 30, 1994, an amended complaint10 to implead Labor arbiter Rivera
and herein private respondent-laborers.

Further, on September 20, 1994, petitioner, filed with the Commission a manifestation11 questioning the
latter's authority to hear the case, the matter being within the jurisdiction of the regular courts. The
manifestation however, was dismissed by Labor arbiter Rivera on October 3, 1994.12

Meanwhile, on September 20, 1994, private respondent-laborers, moved for the dismissal of the civil
case on the ground of the court's lack of jurisdiction.13 Petitioner filed its opposition to said motion on
October 4, 1994.14

On November 7, 1994, after both parties had submitted their respective briefs, respondent court
rendered its assailed decision premised on the following grounds:

First, this Court is equal rank with the NLRC, hence, has no jurisdiction to issue an injunction against the
execution of the NLRC decision. . . .

Second, the NLRC retains authority over all proceedings anent the execution of its decision. This power
carries with it the right to determine every question which may be involved in the execution of its
decision. . . .
Third, Deltaventures Resources, Inc. should rely on and comply with the Rules of the NLRC because it is
the principal procedure to be followed, the Rules of Court being merely suppletory in application, . . .

Fourth, the invocation of estoppel by the plaintiffs is misplaced. . . . . [B]efore the defendants have filed
their formal answer to the amended complaint, they moved to dismiss it for lack of jurisdiction.

Lastly, the plaintiff, having in the first place addressed to the jurisdiction of the NLRC by filing with it a
Third Party Claim may not at the same time pursue the present amended Complaint under the forum
shopping rule.15

Their motion for reconsideration having been denied by respondent Judge, 16 petitioner promptly filed
this petition now before us.

In spite of the many errors assigned by petitioner,17 we find that here the core issue is whether or not
the trial court may take cognizance of the complaint filed by petitioner and consequently provide the
injunction relief sought. Such cognizance in turn, would depend on whether the acts complained of are
related to, connected or interwoven with the cases falling under the exclusive jurisdiction of the Labor
arbiter or the NLRC.

Petitioner avers that court a quo erred in dismissing the third-party claim on the ground of lack of
jurisdiction. Further, it contends that the NLRC-CAR did not acquire jurisdiction over the claim for it did
not impugn the decision of the NLRC-CAR but merely questioned the propriety of the levy made by
Sheriff Ventura. In support of its claim, petitioner asserts that the instant case does not involve a labor
dispute, as no-employer-employee relationship exists between the parties. Nor is the petitioner's case
related in any way to either parties' case before the NLRC-CAR hence, not within the jurisdiction of the
Commission.

Basic as a hornbook principle, jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations in the complainant18 which comprise a concise statement of the ultimate
facts constituting the petitioner's cause of action.19 Thus we have held that:

Jurisdiction over the subject-matter is determined upon the allegations made in the complainant,
irrespective of whether the plaintiff is entitled or not entitled to recover upon the claim asserted therein
- a matter resolved only after and as a result of the trial. 20

Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by
the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce
and execute the commission's decision in NLRC Case No. 01-08-0165-89 (Illegal Dismissal and Unfair
Labor Practice) against Green Mountain Farm, Roberto Ongpin and Almus Alabe.

Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in
essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of
execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the
writ. The complainant was in effect a motion to quash the writ of execution of a decision rendered on a
case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor
Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third
party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts.
Precedents abound confirming the rule that said courts have no labor jurisdiction to act on labor cases
or various incidents arising therefrom, including the execution of decisions, awards or
orders.21 Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official
concerned under the Department of Labor and Employment. To hold otherwise is to sanction split
jurisdiction which is obnoxious to the orderly administration of justice.22

Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself to
the jurisdiction of the Commission acting through the Labor Arbiter.1âwphi1 It failed to perceive the fact
that what it is really controverting is the decision of the Labor arbiter and not the act of the deputy
sheriff in executing said order issued as a consequence of said decision rendered.

Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is
terminated.23Whatever irregularities attended the issuance and execution of the alias writ of execution
should be referred to the same administrative tribunal which rendered the decision.24 This is because
any court which issued a writ of execution has the inherent power, for the advancement of justice, to
correct errors of its ministerial officers and to control its own processes.25

The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by
Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction over
incidents arising from, in connection with or relating to labor disputes, as the controversy under
consideration, to the exclusion of the regular courts.

Having established that jurisdiction over the case rests with the Commission, we find no grave abuse of
discretion on the part of respondent Judge Cabato in denying petitioner's motion for the issuance of an
injunction against the execution of the decision of the National Labor Relations Commission.

Moreover, it must be noted that the Labor Code in Article 254 explicitly prohibits issuance of a
temporary or permanent injunction or restraining order in any case involving or growing out of labor
disputes by any court or other entity (except as otherwise provided in Arts. 218 and 264). As correctly
observed by court a quo, the main issue and the subject of the amended complaint for injunction are
questions interwoven with the execution of the Commission's decision. No doubt the aforecited
prohibition in Article 254 is applicable.1âwphi1

Petitioner should have filed its third-party claim before the Labor Arbiter, from whom the writ of
execution originated, before instituting said civil case. The NLRC's Manual on Execution of
Judgment,26 issued pursuant to Article 218 of the Labor Code, provides the mechanism for a third-party
claimant to assert his claim over a property levied upon by the sheriff pursuant to an order or decision
of the Commission or of the Labor Arbiter. The power of the Labor Arbiter to issue a writ of execution
carries with it the power to inquire into the correctness of the execution of his decision and to consider
whatever supervening events might transpire during such execution.

Moreover, in denying petitioner's petition for injunction, the court a quo is merely upholding the time-
honored principle that a Regional Trial Court, being a co-equal body of the National Labor Relations
Commission, has no jurisdiction to issue any restraining order or injunction to enjoin the execution of
any decision of the latter.27

WHEREFORE, the petition for certiorari and prohibition is DENIED. The assailed Orders of respondent
Judge Fernando P. Cabato dated November 7, 1994 and December 14, 1994, respectively are AFFIRMED.
The records of this case are hereby REMANDED to the National Labor Relations Commission for further
proceedings.1âwphi1.nêt

Costs against petitioner.

SO ORDERED.
G.R. No. 184778 October 2, 2009

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners,

vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch
28; RURAL BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.; RURAL BANK OF
CARMEN (CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE COUNTRYSIDE RURAL BANK, INC.;
RURAL BANK OF CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL BANK); RURAL BANK OF
DARBCI, INC.; RURAL BANK OF KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL
BANK OF BISAYAS MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT
BANK, INC., Respondents.

DECISION

VELASCO, JR., J.:

The Case

This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary
Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision dated September 30,
20081 of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA Decision upheld the Order2 dated
June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in Manila, issuing writs of preliminary
injunction in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-
119249, 08-119250, 08-119251, and 08-119273, and the Order dated May 21, 2008 that consolidated
the civil cases.

The Facts

In September of 2007, the Supervision and Examination Department (SED) of the Bangko Sentral ng
Pilipinas (BSP) conducted examinations of the books of the following banks: Rural Bank of Parañaque,
Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural
Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc. (now
Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate
Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San Pablo City Development
Bank, Inc.

After the examinations, exit conferences were held with the officers or representatives of the banks
wherein the SED examiners provided them with copies of Lists of Findings/Exceptions containing the
deficiencies discovered during the examinations. These banks were then required to comment and to
undertake the remedial measures stated in these lists within 30 days from their receipt of the lists,
which remedial measures included the infusion of additional capital. Though the banks claimed that
they made the additional capital infusions, petitioner Chuchi Fonacier, officer-in-charge of the SED, sent
separate letters to the Board of Directors of each bank, informing them that the SED found that the
banks failed to carry out the required remedial measures. In response, the banks requested that they be
given time to obtain BSP approval to amend their Articles of Incorporation, that they have an
opportunity to seek investors. They requested as well that the basis for the capital infusion figures be
disclosed, and noted that none of them had received the Report of Examination (ROE) which finalizes
the audit findings. They also requested meetings with the BSP audit teams to reconcile audit figures. In
response, Fonacier reiterated the banks’ failure to comply with the directive for additional capital
infusions.

On May 12, 2008, the RBPI filed a complaint for nullification of the BSP ROE with application for a TRO
and writ of preliminary injunction before the RTC docketed as Civil Case No. 08-119243 against Fonacier,
the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B. Valdepenas, Jr., Raul A. Boncan, Juanita D.
Amatong, Alfredo C. Antonio, and Nelly F. Villafuerte. RBPI prayed that Fonacier, her subordinates,
agents, or any other person acting in her behalf be enjoined from submitting the ROE or any similar
report to the Monetary Board (MB), or if the ROE had already been submitted, the MB be enjoined from
acting on the basis of said ROE, on the allegation that the failure to furnish the bank with a copy of the
ROE violated its right to due process.

The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural Bank, Inc.,
Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc., Rural Bank of Darbci,
Inc., Rural Bank of Kananga (Leyte), Inc., and Rural Bank de Bisayas Minglanilla followed suit, filing
complaints with the RTC substantially similar to that of RBPI, including the reliefs prayed for, which were
raffled to different branches and docketed as Civil Cases Nos. 08-119244, 08-119245, 08-119246, 08-
119247, 08-119248, 08-119249, 08-119250, and 08-119251, respectively.

On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a
motion for reconsideration the next day.

On May 14, 2008, Fonacier and the BSP filed their opposition to the application for a TRO and writ of
preliminary injunction in Civil Case No. 08-119243 with the RTC. Respondent Judge Nina Antonio-
Valenzuela of Branch 28 granted RBPI’s prayer for the issuance of a TRO.

The other banks separately filed motions for consolidation of their cases in Branch 28, which motions
were granted. Judge Valenzuela set the complaint of Rural Bank of San Jose (Batangas), Inc. for hearing
on May 15, 2008. Petitioners assailed the validity of the consolidation of the nine cases before the RTC,
alleging that the court had already prejudged the case by the earlier issuance of a TRO in Civil Case No.
08-119243, and moved for the inhibition of respondent judge. Petitioners filed a motion for
reconsideration regarding the consolidation of the subject cases.

On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar complaint against the same
defendants with the RTC, and this was docketed as Civil Case No. 08-119273 that was later on
consolidated with Civil Case No. 08-119243. Petitioners filed an Urgent Motion to Lift/Dissolve the TRO
and an Opposition to the earlier motion for reconsideration of Pilipino Rural Bank, Inc.

On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for the issuance of TROs for the
other seven cases consolidated with Civil Case No. 08-119243. On May 21, 2008, Judge Valenzuela
issued an Order denying petitioners’ motion for reconsideration regarding the consolidation of cases in
Branch 28. On May 22, 2008, Judge Valenzuela granted the urgent motion for reconsideration of Pilipino
Rural Bank, Inc. and issued a TRO similar to the ones earlier issued.

On May 26, 2008, petitioners filed a Motion to Dismiss against all the complaints (except that of the San
Pablo City Development Bank, Inc.), on the grounds that the complaints stated no cause of action and
that a condition precedent for filing the cases had not been complied with. On May 29, 2008, a hearing
was conducted on the application for a TRO and for a writ of preliminary injunction of San Pablo City
Development Bank, Inc.

The Ruling of the RTC

After the parties filed their respective memoranda, the RTC, on June 4, 2008, ruled that the banks were
entitled to the writs of preliminary injunction prayed for. It held that it had been the practice of the SED
to provide the ROEs to the banks before submission to the MB. It further held that as the banks are the
subjects of examinations, they are entitled to copies of the ROEs. The denial by petitioners of the banks’
requests for copies of the ROEs was held to be a denial of the banks’ right to due process.

The dispositive portion of the RTC’s order reads:

WHEREFORE, the Court rules as follows:

1) Re: Civil Case No. 08-119243. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Rural Bank of Paranaque Inc. is directed to post a bond executed to the defendants, in the amount of
P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may
sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled
thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board.
In case such a Report on Examination [sic] or any other similar report prepared in connection with the
examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its
members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.

2) Re: Civil Case No. 08-119244. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Rural Bank of San Jose (Batangas), Inc. is directed to post a bond executed to the defendants, in the
amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they
may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not
entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be
issued to enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary
Board. In case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter
and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.

3) Re: Civil Case No. 08-119245. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Rural Bank of Carmen (Cebu), Inc. is directed to post a bond executed to the defendants, in the amount
of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may
sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled
thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board.
In case such a Report on Examination [sic] or any other similar report prepared in connection with the
examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its
members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.

4) Re: Civil Case No. 08-119246. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Pilipino Rural Bank Inc. is directed to post a bond executed to the defendants, in the amount of
P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may
sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled
thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board.
In case such a Report on Examination [sic] or any other similar report prepared in connection with the
examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its
members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.

5) Re: Civil Case No. 08-119247. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Philippine Countryside Rural Bank Inc. is directed to post a bond executed to the defendants, in the
amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they
may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not
entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be
issued to enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary
Board. In case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter
and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.

6) Re: Civil Case No. 08-119248. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Dynamic Bank Inc. (Rural Bank of Calatagan) is directed to post a bond executed to the defendants, in
the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which
they may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not
entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be
issued to enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary
Board. In case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter
and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.

7) Re: Civil Case No. 08-119249. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Rural Bank of DARBCI, Inc. is directed to post a bond executed to the defendants, in the amount of
P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may
sustain by reason of the injunction if the Court should finally decide that the plaintiff was not entitled
thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other similar
report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board.
In case such a Report on Examination [sic] or any other similar report prepared in connection with the
examination conducted on the plaintiff has been submitted to the Monetary Board, the latter and its
members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.

8) Re: Civil Case No. 08-119250. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Rural Bank of Kananga Inc. (First Intestate Bank), is directed to post a bond executed to the defendants,
in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages
which they may sustain by reason of the injunction if the Court should finally decide that the plaintiff
was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or
any other similar report prepared in connection with the examination conducted on the plaintiff, to the
Monetary Board. In case such a Report on Examination [sic] or any other similar report prepared in
connection with the examination conducted on the plaintiff has been submitted to the Monetary Board,
the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.

9) Re: Civil Case No. 08-119251. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
Banco Rural De Bisayas Minglanilla (Cebu) Inc. (Bank of East Asia) is directed to post a bond executed to
the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay to the defendants
all damages which they may sustain by reason of the injunction if the Court should finally decide that
the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of
preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of
Examination or any other similar report prepared in connection with the examination conducted on the
plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any other similar report
prepared in connection with the examination conducted on the plaintiff has been submitted to the
Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan,
Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

10) Re: Civil Case No. 08-119273. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff
San Pablo City Development Bank, Inc. is directed to post a bond executed to the defendants, in the
amount of P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they
may sustain by reason of the injunction if the Court should finally decide that the plaintiff was not
entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be
issued to enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary
Board. In case such a Report on Examination [sic] or any other similar report prepared in connection
with the examination conducted on the plaintiff has been submitted to the Monetary Board, the latter
and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.3

The Ruling of the CA

Petitioners then brought the matter to the CA via a petition for certiorari under Rule 65 claiming grave
abuse of discretion on the part of Judge Valenzuela when she issued the orders dated May 21, 2008 and
June 4, 2008.
The CA ruled that the RTC committed no grave abuse of discretion when it ordered the issuance of a
writ of preliminary injunction and when it ordered the consolidation of the 10 cases.

It held that petitioners should have first filed a motion for reconsideration of the assailed orders, and
failed to justify why they resorted to a special civil action of certiorari instead.

The CA also found that aside from the technical aspect, there was no grave abuse of discretion on the
part of the RTC, and if there was a mistake in the assessment of evidence by the trial court, that should
be characterized as an error of judgment, and should be correctable via appeal.

The CA held that the principles of fairness and transparency dictate that the respondent banks are
entitled to copies of the ROE.

Regarding the consolidation of the 10 cases, the CA found that there was a similarity of facts, reliefs
sought, issues raised, defendants, and that plaintiffs and defendants were represented by the same sets
of counsels. It found that the joint trial of these cases would prejudice any substantial right of
petitioners.

Finding that no grave abuse of discretion attended the issuance of the orders by the RTC, the CA denied
the petition.

On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from
implementing and enforcing the CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935.4

By reason of the TRO issued by this Court, the SED was able to submit their ROEs to the MB. The MB
then prohibited the respondent banks from transacting business and placed them under receivership
under Section 53 of Republic Act No. (RA) 87915 and Sec. 30 of RA

76536 through MB Resolution No. 1616 dated December 9, 2008; Resolution Nos. 1637 and 1638 dated
December 11, 2008; Resolution Nos. 1647, 1648, and 1649 dated December 12, 2008; Resolution Nos.
1652 and 1653 dated December 16, 2008; and Resolution Nos. 1692 and 1695 dated December 19,
2008, with the Philippine Deposit Insurance Corporation as the appointed receiver.

Now we resolve the main petition.

Grounds in Support of Petition

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE INJUNCTION ISSUED
BY THE REGIONAL TRIAL COURT VIOLATED SECTION 25 OF THE NEW CENTRAL BANK ACT AND
EFFECTIVELY HANDCUFFED THE BANGKO SENTRAL FROM DISCHARGING ITS FUNCTIONS TO THE GREAT
AND IRREPARABLE DAMAGE OF THE COUNTRY’S BANKING SYSTEM;

II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE ENTITLED
TO BE FURNISHED COPIES OF THEIR RESPECTIVE ROEs BEFORE THE SAME IS SUBMITTED TO THE
MONETARY BOARD IN VIEW OF THE PRINCIPLES OF FAIRNESS AND TRANSPARENCY DESPITE LACK OF
EXPRESS PROVISION IN THE NEW CENTRAL BANK ACT REQUIRING BSP TO DO THE SAME

III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM WELL-ESTABLISHED
PRECEPTS OF LAW AND JURISPRUDENCE
A. THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR CERTIORARI UNDER RULE
65 INSTEAD OF FIRST FILING A MOTION FOR RECONSIDERATION

B. RESPONDENT BANKS’ ACT OF RESORTING IMMEDIATELY TO THE COURT WAS PREMATURE SINCE IT
WAS MADE IN UTTER DISREGARD OF THE PRINCIPLE OF PRIMARY JURISDICTION AND EXHAUSTION OF
ADMINISTRATIVE REMEDY

C. THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL TRIAL COURT WAS NOT
ONLY IMPROPER BUT AMOUNTED TO GRAVE ABUSE OF DISCRETION7

Our Ruling

The petition is meritorious.

In Lim v. Court of Appeals it was stated:

The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is
material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an
urgent and paramount necessity for the writ to prevent serious damage.

As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing
right to be protected during the pendency of the principal action. The twin requirements of a valid
injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an
injunctive writ, the right to be protected and the violation against that right must be shown.8

These requirements are absent in the present case.

In granting the writs of preliminary injunction, the trial court held that the submission of the ROEs to the
MB before the respondent banks would violate the right to due process of said banks.

This is erroneous.

The respondent banks have failed to show that they are entitled to copies of the ROEs. They can point to
no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give
them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank Act, which governs examinations
of banking institutions, provides that the ROE shall be submitted to the MB; the bank examined is not
mentioned as a recipient of the ROE.

The respondent banks cannot claim a violation of their right to due process if they are not provided with
copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the
deficiencies found by the SED examiners when they examined the books of the respondent banks. As
found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of
the respondent banks, and the respondent banks were required to comment and to undertake remedial
measures stated in said lists. Despite these instructions, respondent banks failed to comply with the
SED’s directive.

Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation
of their right to due process simply because they are not furnished with copies of the ROEs. Respondent
banks were held by the CA to be entitled to copies of the ROEs prior to or simultaneously with their
submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the
contents of the ROEs are essentially the same as those of the lists of findings/exceptions provided to
said banks, there is no reason not to give copies of the ROEs to the banks. This is a flawed conclusion,
since if the banks are already aware of the contents of the ROEs, they cannot say that fairness and
transparency are not present. If sanctions are to be imposed upon the respondent banks, they are
already well aware of the reasons for the sanctions, having been informed via the lists of
findings/exceptions, demolishing that particular argument. The ROEs would then be superfluities to the
respondent banks, and should not be the basis for a writ of preliminary injunction. Also, the reliance of
the RTC on Banco Filipino v. Monetary Board9 is misplaced. The petitioner in that case was held to be
entitled to annexes of the Supervision and Examination Sector’s reports, as it already had a copy of the
reports themselves. It was not the subject of the case whether or not the petitioner was entitled to a
copy of the reports. And the ruling was made after the petitioner bank was ordered closed, and it was
allowed to be supplied with annexes of the reports in order to better prepare its defense. In this
instance, at the time the respondent banks requested copies of the ROEs, no action had yet been taken
by the MB with regard to imposing sanctions upon said banks.

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB. Secs. 29 and 30 of RA 765310 refer to the appointment of a conservator or a receiver
for a bank, which is a power of the MB for which they need the ROEs done by the supervising or
examining department. The writs of preliminary injunction issued by the trial court hinder the MB from
fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be
restrained or set aside by the court except on petition for certiorari on the ground that the action taken
was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction." The writs of preliminary injunction order are precisely what cannot be done under the law
by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653.

As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary
injunction to prevent serious damage. The serious damage contemplated by the trial court was the
possibility of the imposition of sanctions upon respondent banks, even the sanction of closure. Under
the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and
hearing. The apparent lack of procedural due process would not result in the invalidity of action by the
MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals.11 This "close now, hear
later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of
the bank’s assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB
from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from
acting on such ROEs.

The trial court required the MB to respect the respondent banks’ right to due process by allowing the
respondent banks to view the ROEs and act upon them to forestall any sanctions the MB might impose.
Such procedure has no basis in law and does in fact violate the "close now, hear later" doctrine. We held
in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas:

It is well-settled that the closure of a bank may be considered as an exercise of police power. The action
of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial
inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion
as to amount to lack or excess of jurisdiction.12
The respondent banks cannot—through seeking a writ of preliminary injunction by appealing to lack of
due process, in a roundabout manner— prevent their closure by the MB. Their remedy, as stated, is a
subsequent one, which will determine whether the closure of the bank was attended by grave abuse of
discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such
action by the MB. The threat of the imposition of sanctions, even that of closure, does not violate their
right to due process, and cannot be the basis for a writ of preliminary injunction.

The "close now, hear later" doctrine has already been justified as a measure for the protection of the
public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits.
Unless adequate and determined efforts are taken by the government against distressed and
mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the
national economy itself, not to mention the losses suffered by the bank depositors, creditors, and
stockholders, who all deserve the protection of the government.13

The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must
be emphasized that an application for injunctive relief is construed strictly against the pleader.14 The
respondent banks cannot rely on a simple appeal to procedural due process to prove entitlement. The
requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent
banks has been shown, nor is their right to copies of the ROEs clear and unmistakable. There is also no
necessity for the writ to prevent serious damage. Indeed the issuance of the writ of preliminary
injunction tramples upon the powers of the MB and prevents it from fulfilling its functions. There is no
right that the writ of preliminary injunction would protect in this particular case. In the absence of a
clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion.15 In the
absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a
writ of preliminary injunction will be nullified.16

Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would not
violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of the court
with the caveat that it should be made with great caution.17 Thus, the issuance of the writ of preliminary
injunction must have basis in and be in accordance with law. All told, while the grant or denial of an
injunction generally rests on the sound discretion of the lower court, this Court may and should
intervene in a clear case of abuse.18

WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in
CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of preliminary injunction of
respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-119244, 08-119245, 08-119246, 08-
119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and
VOID.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice
G.R. No. L-66321 October 31 1984

TRADERS ROYAL BANK, petitioner,

vs.
THE HON INTERMEDIATE APPELATE COURT, HON., JESUS R. DE VEGA, AS PRESIDING JUDGE OF THE
RETIONAL TRIA COURT, THIRD JUDICIAL REGION, BRANCH IX, MALOLOS, Bulacan, LA TONDEÑA, INC.,
VICTORINO P. EVANGELISTA IN HIS CAPACITY AS Ex-Officio Provincial Sheriff of Bulacan, and/or any
and all his deputies, respondents.

ESCOLIN, J.:ñé+.£ªwph!1

The issue posed for resolution in this petition involves the authority of a Regional Trial Court to issue, at
the instance of a third-party claimant, an injunction enjoining the sale of property previously levied
upon by the sheriff pursuant to a writ of attachment issued by another Regional Trial Court.

The antecedent facts, undisputed by the parties, are set forth in the decision of the respondent
Intermediate Appellate Court thus: têñ.£îhqwâ£

Sometime on March 18, 1983 herein petitioner Traders Royal Bank instituted a suit against the Remco
Alcohol Distillery, Inc. REMCO before the Regional Trial Court, Branch CX, Pasay City, in Civil Case No.
9894-P, for the recovery of the sum of Two Million Three Hundred Eighty Two Thousand Two Hundred
Fifty Eight & 71/100 Pesos (P2,382,258.71) obtaining therein a writ of pre attachment directed against
the assets and properties of Remco Alcohol Distillery, Inc.

Pursuant to said writ of attachment issued in Civil Case No. 9894-P, Deputy Sheriff Edilberto Santiago
levied among others about 4,600 barrels of aged or rectified alcohol found within the premises of said
Remco Distillery Inc. A third party claim was filed with the Deputy Sheriff by herein respondent La
Tondeña, Inc. on April 1, 1982 claiming ownership over said attached property (Complaint, p. 17, Rollo).

On May 12, 1982, private respondent La Tondeña, Inc. filed a complaint-in- intervention in said Civil
Case No. 9894, alleging among others, that 'it had made advances to Remco Distillery Inc. which totalled
P3M and which remains outstanding as of date' and that the 'attached properties are owned by La
Tondeña, Inc.' (Annex '3' to petitioner's Motion to Dismiss dated July 27, 1983 — Annex "C" to the
petition).

Subsequently, private respondent La Tondeña, Inc., without the foregoing complaint-in- intervention
having been passed upon by the Regional Trial Court, Branch CX, (Pasay City), filed in Civil Case No.
9894-P a "Motion to Withdraw" dated October 8, 1983, praying that it be allowed to withdraw alcohol
and molasses from the Remco Distillery Plant (Annex 4 to Petitioner's Motion to Dismiss-Annex C,
Petition) and which motion was granted per order of the Pasay Court dated January 27, 1983,
authorizing respondent La Tondeña, Inc. to withdraw alcohol and molasses from the Remco Distillery
Plant at Calumpit, Bulacan (Annex "I" to Reply to Plaintiff's Opposition dated August 2, 1983 — Annex E
to the Petition).

The foregoing order dated January 27, 1983 was however reconsidered by the Pasay Court by virtue of
its order dated February 18, 1983 (Annex A — Petition, p. 15) declaring that the alcohol "which has not
been withdrawn remains in the ownership of defendant Remco Alcohol Distillery Corporation" and
which order likewise denied La Tondeña's motion to intervene.

A motion for reconsideration of the foregoing order of February 18, 1983 was filed by respondent La
Tondeña, Inc., on March 8, 1983 reiterating its request for leave to withdraw alcohol from the Remco
Distillery Plant, and praying further that the "portion of the order dated February 18, 1983" declaring
Remco to be the owner of subject alcohol, "be reconsidered and striken off said order". This motion has
not been resolved (p. 4, Petition) up to July 18, 1983 when a manifestation that it was withdrawing its
motion for reconsideration was filed by respondent La Tondeña Inc.

On July 19, 1983, private respondent La Tondeña Inc. instituted before the Regional Trial Court, Branch
IX, Malolos, Bulacan presided over by Respondent Judge, Civil Case No. 7003-M, in which it asserted its
claim of ownership over the properties attached in Civil Case No. 9894-P, and likewise prayed for the
issuance of a writ of Preliminary Mandatory and Prohibitory Injunction (Annex B,id ).

A Motion to Dismiss and/or Opposition to the application for a writ of Preliminary Injunction by herein
respondent La Tondeña Inc. was filed by petitioner on July 27, 1983 (Annex C, p. 42, Id.)

This was followed by respondent La Tondeña's opposition to petitioner's Motion to Dismiss on August 1,
1983 (Annex D, p. 67, Id.).

A reply on the part of petitioner was made on the foregoing opposition on August 3, 1983 (p. 92, Id.).

Hearings were held on respondent La Tondeña's application for injunctive relief and on petitioner's
motion to dismiss on August 8, 19 & 23, 1983 (p. 5, Id.).

Thereafter, the parties filed their respective memoranda (Annex F, p. 104; Annex G, p. 113, Rollo).

Subsequently, the questioned order dated September 28, 1983 was issued by the respondent Judge
declaring respondent La Tondeña Inc. to be the owner of the disputed alcohol, and granting the latter's
application for injunctive relief (Annex H-1, Id.).

On October 6, 1983, respondent Sheriff Victorino Evangelista issued on Edilberto A. Santiago Deputy
Sheriff of Pasay City the corresponding writ of preliminary injunction (Annex N, p. 127, Id.).

This was followed by an order issued by the Pasay Court dated October 11, 1983 in Civil Case No. 9894-P
requiring Deputy Sheriff Edilberto A. Santiago to enforce the writ of preliminary attachment previously
issued by said court, by preventing respondent sheriff and respondent La Tondeña, Inc. from
withdrawing or removing the disputed alcohol from the Remco ageing warehouse at Calumpit, Bulacan,
and requiring the aforenamed respondents to explain and show cause why they should not be cited for
contempt for withdrawing or removing said attached alcohol belonging to Remco, from the latter's
ageing warehouse at Calumpit, Bulacan (Annex F, p. 141, Petition).

Thereafter, petitioner Traders Royal Bank filed with the Intermediate Appellate Court a petition for
certiorari and prohibition, with application for a writ of preliminary injunction, to annul and set aside the
Order dated September 28, 1983 of the respondent Regional Trial Court of Malolos, Bulacan, Branch IX,
issued in Civil Case No. 7003-M; to dissolve the writ of preliminary injunction dated October 6, 1983
issued pursuant to said order; to prohibit respondent Judge from taking cognizance of and assuming
jurisdiction over Civil Case No. 7003-M, and to compel private respondent La Tondeña, Inc., and Ex-
Oficio Provincial Sheriff of Bulacan to return the disputed alcohol to their original location at Remco's
ageing warehouse at Calumpit, Bulacan.

In its decision, the Intermediate Appellate Court dismissed the petition for lack of legal and factual basis,
holding that the respondent Judge did not abuse his discretion in issuing the Order of September 28,
1983 and the writ of preliminary injunction dated October 3, 1983. citing the decision in Detective and
Protective Bureau vs. Cloribel (26 SCRA 255). Petitioner moved for reconsideration, but the respondent
court denied the same in its resolution dated February 2, 1984.

Hence, this petition.

Petitioner contends that respondent Judge of the Regional T- trial Court of Bulacan acted without
jurisdiction in entertaining Civil Case No. 7003-M, in authorizing the issuance of a writ of preliminary
mandatory and prohibitory injunction, which enjoined the sheriff of Pasay City from interferring with La
Tondeña's right to enter and withdraw the barrels of alcohol and molasses from Remco's ageing
warehouse and from conducting the sale thereof, said merchandise having been previously levied upon
pursuant to the attachment writ issued by the Regional Trial Court of Pasay City in Civil Case No. 9894-P.
It is submitted that such order of the Bulacan Court constitutes undue and illegal interference with the
exercise by the Pasay Court of its coordinate and co-equal authority on matters properly brought before
it.

We find the petition devoid of merit.

There is no question that the action filed by private respondent La Tondeña, Inc., as third-party claimant,
before the Regional Trial Court of Bulacan in Civil Case No. 7003-M wherein it claimed ownership over
the property levied upon by Pasay City Deputy Sheriff Edilberto Santiago is sanctioned by Section 14,
Rule 57 of the Rules of Court. Thus — têñ.£îhqwâ£

If property taken be claimed by any person other than the party against whom attachment had been
issued or his agent, and such person makes an affidavit of his title thereto or right to the possession
thereof, stating the grounds of such right or title, and serves such affidavit upon the officer while the
latter has possession of the property, and a copy thereof upon the attaching creditor, the officer shall
not be bound to keep the property under the attachment, unless the attaching creditor or his agent, on
demand of said officer, secures aim against such claim by a bond in a sum not greater than the value of
the property attached. In case of disagreement as to such value, the same shall be decided by the court
issuing the writ of attachment. The officer shall not be liable for damages, for the taking or keeping of
such property, to any such third-party claimant, unless such a claim is so made and the action upon the
bond brought within one hundred and twenty (120) days from the date of the filing of said bond. But
nothing herein contained shall prevent such third person from vindicating his claim to the property by
proper action ...

The foregoing rule explicitly sets forth the remedy that may be availed of by a person who claims to be
the owner of property levied upon by attachment, viz: to lodge a third- party claim with the sheriff, and
if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and
independent action to vindicate his claim (Abiera vs. Court of Appeals, 45 SCRA 314). And this precisely
was the remedy resorted to by private respondent La Tondeña when it filed the vindicatory action
before the Bulacan Court.
The case before us does not really present an issue of first impression. In Manila Herald Publishing Co.,
Inc. vs. Ramos, 1 this Court resolved a similar question in this wise: têñ.£îhqwâ£

The objection that at once suggests itself to entertaining in Case No. 12263 the motion to discharge the
preliminary attachment levied in Case No. 11531 is that by so doing one judge would interfere with
another judge's actuations. The objection is superficial and will not bear analysis.

It has been seen that a separate action by the third party who claims to be the owner of the property
attached is appropriate. If this is so, it must be admitted that the judge trying such action may render
judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the
plaintiff-claimant or desist from seizing it. It follows further that the court may make an interlocutory
order, upon the filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction over an interlocutory matter
incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect the
parties' interests. This is self-evident.

xxx xxx xxx

It is true of course that property in custody of the law can not be interfered without the permission of
the proper court, and property legally attached is property in custodia legis. But for the reason just
stated, this rule is confined to cases where the property belongs to the defendant or one in which the
defendant has proprietary interest. When the sheriff acting beyond the bounds of his office seizes a
stranger's property, the rule does not apply and interference with his custody is not interference with
another court's order of attachment.

It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for that
matter. Speculations are however beside the point. The title is the very issue in the case for the recovery
of property or the dissolution of the attachment, and pending final decision, the court may enter any
interlocutory order calculated to preserve the property in litigation and protect the parties' rights and
interests.

Generally, the rule that no court has the power to interfere by injunction with the judgments or decrees
of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief sought by
injunction, is applied in cases where no third-party claimant is involved, in order to prevent one court
from nullifying the judgment or process of another court of the same rank or category, a power which
devolves upon the proper appellate court . 2The purpose of the rule is to avoid conflict of power
between different courts of coordinate jurisdiction and to bring about a harmonious and smooth
functioning of their proceedings.

It is further argued that since private respondent La Tondeña, Inc., had voluntarily submitted itself to the
jurisdiction of the Pasay Court by filing a motion to intervene in Civil Case No. 9894-P, the denial or
dismissal thereof constitutes a bar to the present action filed before the Bulacan Court.

We cannot sustain the petitioner's view. Suffice it to state that intervention as a means of protecting the
third-party claimant's right in an attachment proceeding is not exclusive but cumulative and suppletory
to the right to bring an independent suit. 3 The denial or dismissal of a third-party claim to property
levied upon cannot operate to bar a subsequent independent action by the claimant to establish his
right to the property even if he failed to appeal from the order denying his original third-party claim.4
WHEREFORE, the instant petition is hereby dismissed and the decision of the Intermediate Appellate
Court in AC-G.R. No. SP-01860 is affirmed, with costs against petitioner Traders Royal Bank.

SO ORDERED.1äwphï1.ñët
G.R. No. 174582 October 11, 2012

THE HEIRS OF THE LATE SPOUSES LAURA YADNO and PUGSONG MAT-AN, namely, LAURO MAT-AN, FE
MAT-AN LAOYAN, JULIA MAT-AN KITANI, ANA MAT-AN MALANI, DARIO MAT-AN and VICTOR MAT-
AN, who are represented by their co-petitioner NENA MAT-AN CLEMENT, Petitioner,
vs.
THE HEIRS OF THE LATE SPOUSES MAURO and ELISA ANCHALES, namely, JOHNNY S. ANCHALES,
BELMORE S. ANCHALES, BENSON S. ANCHALES, BRIGETTE S. HARASYMUK, RITA A. KAWA, and NENITA
S. ANCHALES, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari are the Decision1 dated January 12, 2006 and the
Resolution2 dated June 28, 2006 issued by the Court of Appeals in CA-G.R. CV No. 77427.

The antecedent facts are as follows:

On December 1, 1982, the Spouses Mauro and Elisa Anchales (Spouses Anchales), respondents'
predecessors, filed with the then Court of First Instance, Branch 9, now Regional Trial Court, Branch 46,
of Urdaneta, Pangasinan (Urdaneta RTC), a Complaint3 for ownership, delivery of possession, damages
with preliminary injunction and attachment against the spouses Augusto and Rosalia Yadno (Spouses
Yadno), Orani Tacay (Orani), and the spouses Laura Yadno and Pugsong Mat-an (Spouses Mat-an),
petitioners' predecessors, docketed as Civil Case No. U- 3882. The Spouses Mat-an and Orani did not file
their Answer, thus, they were declared in default. The Spouses Yadno were also declared in default so
the Spouses Anchales were allowed to present their evidence ex-parte. The Spouses Yadno filed a
motion for reconsideration of the Order declaring them in default, but the RTC denied the motion and
submitted the case for decision. On September 14, 1987, the Urdaneta RTC rendered its Decision,4 the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring the plaintiffs as the absolute owners of the land in question;

2. Ordering the defendants Augusto Yadno and Rosalia Yadno to vacate the premises of the land in
question and restore the possession thereof to the plaintiffs;

3. Ordering the said defendants to remove their house constructed which is still standing on the
premises in question;

4. Ordering the defendants Augusto Yadno, Rosalia Yadno, Orani Tacay, Laura Yadno and Pugsong Mat-
an to pay jointly and severally the plaintiffs the amount of 400 cavans of palay representing the harvest
for the last six (6) years up to and including the years 1982 and 1983 until they actually vacate and
deliver the premises to the plaintiffs; and

5. That the said defendants are hereby ordered to pay jointly and severally the plaintiffs the sum of
P10,000.00 as attorney's fees.

Other claims of plaintiffs for damages are hereby denied for lack of evidence.
With costs against all the defendants solidarily.

SO ORDERED.5

The decision became final and executory. A Writ of Execution was issued on September 20, 1988.6 The
sheriff of the Urdaneta RTC issued a Notice of Levy dated October 10, 1988 on the property registered
under the name of Orani, one of the defendants, covered by TCT No.T-13845 of the Register of Deeds of
Baguio City. The notice of levy was annotated at the back of the title on November 7, 1988.7 A public
auction was held on November 14, 1988 and Mauro Anchales emerged as the highest bidder.8 A
Certificate of Sale9 dated December 20, 1988 was issued to Mauro Anchales which was registered with
the Register of Deeds of Baguio City on August 7, 1989. The Sheriff's Final Certificate of Sale10 was issued
on March 7, 1991 and was annotated at the back of TCT No. 13845 on April 3, 1991.

Earlier, on February 10, 1989, petitioners' predecessors, the Spouses Mat-an, filed with the RTC of
Baguio City (Baguio RTC), Branch 7, an Action11 for injunction and damages with prayer for writ of
preliminary injunction against respondents’ predecessors, the Spouses Anchales, Spouses Yadno, and
the Provincial Sheriff of the RTC Branch 46, Urdaneta, Pangasinan, docketed as Civil Case No. 1651-R,
the subject of the instant petition. In their Complaint, the Spouses Mat-an claimed that on December
16, 1988, the Provincial Sheriff of Urdaneta, without any authority from the trial court, indiscriminately
levied and conducted a public auction sale of the property registered under the name of Orani Tacay
covered by TCT No. 13845, thus, saving the real property of the Spouses Yadno covered by TCT No. T-
88740 situated at Dungon, Sison, Pangasinan. The Spouses Mat-an further argued that Orani died on
December 28, 1986, which was before the Urdaneta RTC had rendered its decision on September 14,
1987, thus Orani's property covered by TCT No 13845 became the estate of her legal heirs and had since
been with a distinct personality which cannot be subjected to levy.

On April 13, 1990, both counsels in the Baguio RTC case moved12 that the injunction case filed therewith
be archived in view of the pending case for partition involving the Yadno and Mat-an Spouses.

On April 30, 1991, the Spouses Anchales filed a motion with the Urdaneta RTC for the issuance of title in
their favor. The RTC issued its Order13 dated July 2, 1991 directing the Spouses Yadno, Orani and the
Spouses Mat-an to produce and surrender the duplicate owner's copy of TCT No. T- 13845 within 15
days from receipt of the Order. The Spouses Mat-an assailed this Order with us which we dismissed in a
Resolution dated December 12, 1991. Subsequently, in an Order14 dated May 20, 1994, the RTC
authorized the Register of Deeds of Baguio City to cancel TCT No. T-13845 and correspondingly issue a
new owner's duplicate copy of the same in the name of Mauro Anchales. Later, the RTC issued another
Order15 dated June 14, 1994 directing the Register of Deeds of Baguio City to annul the title of Orani and
to issue another title in lieu thereof to Mauro Anchales immediately upon receipt of the Order.
Consequently, TCT No. 60513 was issued to Mauro Anchales on July 6, 1994.16

On September 16, 1997, petitioners' predecessors, the Spouses Mat-an, filed with Baguio RTC an Ex-
Parte Motion17 for the revival of their injunction case filed therewith, a motion for admission of
supplemental complaint and a motion for substitution18 of defendants Mauro and Eliza Anchales who
had already died. In their Supplemental Complaint,19 the Spouses Mat-an assailed the levy and sale of
the Orani property as illegal and the Orders dated July 2, 1991, May 20, 1994 and June 14, 1994 for
being void and of no legal effect. They claimed that the decision rendered by the Urdaneta RTC in Civil
Case No. U-3882 was null and void in so far as Orani was concerned, since she had died before the
decision was rendered and her intestate estate was not impleaded to substitute her before the
rendition of the judgment.

In an Order20 dated October 22, 1997, the Baguio RTC granted the Motion to Revive the Case, and on
February 9, 1998, admitted the Supplemental Complaint. The RTC subsequently ordered the defendants
to file their answer to the complaint. Accordingly, defendants filed their Answer with Counterclaim.21

The Spouses Mat-an moved22 to drop the Spouses Yadno as defendants in the case, which the RTC
granted in an Order dated January 3, 2002.

Subsequently, defendants filed a Motion to Dismiss23 on the ground that the Baguio RTC had no
jurisdiction to enjoin the Urdaneta RTC, since that latter court is a court of coordinate jurisdiction. The
Spouses Mat-an filed their Opposition.

On August 21, 2002, the Baguio RTC issued its Order24 granting the Motion to Dismiss.

In so ruling, the RTC said:

There is no doubt Orani Tacay was defendant in Civil Case No.-3882. And so, the decision rendered in
said case, dated September 14, 1987, is binding and effective on said Orani Tacay and her co-defendants
(Augusto Yadno, Rosalia Yadno, Laura Yadno and Pugsong Mat-an). And so to enforce said judgment by
way of writ of execution, the property/properties of said defendants can be levied upon to satisfy the
judgment.

The property (covered by TCT T-13845) levied upon belongs to the intestate estate of Orani Tacay. And
the only legal heirs of the deceased Orani Tacay are Lauro Yadno and Augusto Yadno, who are all
defendants in said Civil Case U-3882.

There were no intestate proceedings instituted in the proper court with respect to the properties left by
Orani Tacay. And so, her (Orani Tacay's) properties are not in custodia legis.

Since the land covered by TCT T-13845 belongs to the defendants, then the Deputy Sheriff who levied on
said property to satisfy the judgment in Civil Case U-3882 just acted within his authority and in
accordance with the rules. As correctly pointed by the defendants-movants, the proper remedy is to file
the appropriate motion/pleading to this effect with the RTC, Branch 46, Urdaneta, which rendered the
judgment. This is so because this court (RTC, Branch 46, Urdaneta) has exclusive jurisdiction over the
execution proceedings.25

The Spouses Mat-an appealed the decision to the CA, which rendered its Decision dated January 12,
2006 dismissing the appeal.

The CA found that the issue involving Civil Case No. U-3882, which was decided by the Urdaneta RTC,
must be resolved by that court and the Baguio RTC had no authority to interfere with the processes of
the Urdaneta RTC which is a coordinate court; that the Spouses Mat-an would like the Baguio RTC to
enjoin the sheriff from auctioning the subject property which cannot be done as it had been levied
pursuant to a lawful order of the Urdaneta RTC which placed the property under custodia legis, hence,
beyond the authority of a co-equal court.

The Motion for Reconsideration filed by petitioners' predecessors was denied in a Resolution dated June
28, 2006.
Petitioners, as heirs of the Spouses Mat-an, filed the instant petition claiming that the CA committed a
reversible error in affirming the Baguio RTC's order dismissing the complaint for the following reasons:

(1) The Supplemental Complaint of the late PLAINTIFFS Laura Yadno and Pugsong Mat-an in Civil Case
No. 1651-R before the court a quo explicitly alleges that the property in litigation was not in custodia
legis but already sold at public auction and Transfer Certificate of Title No. T-13845- in the name of the
late Orani Tacay had already been cancelled and Transfer Certificate of Title No. 60513 was already
issued to the late DEFENDANT Mauro Anchales on July 6, 1994;

(2) The main action in Civil Case No. 1651-R before the court a quo is for quieting of title, recovery of
ownership and reconveyance of the property in litigation, in which case the policy of judicial stability is
inapplicable thereto;

(3) The prayer of the late PLAINTIFFS Laura Yadno and Pugsong Mat-an in their Supplemental Complaint
for the court a quo to declare "as null and void ab initio Transfer Certificate of Title No. T-60513 issued
to the (late) defendant Mauro Anchales" is only incidental to the main action to quiet title, recovery of
ownership, and reconveyance of the property in litigation "by directing the Register of Deeds for Baguio
City to restore Transfer Certificate of Title No. T-13845" and, therefore, the policy of judicial stability is
inapplicable to Civil Case No. 1651-R before the court a quo; and

(4) The late DEFENDANTS Mauro Anchales and Eliza Anchales flagrantly violated the policy of judicial
stability and the prohibition against forum shopping in securing, and the Regional Trial Court of
Urdaneta, Pangasinan, committed grave abuse of discretion, as it was utterly devoid of jurisdiction in
issuing the July 2, 1991, May 20, 1994 and June 14, 1994 Orders in Civil Case No. U-3882 during the
pendency of Civil Case No. 2175 before the Regional Trial Court of Baguio City. Hence, the said July 2,
1991, May 20, 1994 and June 14, 1994 Orders are null and void ab initio and the court a quo will not
violate the policy of judicial stability if it resolved these issues in Civil Case No. 1651-R before it.26

The main issue for resolution is whether the CA committed a reversible error when it affirmed the
Baguio RTC's dismissal for lack of jurisdiction the complaint filed with it by petitioners' predecessors, the
Spouses Mat-an.

We rule in the negative.

In their Complaint for injunction and damages and issuance of a writ of preliminary injunction filed
before the Baguio RTC, which was docketed as Civil Case No. 1651-R, petitioners' predecessors assailed
the validity of the judgment issued by Branch 46 of the Urdaneta RTC in Civil Case No. U-3882 for being
null and void. They claimed that Orani Tacay, one of the party defendants in Civil Case No. U-3882, had
already died before the judgment was rendered but was not duly substituted by either her heirs or the
administrator of her estate. Thus, the judgment was never binding and had never attained finality as
against Orani or her intestate estate; that the levy and execution, as well as the subsequent sale at
public auction of Orani's property to satisfy the judgment in Civil Case No. U-3882 were all null and void,
because of the total nullity of the judgment sought to be enforced. In their Supplemental Complaint,
petitioners' predecessors argued that the Orders dated July 2, 1991, May 20, 1994, and June 14, 1994
issued by the Urdaneta RTC were also all null and void.

Notably, the Decision dated September 14, 1987 of the Urdaneta RTC, issued in Civil Case No. U-3882
which petitioners sought to assail in their complaint filed in the Baguio RTC had long become final and
executory. In the said Decision, the Urdaneta RTC ordered, among others, that: "defendants Augusto
Yadno, Rosalia Yadno, Orani Tacay, Laura Yadno and Pugsong Mat-an to pay jointly and severally the
plaintiffs the amount of 400 cavans of palay representing the harvest for the last six years up to and
including the years 1982 and 1983 until they actually vacate and deliver the premises to the plaintiffs."
Since Orani was one of the defendants adjudged to be jointly and severally liable to respondents'
predecessors, the Spouses Anchales, her property was levied on October 10, 1988 by virtue of a Writ of
Execution dated September 20, 1988 issued in the said case. The notice of levy was annotated at the
back of Orani's TCT No. 13845 on November 7, 1988 and the property was sold to Mauro Anchales who
emerged as the highest bidder. A certificate of sale was issued to Mauro Anchales on December 20,
1988 and was registered and annotated on TCT No. 13845 on August 7, 1989. As no redemption was
made within the one-year period for doing so, the sheriff's sale became absolute. Subsequently, the
Urdaneta RTC issued an Order dated July 2, 1991 which directed the defendants in said case to produce
and surrender to the court their duplicate owner's copy of TCT No. T-13845. And on the May 20, 1994
and June 14, 1994 Orders of the Urdaneta RTC, the Register of Deeds of Baguio City was authorized to
cancel TCT No. 13845 in Orani's name and to correspondingly issue a new owner's duplicate copy in the
name of Mauro Anchales and to annul Orani's title and to issue another title to Mauro Anchales,
respectively. Notably, the last three Orders which petitioners claimed to be void were merely the
consequence of the execution of judgment dated September 14, 1987 in Civil Case No. U-3382 which
had already been enforced when Orani's property was levied upon and sold at public auction with
Mauro Anchales as the highest bidder.

We find that the Baguio RTC correctly dismissed the case for injunction with damages filed with it, since
it had no jurisdiction over the nature of the action. Petitioners' predecessors could not in an action for
injunction with damages filed with the Baguio RTC sought the nullification of a final and executory
decision rendered by the Urdaneta RTC and its subsequent orders issued pursuant thereto for the
satisfaction of the said judgment. This would go against the principle of judicial stability where the
judgment or order of a court of competent jurisdiction, the Urdaneta RTC, may not be interfered with by
any court of concurrent jurisdiction (i.e., another RTC), for the simple reason that the power to open,
modify or vacate the said judgment or order is not only possessed by but is restricted to the court in
which the judgment or order is rendered or issued.27

The long standing doctrine is that no court has the power to interfere by injunction with the judgments
or decrees of a court of concurrent or coordinate jurisdiction. The various trial courts of a province or
city, having the same or equal authority, should not, cannot, and are not permitted to interfere with
their respective cases, much less with their orders or judgments.28 A contrary rule would obviously lead
to confusion and seriously hamper the administration of justice.29

Petitioners argue that the decision of the Urdaneta RTC had never attained finality as against defendant
Orani because it was rendered after Orani's death and without her having been substituted by her
intestate estate; that her intestate estate cannot be held liable to the satisfaction of the judgment debt
because in legal contemplation, no judgment was ever rendered either against her or her intestate
estate.

This argument should have been presented before the Urdaneta RTC as it was the court which rendered
the decision and ordered the execution sale of the Orani property and thus should settle the whole
controversy.30Moreover, it appears that the Urdaneta RTC was not apprised at all of Orani's death, since
there was no notice of her death filed with it. In fact, in their Comment filed with us, respondents allege
that:

The defendants spouses Mauro Anchales and Elisa Anchales pointed out in paragraph 4 of their Answer
to the original Complaint and in paragraph 11 of their Answer to the supplemental complaint that the
plaintiff spouses Laura Yadno Mat-an and Pugsong Mat-an never informed the trial court (RTC, Branch
46, Urdaneta, Pangasinan) about such alleged death of Orani Tacay.

These contentions of spouses Mauro Anchales and Elisa Anchales that the trial court (RTC 46, Urdaneta
Pangasinan) was never informed of the alleged death of Orani Tacay was never rebutted by Lauro Yadno
Mat-An and Pugsong Mat-an in Civil Case No. 1651-R (RTC, Branch 7, Baguio City).

In fine, it is the fault of spouses Laura Yadno Mat-an and Pugsong Mat-an (now substituted by
petitioners) in not informing the trial court (RTC 46, Urdaneta, Pangasinan) about the alleged death of
Orani Tacay.1âwphi1

Petitioners never rebutted these allegations in their Rejoinder. The Baguio RTC had no jurisdiction to
nullify the final and executory decision of the Urdaneta RTC. To allow it would open the floodgates to
protracted and endless litigations, since the counsel or the parties, in an action for recovery of money, in
case said defendant dies before final judgment in a regional trial court, is to conceal such death from the
court and thereafter pretend to go through the motions of trial, and after judgment is rendered against
his client, to question such judgment by raising the matter that the defendant was not substituted by
her intestate heirs.31

Moreover, it also appears that petitioners' predecessors admitted that Orani's only legal heirs were
Laura Yadno, petitioner's predecessor, and Augusto Yadno, who both became the absolute owners of
the property from the moment of Orani's death. Notably, Laura and Augusto, together with Orani, were
the original defendants in the case of recovery of sum of money filed with the Urdaneta RTC and who
were adjudged jointly and severally liable to the Spouses Anchales. Thus, they cannot claim that they
were deprived of such property, since the sale was done in accordance with the rules on the execution
of judgment rendered against them.

Petitioners contend that the CA erred in its factual finding that the subject property was in custodia legis
of the Urdaneta RTC when it is established that a new TCT No. 60513 had already been issued to Mauro
Anchales; that such finding led to a wrong legal conclusion that the Baguio RTC is devoid of jurisdiction
over the complaint on the policy of judicial stability.

We are not impressed.

There is no dispute that the Orani property had been in custodia legis of the Urdaneta RTC when it was
levied on October 10, 1988 and sold under a writ of execution for the satisfaction of the judgment
rendered by the said court. The subsequent issuance of a new title of the Orani property in the name of
Mauro Anchales was by virtue of a levy and an execution sale of the said property which was not
redeemed within the one-year period. Thus, the Baguio RTC correctly ruled that it cannot, in an
injunction case with damages filed with it, interfere with the judgment of the Urdaneta RTC and the
subsequent orders issued pursuant thereto since it is beyond the former's authority as a co-equal court.
It is the Urdaneta RTC which has a general supervisory control over its processes in the execution of its
judgment with a right to determine every question of fact and law which may be involved in the
execution.32

Finally, petitioners’ claim that the cause of action filed with the Baguio RTC is in reality an action to quiet
title as well as for recovery of ownership and reconveyance is belied by the allegations stated in their
complaint, which basically sought to nullify the final and executory judgment of the Urdaneta RTC, the
levy and sale of the property, and the issuance of a new title in the name of Mauro Anchales.

WHEREFORE, the petition is DENIED. The Decision dated January 12, 2006 and the Resolution dated June
28, 2006 of the Court of Appeals in CA-G.R. CV No. 77427 are hereby AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
G.R. No. 199238

BANCO DE ORO UNIBANK, INC., Petitioner,

vs.
COURT OF APPEALS and RCBC CAPITAL CORPORATION, Respondents.

DECISION

VILLARAMA, JR., J.:

Before the Court are two consolidated petitions separately filed by the parties in an arbitration case
administered by the International Chamber of Commerce-International Court of Arbitration (ICC-ICA)
pursuant to the arbitration clause in their contract.

The Case

In G.R. No. 196171, a petition for review under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, RCBC Capital Corporation (RCBC) seeks to reverse the Court of Appeals (CA) Decision1 dated
December 23, 2010 in CA-G.R. SP No. 113525 which reversed and set aside the June 24, 2009 Order2 of
the Regional Trial Court (RTC) of Makati City, Branch 148 in SP Proc. Case No. M-6046.

In G.R. No. 199238,a petition for certiorari under Rule 65, Banco De Oro Unibank, Inc. (BDO)assails the
Resolution3dated September 13, 2011 in CA-G.R. SP No. 120888 which denied BDO’s application for the
issuance of a stay order and/or temporary restraining order (TRO)/preliminary injunction against the
implementation of the Writ of Execution4 dated August 22, 2011 issued by the Makati City RTC, Branch
148 in SP Proc. Case No. M-6046.

Factual Antecedents

On May 24, 2000, RCBC entered into a Share Purchase Agreement5 (SPA) with Equitable-PCI Bank, Inc.
(EPCIB), George L. Go and the individual shareholders6 of Bankard, Inc. (Bankard) for the sale to RCBC of
226,460,000 shares (Subject Shares) of Bankard, constituting 67% of the latter’s capital stock. After
completing payment of the contract price (₱1,786,769,400), the corresponding deeds of sale over the
subject shares were executed in January 2001.

The dispute between the parties arose sometime in May 2003 when RCBC informed EPCIB and the other
selling shareholdersof an overpayment of the subject shares, claiming there was an overstatement of
valuation of accounts amounting to ₱478 million and that the sellers violated their warrantyunder
Section 5(g)of the SPA.7

As no settlement was reached, RCBC commenced arbitration proceedings with the ICC-ICA in
accordance with Section 10 of the SPA which states:

Section 10.Arbitration

Should there be any dispute arising between the parties relating to this Agreement including the
interpretation or performance hereof which cannot be resolved by agreement of the parties within
fifteen (15) days after written notice by a party to another, such matter shall then be finally settled by
arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce in
force as of the time of arbitration, by three arbitrators appointed in accordance with such rules. The
venue of arbitration shall be in Makati City, Philippines and the arbitration proceedings shall be
conducted in the English language. Substantive aspects of the dispute shall be settled by applying the
laws of the Philippines. The decision of the arbitrators shall be final and binding upon the parties hereto
and the expenses of arbitration (including without limitation the award of attorney’s fees to the
prevailing party) shall be paid as the arbitrators shall determine.8

In its Request for Arbitration9 dated May 12, 2004, Claimant RCBC charged Bankard with deviating from
and contravening generally accepted accounting principles and practices, due to which the financial
statements of Bankard prior to the stock purchase were far from fair and accurate, and resulted in the
overpayment of ₱556 million. For this violation of sellers’representations and warranties under the SPA,
RCBC sought its rescission, as well as payment of actual damages in the amount of ₱573,132,110, legal
interest on the purchase price until actual restitution, moral damages and litigation and attorney’s fees,
with alternative prayer for award of damages in the amount of at least ₱809,796,082 plus legal interest.

In their Answer,10 EPCIB, Go and the other selling individual shareholders (Respondents) denied RCBC’s
allegations contending that RCBC’s claim is one for overpayment or price reduction under Section 5(h) of
the SPA which is already time-barred, the remedy of rescission is unavailable, and even assuming that
rescission is permitted by the SPA, RCBC failed to file its claim within a reasonable time. They further
asserted that RCBC is not entitled to its alternative prayer for damages, being guilty of laches and failing
to set out the details of the breach as required under Section 7 of the SPA. A counterclaim for litigation
expenses and costs of arbitration in the amount of US$300,000, as well as moral and exemplary
damages, was likewise raised by the Respondents.

RCBC submitted a Reply11 to the aforesaid Answer.

Subsequently, the Arbitration Tribunal was constituted. Mr. Neil Kaplan was nominated by RCBC; Justice
Santiago M. Kapunan (a retired Member of this Court) was nominated by the Respondents; and Sir Ian
Barker was appointed by the ICC-ICA as Chairman.

On August 13, 2004, the ICC-ICA informed the parties that they are required to pay US$350,000 as
advance on costs pursuant to Article 30 (3) of the ICC Rules of Arbitration (ICC Rules). RCBC paid its
share of US$107,000, the balance remaining after deducting payments of US$2,500 and US$65,000 it
made earlier. Respondents’ share of the advance on costs was thus fixed at US$175,000.

Respondents filed an Application for Separate Advances on Costs12 dated September 17, 2004 under
Article 30(2) of the ICC Rules, praying that the ICC fix separate advances on the cost of the parties’
respective claims and counterclaims, instead of directing them to share equally on the advance cost of
Claimant’s (RCBC) claim. Respondents deemed this advance cost allocation to be proper, pointing out
that the total amount of RCBC’s claim is substantially higher – more than 40 times –the total amount of
their counterclaims, and that it would be unfair to require them to share in the costs of arbitrating what
is essentially a price issue that is now time-barred under the SPA.

On September 20, 2004, the ICC-ICA informed Respondents that their application for separate advances
on costs was premature pending the execution of the Terms of Reference (TOR).13 The TOR was settled
by the parties and signed by the Chairman and Members of the Arbitral Tribunal by October 11, 2004.
On December 3, 2004,14 the ICC-ICA denied the application for separate advances on costs and invited
anew the Respondents to pay its share in the advance on costs. However, despite reminders from the
ICC-ICA, Respondents refused to pay their share in the advance cost fixed by the ICC-ICA. On December
16, 2004, the ICC-ICA informed the parties that if Respondents still failed to pay its share in the advance
cost, it would apply Article 30(4) of the ICC Rules and request the Arbitration Tribunal to suspend its
work and set a new time limit, and if such requested deposit remains unpaid at the expiry thereof, the
counterclaims would be considered withdrawn.15

In a fax-letter dated January 4, 2005, the ICC-ICA invited RCBC to pay the said amount in substitution of
Respondents.It also granted an extension until January 17, 2005 within which to pay the balance of the
advance cost (US$175,000). RCBC replied that it was not willing to shoulder the share of Respondents in
the advance on costs but nevertheless requested for a clarification as to the effect of such refusal to
substitute for Respondents’share.16

On March 10, 2005, the ICC-ICA instructed the Arbitration Tribunal to suspend its work and granted the
parties a final time-limit of 15 days to pay the balance of the advanceon costs, failing which the claims
shall be considered withdrawn, without prejudice to their reintroduction at a later date in another
proceeding. The parties were advised that if any of them objects to the measure, it should make a
request in writing within such period.17 For the same reason of non-receipt of the balance of the
advance cost, the ICC-ICA issued Procedural Order No. 3 for the adjournment of the substantive
hearings and granting the Respondents a two-month extension within which to submit their brief of
evidence and witnesses.

RCBC objected to the cancellation of hearings, pointing out that Respondents have been given ample
time and opportunity to submit their brief of evidence and prepare for the hearings and that their
request for postponement serves no other purpose but to delay the proceedings. It alleged that
Respondents’ unjustified refusal to pay their share in the advance on costs warrants a ruling that they
have lost standing to participate in the proceedings. It thus prayed that Respondents be declared as in
default, the substantive hearings be conducted as originally scheduled, and RCBC be allowed to submit
rebuttal evidence and additional witness statements.18

On December 15, 2005, the ICC-ICA notified the parties of its decision to increase the advances on costs
from US$350,000 to US$450,000 subject to later readjustments, and again invited the Respondents to
pay the US$100,000 increment within 30 days from notice. Respondents, however, refused to pay the
increment, insisting that RCBC should bear the cost of prosecuting its own claim and that compelling the
Respondents to fund such prosecution is inequitable. Respondents reiterated that it was willing to pay
the advance on costs for their counterclaim.19

On December 27, 2005, the ICC-ICA advised that it was not possible to fix separate advances on costs as
explained in its December 3, 2004 letter, and again invited Respondents to pay their share in the
advance on costs. Respondents’ response contained in the letter dated January 6, 2006 was still the
same: it was willing to pay only the separate advance on costs of their counterclaim.20 In view of
Respondents’ continuing refusal to pay its equal share in the advance on costs and increment, RCBC
wrote the ICC-ICA stating that the latter should compel the Respondents to pay as otherwise RCBC will
be prejudiced and the inaction of the ICC-ICA and the Arbitration Tribunal will detract from the
effectiveness of arbitration as a means of settling disputes. In accordance with Article 30(4) of the ICC
Rules, RCBC reiterated its request to declare the Respondents as in default without any personality to
participate in the proceedings not only with respect to their counterclaims but also to the claim of
RCBC.21
Chairman Ian Barker, in a letter dated January 25, 2006, stated in part:

xxxx

2. The Tribunal has no power under the ICC Rules to order the Respondents to pay the advance on
costs sought by the ICC or to give the Claimant any relief against the Respondents’ refusal to pay. The
ICC Rules differ from, for example, the Rules of the LCIA (Article 24.3) which enables a party paying the
share of costs which the other party has refused to pay, to recover "that amount as a debt immediately
due from the defaulting party."

3. The only sanction under the ICC Rules is contained within Article 30 (4). Where a request for an
advance on costs has not been complied with, after consultation with the Tribunal, the Secretary-
General may direct the Tribunal to suspend its work. After expiry of a time limit, all claims and
counterclaims are then considered as withdrawn. This provision cannot assist a Claimant who is anxious
to litigate its claim. Such a Claimant has to pay the sums requested (including the Respondents’ share) if
it wishes the arbitration to proceed.

4. It may be possible for a Claimant in the course of the arbitral hearing (or whenever costs are being
considered by the Tribunal) to make submissions based on the failure of the Respondents to pay their
share of the costs advance.What relief, if any, would have to be then determined by the Tribunal after
having heard submissions from the Respondents.

5. I should be pleased if the Claimant will advise the Tribunal of its intention in relation to the costs
advance. If the costs are not paid, the arbitration cannot proceed.22 (Italics in the original; emphasis
supplied)

RCBC paid the additional US$100,000 under the second assessment to avert suspension of the
Arbitration Tribunal’s proceedings.

Upon the commencement of the hearings, the Arbitration Tribunal decided that hearings will be initially
confined to issues of liability (liability phase) while the substantial issues will be heard on a later date
(quantum phase).

Meanwhile, EPCIB’s corporate name was officially changed to Banco De Oro (BDO)-EPCIB after its
merger with BDO was duly approved by the Securities and Exchange Commission. As such, BDO assumed
all the obligations and liabilities of EPCIB under the SPA.

On September 27, 2007, the Arbitration Tribunal rendered a Partial Award23 (First Partial Award) in ICC-
ICA Case No. 13290/MS/JB/JEM,as follows:

15 AWARD AND DIRECTIONS

15.1 The Tribunal makes the following declarations by way of Partial Award:

(a) The Claimant’s claim is not time-barred under the provisions of this SPA.

(b) The Claimant is not estopped by its conduct or the equitable doctrine of laches from pursuing its
claim.

(c) As detailed in the Partial Award, the Claimant has established the following breaches by the
Respondents of clause 5(g) of the SPA:
i) the assets, revenue and net worth of Bankard were overstated by reason of its policy on and
recognition of Late Payment Fees;

ii) reported receivables were higher than their realisable values by reason of the ‘bucketing’ method,
thus overstating Bankard’s assets; and

iii) the relevant Bankard statements were inadequate and misleading in that their disclosures caused
readers to be misinformed about Bankard’s accounting policies on revenue and receivables.

(d) Subject to proof of loss the Claimant is entitled to damages for the foregoing breaches.

(e) The Claimant is not entitled to rescission of the SPA.

(f) All other issues, including any issue relating to costs, will be dealt with in a further or final award.

15.2 A further Procedural Order will be necessary subsequent to the delivery of this Partial Award to
deal with the determination of quantum and in particular, whether there should be an Expert appointed
by the Tribunal under Article 20(4) of the ICC Rules to assist the Tribunal in this regard.

15.3 This Award is delivered by a majority of the Tribunal (Sir Ian Barker and Mr. Kaplan). Justice
Kapunan is unable to agree with the majority’s conclusion on the claim of estoppel brought by the
Respondents.24(Emphasis supplied)

On October 26, 2007, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-
6046)amotion to confirm the First Partial Award, while Respondents filed a motion to vacate the same.

ICC-ICA by letter25 dated October 12, 2007 increased the advance on costs from US$450,000 to
US$580,000. Under this third assessment, RCBC paid US$130,000 as its share on the increment.
Respondents declined to pay its adjudged total share of US$290,000 on account of its filing in the RTC of
a motion to vacate the First Partial Award.26 The ICC-ICA then invited RCBC to substitute for Respondents
in paying the balance of US$130,000 by December 21, 2007.27 RCBC complied with the request, making
its total payments in the amount of US$580,000.28

While RCBC paid Respondents’ share in the increment (US$130,000), it reiterated its plea that
Respondents be declared as in default and the counterclaimsdeemed as withdrawn.29

Chairman Barker’s letter dated December 18, 2007 states in part:

xxxx

8. Contrary to the Complainant’s view, the Tribunal has no jurisdiction to declare that the Respondents
have no right to participate in the proceedings concerning the claim. Article 30(4) of the ICC Rules
applies only to any counterclaim of the Respondents.

9. The Tribunal interprets the Claimant’s latest letter as an application by the Claimant to the Tribunal
for the issue of a partial award against the Respondents in respect of their failure to pay their share of
the ICC’s requests for advance on costs.

10. I should be grateful if the Claimant would confirm that this is the situation. If so, the Claimant should
propose a timetable for which written submissions should be made by both parties. This is an
application which can be considered by the Tribunal on written submissions.30 (Emphasis supplied)
RCBC, in a letter dated December 26, 2007, confirmed the Arbitration Tribunal’s interpretation that it
was applying for a partial award against Respondents’ failure to pay their share in the advance on
costs.31

Meanwhile, on January 8, 2008, the Makati City RTC, Branch 148 issued an order in SP Proc. Case No. M-
6046 confirming the First Partial Award and denying Respondents’ separate motions to vacate and to
suspend and inhibit Barker and Kaplan. Respondents’ motion for reconsideration was likewise denied.
Respondents directly filed with this Court a petition for review on certiorari under Rule 45, docketed
as G.R. No. 182248 and entitled Equitable PCI Banking Corporation v. RCBC Capital Corporation.32 In our
Decision dated December 18, 2008, we denied the petition and affirmed the RTC’s ruling confirming the
First Partial Award.

On January 18, 2008, the Arbitration Tribunal set a timetable for the filing of submission by the parties
on whether it should issue a Second Partial Award in respect of the Respondents’ refusal to pay an
advance on costs to the ICC-ICA.

In compliance, RCBC filed on February 7, 2008an Application for Reimbursement of Advance on Costs
Paid, praying for the issuance of a partial award directing the Respondents to reimburse its payment in
the amount of US$290,000 representing Respondents’ share in the Advance on Costs and to consider
Respondents’ counterclaim for actual damages in the amount of US$300,000, and moral and exemplary
damages as withdrawn for their failure to pay their equal share in the advance on costs. RCBC invoked
the plain terms of Article 30 (2) and (3) to stress the liability of Respondents to share equally in paying
the advance on costs where the Arbitration Tribunal has fixed the same.33

Respondents, on the other hand, filed their Opposition34 to the said application alleging that the
Arbitration Tribunal has lost its objectivity in an unnecessary litigation over the payment of
Respondents’ share in the advance costs. They pointed out that RCBC’s letter merely asked that
Respondents be declared as in default for their failure to pay advance costs but the Arbitration Tribunal,
while denying the request offered an alternative to RCBC: a Partial Award for Respondents’ share in the
advance costs even if it was clear from the language of RCBC’s December 11, 2007 letter that it had no
intention of litigating for the advance costs. Chairman Barker, after ruling earlier that it cannot grant
RCBC’s request to declare the Respondents as having no right to participate in the proceedings
concerning the claim, interpreted RCBC’s letter as an application for the Arbitration Tribunal to issue a
partial award in respect of such refusal of Respondents to pay their share in the advance on costs, and
subsequently directed the parties to make submissions on the matter.Aside from violating their right to
due process and to be heard by an impartial tribunal, Respondents also argued that in issuing the award
for advance cost, the ArbitrationTribunal decided an issue beyond the terms of the TOR.

Respondents also emphasized that the parties agreed on a two-part arbitration: the first part of the
Tribunal’s proceedings would determine Respondents’ liability, if any, for alleged violation of Section
5(g) and (h) of the SPA; and the second part of the proceedings would determine the amounts owed by
one party to another as a consequence of a finding of liability or lack thereof. An award for
"reimbursement of advances for costs" clearly falls outside the scope of either proceedings. Neither can
the Tribunal justify such proceedings under Article 23 of the ICC Rules (Conservatory and Interim
Measures) because that provision does not contemplate an award for the reimbursement of advance on
costs in arbitration cases. Respondents further asserted that since the advances on costs have been paid
by the Claimant (RCBC), the main claim and counterclaim may both be heard by the Arbitration Tribunal.
In his letter dated March 13, 2008, Chairman Barker advised the parties, as follows:

1. The Tribunal acknowledges the Respondents’ response to the Claimant’s application for a Partial
Award, based on the Respondents’ failure to pay their share of the costs, as requested by the ICC.

2. The Tribunal notes that neither party has referred to an article by Mat[t]hew Secomb on this very
subject which appears in the ICC Bulletin Vol. 14 No.1 (Spring 2003). To assist both sides and to ensure
that the Tribunal does not consider material on which the parties have not been given an opportunity to
address, I attach a copy of this article, which also contains reference to other scholarly works on the
subject.

3. The Tribunal will give each party seven days within which to submit further written comments as a
consequence of being alerted to the above authorities.35 (Additional emphasis supplied)

The parties complied by submitting their respective comments.

RCBC refuted Respondents’ allegation of partiality on the part of Chairman Barker and reiterated the
prayer in its application for reimbursement of advance on costs paid to the ICC-ICA. RCBC
contended that based on Mr. Secomb’s article, whether the "contractual" or "provisional measures"
approach is applied, the Arbitration Tribunal is vested with jurisdiction and authority to render an award
with respect to said reimbursement of advance cost paid by the non-defaulting party.36

Respondents, on the other hand, maintained that RCBC’s application for reimbursement of advance cost
has no basis under the ICC Rules. They contended that no manifest injustice can be inferred from an act
of a party paying for the share of the defaulting party as this scenario is allowed by the ICC Rules.
Neither can a partial award for advance cost be justified under the "contractual approach" since the
matter of costs for arbitration is between the ICC and the parties, not the Arbitration Tribunal and the
parties. An arbitration tribunal can issue decisions on costs only for those costs not fixed by the ICC.37

Respondents reiterated their position that Article 30(3) envisions a situation whereby a party would
refuse to pay its share on the advance on costs and provides a remedy therefor – the other party "shall
be free to pay the whole of the advance on costs." Such party’s reimbursement for payments of the
defaulting party’s share depends on the final arbitral award where the party liable for costs would be
determined. This is the only remedy provided by the ICC Rules.38

On May 28, 2008, the Arbitration Tribunal rendered the Second Partial Award,39 as follows:

7 AWARD

7.1 Having read and considered the submissions of both parties, the Tribunal AWARDS, DECLARES AND
ORDERS as follows:

(a) The Respondents are forthwith to pay to the Claimant the sum of US$290,000.

(b) The Respondents’ counterclaim is to be considered as withdrawn.

(c) All other questions, including interest and costs, will be dealt with in a subsequent award.40

The above partial award was received by RCBC and Respondents on June 12, 2008.
On July 11, 2008, EPCIB filed a Motion to Vacate Second Partial Award41 in the Makati City RTC, Branch
148 (SP Proc. Case No. M-6046). On July 10, 2008, RCBC filed in the same court a Motion to Confirm
Second Partial Award.42

EPCIB raised the following grounds for vacating the Second Partial Award: (a) the award is void ab
initio having been rendered by the arbitrators who exceeded their power or acted without it; and (b) the
award was procured by undue means or issued with evident partiality or attended by misbehavior on
the part of the Tribunal which resulted in a material prejudice to the rights of the Respondents. EPCIB
argued that there is no express agreement either in the SPA or the ICC Rules for such right of
reimbursement. There is likewise no implied agreement because from the ICC Rules, the only inference
is that the parties agreed to await the dispositions on costs liability in the Final Award, not before.

On the ruling of the Arbitration Tribunal that Respondents’ application for costs are not counterclaims,
EPCIB asserted that this is contrary to Philippine law as it is basic in our jurisdiction that counterclaims
for litigation expenses, moral and exemplary damages are proper counterclaims, which rule should be
recognized in view of Section 10 of the SPA which provides that "substantive aspects of the dispute shall
be settled by applying the laws of the Philippines." Finally, EPCIB takes issue with Chairman Barker’s
interpretation of RCBC’s December 11, 2007 letter as an application for a partial award for
reimbursement of the substituted payments. Such conduct of Chairman Barker is prejudicial and proves
his evident partiality in favor of RCBC.

RCBC filed its Opposition,43 asserting that the Arbitration Tribunal had jurisdiction to consider
Respondents’ counterclaim as withdrawn, the same having been abandoned by not presenting any
computation or substantiation by evidence, their only computation relates only to attorney’s fees which
are simply cost of litigation properly brought at the conclusion of the arbitration. It also pointed out that
the Arbitration Tribunal was empowered by the parties’ arbitral clause to determine the manner of
payment of expenses of arbitration, and that the Second Partial Award was based on authorities and
treatiseson the mandatory and contractual nature of the obligation to pay advances on costs.

In its Reply,44 EPCIB contended that RCBC had the option to agree to its proposal for separate advances
on costs but decided against it; RCBC’s act of paying the balance of the advance cost in substitution of
EPCIB was for the purpose of having EPCIB defaulted and the latter’s counterclaim withdrawn. Having
agreed to finance the arbitration until its completion, RCBC is not entitled to immediate reimbursement
of the amount it paid in substitution of EPCIB under an interim award, as its right to a partial or total
reimbursement will have to be determined under the final award. EPCIB asserted that the matter of
reimbursement of advance cost paid cannot be said to have properly arisen during arbitration. EPCIB
reiterated that Chairman Barker’s interpretation of RCBC’s December 11, 2007 letter as an application
for interim award for reimbursement is tantamount to a promise that the award will be issued in due
course.

After a further exchange of pleadings, and other motions seeking relief from the court in connection
with the arbitration proceedings (quantum phase), the Makati City RTC, Branch 148 issued the
Order45 dated June 24, 2009 confirming the Second Partial Award and denying EPCIB’s motion to vacate
the same. Said court held that since the parties agreed to submit any dispute under the SPA to
arbitration and to be bound by the ICC Rules, they are also bound to pay in equal shares the advance on
costs as provided in Article 30 (2) and (3). It noted that RCBC was forced to pay the share of EPCIB in
substitution of the latter to prevent a suspension of the arbitration proceedings, while EPCIB’s non-
payment seems more like a scheme to delay such proceedings. On the Arbitration Tribunal’s ruling on
EPCIB’s counterclaim, no error was committed in considering it withdrawn for failure of EPCIB to
quantify and substantiate it with supporting evidence. As to EPCIB’s claim for attorney’s fees, the RTC
agreed that these should be brought only at the close of arbitration.

EPCIB moved to reconsider the June 24, 2009 Order and for the voluntary inhibition of the Presiding
Judge (Judge Oscar B. Pimentel) on the ground that EPCIB’s new counsel represented another client in
another case before him in which said counsel assailed his conduct and had likewise sought his
inhibition. Both motions were denied in the Joint Order46 dated March 23, 2010.

On April 14, 2010, EPCIB filed in the CA a petition for review47 with application for TRO and/or writ of
preliminary injunction (CA-G.R. SP No. 113525) in accordance with Rule 19, Section 4 of the Special Rules
of Court on Alternative Dispute Resolution48 (Special ADR Rules). EPCIB assailed the Makati City RTC,
Branch 148 in denying its motion to vacate the Second Partial Award despite (a) said award having been
rendered in excess of jurisdiction or power, and contrary to public policy; (b) the fact that it was issued
with evident partiality and serious misconduct; (c) the award deals with a dispute not contemplated
within the terms of submission to arbitration or beyond the scope of such submission, which therefore
ought to be vacated pursuant to Article 34 of the UNCITRAL Model Law; and (d) the Presiding Judge
having exhibited bias and prejudice against BDO and its counsel as confirmed by his pronouncements in
the Joint Order dated March 23, 2010 in which, instead of recusing himself, he imputed malice and
unethical conduct in the entry of appearance of Belo Gozon Elma Asuncion and Lucila Law Offices in SP
Proc. Case No. M-6046, which warrants his voluntary inhibition.

Meanwhile, on June 16, 2010, the Arbitration Tribunal issued the Final Award,49 as follows:

15 AWARD

15.1 The Tribunal by a majority (Sir Ian Barker & Mr. Kaplan) awards, declares and adjudges as follows:

(a) the Respondents are to pay damages to the Claimant for breach of the sale and purchase agreement
for Bankard shares in the sum of ₱348,736,920.29.

(b) The Respondents are to pay to the Claimant the sum of US$880,000 in respect of the costs of the
arbitration as fixed by the ICC Court.

(c) The Respondents are to pay to the Claimant the sum of US$582,936.56 for the fees and expenses of
Mr. Best.

(d) The Respondents are to pay to the Claimant their expenses of the arbitration as follows:

(i) Experts’ fees ₱7,082,788.55

(ii) Costs of without prejudice meeting ₱22,571.45

(iii) Costs of arbitration hearings ₱553,420.66

(iv) Costs of transcription service ₱483,597.26

Total ₱8,144,377.62

(e) The Respondents are to pay to the Claimant the sum of ₱7,000,000 for party-and-party legal costs.
(f) The Counterclaims of the Respondents are all dismissed.

(g) All claims of the Claimant are dismissed, other than those referred to above.

15.2 Justice Kapunan does not agree with the majority of the members of the Tribunal and has issued a
dissenting opinion. He has refused to sign this Award.50

On July 1, 2010 BDO filed in the Makati City RTC a Petition to Vacate Final Award Ad
Cautelam,51 docketed as SP Proc. Case No. M-6995, which was raffled to Branch 65.

On July 28, 2010, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-6046) a Motion
to Confirm Final Award.52 BDO filed its Opposition With Motion to Dismiss53 on grounds that a Petition to
Vacate Final Award Ad Cautelamhad already been filed in SP Proc. Case No. M-6995. BDO also pointed
out that RCBC did not file the required petition but instead filed a mere motion which did not go
through the process of raffling to a proper branch of the RTC of Makati City and the payment of the
required docket/filing fees. Even assuming that Branch 148 has jurisdiction over RCBC’s motion to
confirm final award, BDO asserted that RCBC had filed before the Arbitration Tribunal an Application for
Correction and Interpretation of Award under Article 29 of the ICC Rules, which is irreconcilable with its
Motion to Confirm Final Award before said court. Hence, the Motion to Confirm Award was filed
precipitately.

On August 18, 2010, RCBC filed an Omnibus Motion in SP Proc. Case No. M-6995 (Branch 65) praying for
the dismissal of BDO’s Petition to Vacate Final Award or the transfer of the same to Branch 148 for
consolidation with SP Proc. Case No. M-6046. RCBC contended that BDO’s filing of its petition with
another court is a blatant violation of the Special ADR Rules and is merely a subterfuge to commit
forum-shopping. BDO filed its Opposition to the Omnibus Motion.54

On October 28, 2010, Branch 65 issued a Resolution55 denying RCBC’s omnibus motion and directing the
service of the petition to RCBC for the latter’s filing of a comment thereon. RCBC’s motion for
reconsideration was likewise denied in the said court’s Order dated December 15, 2010. RCBC then filed
its Opposition to the Petition to Vacate Final Award Ad Cautelam.

Meanwhile, on November 10, 2010, Branch 148 (SP Proc. Case No. M-6046) issued an Order56 confirming
the Final Award "subject to the correction/interpretation thereof by the Arbitral Tribunal pursuant to
the ICC Rules and the UNCITRAL Model Law," and denying BDO’s Opposition with Motion to Dismiss.

On December 30, 2010, George L. Go, in his personal capacity and as attorney-in-fact of the other listed
shareholders of Bankard, Inc. in the SPA (Individual Shareholders), filed a petition in the CA, CA-G.R. SP
No. 117451, seeking to set aside the above-cited November 10, 2010 Order and to enjoin Branch 148
from further proceeding in SP Proc. Case No. M-6046. By Decision57 dated June 15, 2011, the CA
dismissed the said petition. Their motion for reconsideration of the said decision was likewise denied by
the CA in its Resolution58 dated December 14, 2011.

On December 23, 2010, the CA rendered its Decision in CA-G.R. SP No. 113525, the dispositive portion of
which states:

WHEREFORE, premises considered, the following are hereby REVERSED and SET ASIDE:
1. the Order dated June 24, 2009 issued in SP Proc. Case No. M-6046 by the Regional Trial Court of
Makati City, Branch 148, insofar as it denied the Motion to Vacate Second Partial Award dated July 8,
2008 and granted the Motion to Confirm Second Partial Award dated July 10, 2008;

2. the Joint Order dated March 23, 2010 issued in SP Proc. Case No. M-6046 by the Regional Trial Court
of Makati City, Branch 148, insofar as it denied the Motion For Reconsideration dated July 28, 2009
relative to the motions concerning the Second Partial Award immediately mentioned above; and

3. the Second Partial Award dated May 28, 2008 issued in International Chamber of Commerce Court of
Arbitration Reference No. 13290/MS/JB/JEM.

SO ORDERED.59

RCBC filed a motion for reconsideration but the CA denied the same in its Resolution60 dated March 16,
2011. On April 6, 2011, it filed a petition for review on certiorari in this Court (G.R. No. 196171).

On February 25, 2011, Branch 65 rendered a Decision61 in SP Proc. Case No. M-6995, as follows:

WHEREFORE, premises considered, the Final Award dated June 16, 2010 in ICC Ref. No.
13290/MS/JB/JEM is hereby VACATED with cost against the respondent.

SO ORDERED.62

In SP Proc. Case No. M-6046, Branch 148 issued an Order63 dated August 8, 2011 resolving the following
motions: (1) Motion for Reconsideration filed by BDO, Go and Individual Shareholders of the November
10, 2010 Order confirming the Final Award; (2) RCBC’s Omnibus Motion to expunge the motion for
reconsideration filed by Go and Individual Shareholders, and for execution of the Final Award; (3)
Motion for Execution filed by RCBC against BDO; (4) BDO’s Motion for Leave to File Supplement to the
Motion for Reconsideration; and (5) Motion for Inhibition filed by Go and Individual Shareholders. Said
Order decreed:

WHEREFORE, premises considered, it is hereby ORDERED, to wit:

1. Banco De Oro’s Motion for Reconsideration, Motion for Leave to File Supplement to Motion for
Reconsideration, and Motion to Inhibit are DENIED for lack of merit.

2. RCBC Capital’s Motion to Expunge, Motion to Execute against Mr. George L. Go and the Bankard
Shareholders, and the Motion to Execute against Banco De Oro are hereby GRANTED.

3. The damages awarded to RCBC Capital Corporation in the amount of Ph₱348,736,920.29 is subject to
an interest of 6% per annum reckoned from the date of RCBC Capital’s extra-judicial demand or from
May 5, 2003 until the confirmation of the Final Award. Likewise, this compounded amount is subject to
12% interest per annum from the date of the confirmation of the Final Award until its satisfaction. The
costs of the arbitration amounting to US$880,000.00, the fees and expenses of Mr. Best amounting to
US$582,936.56, the Claimant’s expenses of the arbitration amounting to Ph₱8,144,377.62, and the
party-and-party legal costs amounting to Ph₱7,000,000.00 all ruled in favor of RCBC Capital Corporation
in the Final Award of the Arbitral Tribunal dated June 16, 2010 are subject to 12% legal interest per
annum, also reckoned from the date of the confirmation of the Final Award until its satisfaction.
4. Pursuant to Section 40 of R.A. No. 9285, otherwise known as the Alternative Dispute Resolution Act of
2004 in relation to Rule 39 of the Rules of Court, since the Final Award have been confirmed, the same
shall be enforced in the same manner as final and executory decisions of the Regional Trial Court, let a
writ of execution be issued commanding the Sheriff to enforce this instant Order confirming this Court’s
Order dated November 10, 2010 that judicially confirmed the June 16, 2010 Final Award.

SO ORDERED.64

Immediately thereafter, RCBC filed an Urgent Motion for Issuance of a Writ of Execution.65 On August
22, 2011, after approving the execution bond, Branch 148 issued a Writ of Execution for the
implementation of the said court’s "Order dated August 8, 2011 confirming the November 10, 2010
Order that judicially confirmed the June 16, 2010 Final Award x x x."66

BDO then filed in the CA, a "Petition for Review (With Application for a Stay Order or Temporary
Restraining Order and/or Writ of Preliminary Injunction," docketed as CA-G.R. SP No. 120888. BDO
sought to reverse and set aside the Orders dated November 10, 2010 and August 8, 2011, and any writ
of execution issued pursuant thereto, as well as the Final Award dated June 16, 2010 issued by the
Arbitration Tribunal.

In its Urgent Omnibus Motion67 to resolve the application for a stay order and/or TRO/writ of
preliminary injunction, and to quash the Writ of Execution dated August 22, 2011 and lift the Notices of
Garnishment dated August 22, 2011, BDO argued that the assailed orders of execution (Writ of
Execution and Notice of Garnishment) were issued with indecent haste and despite the non-compliance
with the procedures in Special ADR Rules of the November 10, 2010 Order confirming the Final Award.
BDO was not given sufficient time to respond to the demand for payment or to elect the method of
satisfaction of the judgment debt or the property to be levied upon. In any case, with the posting of a
bond by BDO, Branch 148 has no jurisdiction to implement the appealed orders as it would pre-empt the
CA from exercising its review under Rule 19 of the Special ADR Rules after BDO had perfected its appeal.
BDO stressed that the bond posted by RCBC was for a measly sum of ₱3,000,000.00 to cause execution
pending appeal of a monetary award that may reach ₱631,429,345.29. RCBC also failed to adduce
evidence of "good cause" or "good reason" to justify discretionary execution under Section 2(a), Rule 39
of the Rules of Court.

BDO further contended that the writ of execution should be quashed for having been issued with grave
abuse of discretion amounting to lack or excess of jurisdiction as Branch 148 modified the Final Award at
the time of execution by imposing the payment of interests though none was provided therein nor in
the Order confirming the same.

During the pendency of CA-G.R. SP No. 120888, Branch 148 continued with execution proceedings and
on motion by RCBC designated/deputized additional sheriffs to replace Sheriff Flora who was
supposedly physically indisposed.68 These court personnel went to the offices/branches of BDO
attempting to serve notices of garnishment and to levy the furniture, fixtures and equipment.

On September 12, 2011, BDO filed a Very Urgent Motion to Lift Levy and For Leave to Post Counter-
Bond69 before Branch 148 praying for the lifting of the levy of BDO Private Bank, Inc. (BPBI) shares and
the cancellation of the execution sale thereof scheduled on September 15, 2011, which was set for
hearing on September 14, 2011. BDO claimed that the levy was invalid because it was served by the RTC
Sheriffs not to the authorized representatives of BPBI, as provided under Section 9(b), Rule 39 in relation
to Section 7, Rule 57 of the Rules of Court stating that a notice of levy on shares of stock must be served
to the president or managing agent of the company which issued the shares. However, BDO was advised
by court staff that Judge Sarabia was on leave and the case could not be set for hearing.

In its Opposition to BDO’s application for injunctive relief, RCBC prayed for its outright denial as BDO’s
petition raises questions of fact and/or law which call for the CA to substitute its judgment with that of
the Arbitration Tribunal, in patent violation of applicable rules of procedure governing domestic
arbitration and beyond the appellate court’s jurisdiction. RCBC asserted that BDO’s application has
become moot and academic as the writ of execution was already implemented and/or enforced. It also
contended that BDO has no clear and unmistakable right to warrant injunctive relief because the issue
of jurisdiction was already ruled upon in CA-G.R. SP No. 117451 which dismissed the petition filed by Go
and the Individual Shareholders of Bankard questioning the authority of Branch 148 over RCBC’s motion
to confirm the Final Award despite the earlier filing by BDO in another branch of the RTC (Branch 65) of
a petition to vacate the said award.

On September 13, 2011, BDO, to avert the sale of the BPBI shares scheduled on September 15, 2011 and
prevent further disruption in the operations of BDO and BPBI, paid under protest by tendering a
Manager’s Check in the amount of ₱637,941,185.55, which was accepted by RCBC as full and complete
satisfaction of the writ of execution. BDO manifested before Branch 148 that such payment was made
without prejudice to its appeal before the CA.70

On even date, the CA denied BDO’s application for a stay order and/or TRO/preliminary injunction for
non-compliance with Rule 19.25 of the Special ADR Rules. The CA ruled that BDO failed to show the
existence of a clear right to be protected and that the acts sought to be enjoined violated any right.
Neither was BDO able to demonstrate that the injury to be suffered by it is irreparable or not
susceptible to mathematical computation.

BDO did not file a motion for reconsideration and directly filed with this Court a petition for certiorari
with urgent application for writ of preliminary mandatory injunction (G.R. No. 199238).

The Petitions

In G.R. No. 196171, RCBC set forth the following grounds for the reversal of the CA Decision dated
December 23, 2010:

I.

THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS HONORABLE COURT
AND COMMITTED REVERSIBLE ERROR IN VACATING THE SECOND PARTIAL AWARD ON THE BASIS OF
CHAIRMAN BARKER’S ALLEGED PARTIALITY, WHICH IT CLAIMS IS INDICATIVE OF BIAS CONSIDERING
THAT THE ALLEGATIONS CONTAINED IN BDO/EPCIB’S PETITION FALL SHORT OF THE JURISPRUDENTIAL
REQUIREMENT THAT THE SAME BE SUPPORTED BY CLEAR AND CONVINCING EVIDENCE.

II.

THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS HONORABLE COURT
AND COMMITTED REVERSIBLE ERROR WHEN IT REVERSED THE ARBITRAL TRIBUNAL’S FINDINGS OF FACT
AND LAW IN THE SECOND PARTIAL AWARD IN PATENT CONTRAVENTION OF THE SPECIAL ADR RULES
WHICH EXPRESSLY PROHIBITS THE COURTS, IN AN APPLICATION TO VACATE AN ARBITRAL AWARD,
FROM DISTURBING THE FINDINGS OF FACT AND/OR INTERPRE[TA]TION OF LAW OF THE ARBITRAL
TRIBUNAL.71

BDO raises the following arguments in G.R. No. 199238:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN PERFUNCTORILY DENYING PETITIONER BDO’S APPLICATION FOR STAY ORDER,
AND/OR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION DESPITE THE EXISTENCE
AND CONCURRENCE OF ALL THE ELEMENTS FOR THE ISSUANCE OF SAID PROVISIONAL RELIEFS

A. PETITIONER BDO HAS CLEAR AND UNMISTAKABLE RIGHTS TO BE PROTECTED BY THE ISSUANCE OF
THE INJUNCTIVE RELIEF PRAYED FOR, WHICH, HOWEVER, WERE DISREGARDED BY PUBLIC RESPONDENT
WHEN IT DENIED PETITIONER BDO’S PRAYER FOR ISSUANCE OF A STAY ORDER AND/OR TRO

B. PETITIONER BDO’S RIGHT TO DUE PROCESS AND EQUAL PROTECTION OF THE LAW WAS GROSSLY
VIOLATED BY THE RTC-MAKATI CITY BRANCH 148, THE DEPUTIZED SHERIFFS AND RESPONDENT RCBC
CAPITAL, WHICH VIOLATION WAS AIDED BY PUBLIC RESPONDENT’S INACTION ON AND EVENTUAL
DENIAL OF THE PRAYER FOR STAY ORDER AND/OR TRO

C. DUE TO THE ACTS AND ORDERS OF RTC BRANCH 148, PETITIONER BDO SUFFERED IRREPARABLE
DAMAGE AND INJURY, AND THERE WAS DIRE AND URGENT NECESSITY FOR THE ISSUANCE OF THE
INJUNCTIVE RELIEF PRAYED FOR WHICH PUBLIC RESPONDENT DENIED IN GRAVE ABUSE OF
DISCRETION72

Essentially, the issues to be resolved are: (1) whether there is legal ground to vacate the Second Partial
Award; and (2) whether BDO is entitled to injunctive relief in connection with the execution proceedings
in SP Proc. Case No. M-6046.

In their TOR, the parties agreed on the governing law and rules as follows:

Laws to be Applied

13 The Tribunal shall determine the issues to be resolved in accordance with the laws of the Republic of
the Philippines.

Procedure to be Applied

14 The proceedings before the Tribunal shall be governed by the ICC Rules of Arbitration (1 January
1998) and the law currently applicable to arbitration in the Republic of the Philippines.73

As stated in the Partial Award dated September 27, 2007, although the parties provided in Section 10 of
the SPA that the arbitration shall be conducted under the ICC Rules, it was nevertheless arbitration
under Philippine law since the parties are both residents of this country. The provisions of Republic Act
No. 87674 (RA 876),as amended by Republic Act No. 928575 (RA 9285)principally applied in the arbitration
between the herein parties.76

The pertinent provisions of R.A. 9285 provide:

SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award shall be governed by
Section 23 of R.A. 876.
A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory
decisions of the Regional Trial Court.

The confirmation of a domestic award shall be made by the regional trial court in accordance with the
Rules of Procedure to be promulgated by the Supreme Court.

xxxx

SEC. 41. Vacation Award. – A party to a domestic arbitration may question the arbitral award with the
appropriate regional trial court in accordance with the rules of procedure to be promulgated by the
Supreme Court only on those grounds enumerated in Section 25 of Republic Act No. 876. Any other
ground raised against a domestic arbitral award shall be disregarded by the regional trial court.

Rule 11.4 of the Special ADR Rules sets forth the grounds for vacating an arbitral award:

Rule 11.4. Grounds.—(A) To vacate an arbitral award. – The arbitral award may be vacated on the
following grounds:

a. The arbitral award was procured through corruption, fraud or other undue means;

b. There was evident partiality or corruption in the arbitral tribunal or any of its members;

c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially
prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or
to hear evidence pertinent and material to the controversy;

d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained
from disclosing such disqualification; or

e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete,
final and definite award upon the subject matter submitted to them was not made.

The award may also be vacated on any or all of the following grounds:

a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or
is otherwise unenforceable; or

b. A party to arbitration is a minor or a person judicially declared to be incompetent.

xxxx

In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than
those enumerated above. (Emphasis supplied)

Judicial Review

At the outset, it must be stated that a review brought to this Court under the Special ADR Rules is not a
matter of right. Rule 19.36 of said Rules specified the conditions for the exercise of this Court’s
discretionary review of the CA’s decision.

Rule 19.36.Review discretionary.—A review by the Supreme Court is not a matter of right, but of sound
judicial discretion, which will be granted only for serious and compelling reasons resulting in grave
prejudice to the aggrieved party. The following, while neither controlling nor fully measuring the court’s
discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that
will warrant the exercise of the Supreme Court’s discretionary powers, when the Court of Appeals:

a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR
Rules in arriving at its decision resulting in substantial prejudice to the aggrieved party;

b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered
such final order or decision;

c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in
substantial prejudice to the aggrieved party; and

d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of

jurisdiction.

The mere fact that the petitioner disagrees with the Court of Appeals’ determination of questions of
fact, of law or both questions of fact and law, shall not warrant the exercise of the Supreme Court’s
discretionary power. The error imputed to the Court of Appeals must be grounded upon any of the
above prescribed grounds for review or be closely analogous thereto.

A mere general allegation that the Court of Appeals has committed serious and substantial error or that
it has acted with grave abuse of discretion resulting in substantial prejudice to the petitioner without
indicating with specificity the nature of such error or abuse of discretion and the serious prejudice
suffered by the petitioner on account thereof, shall constitute sufficient ground for the Supreme Court
to dismiss outright the petition. (Emphasis supplied)

The applicable standard for judicial review of arbitral awards in this jurisdiction is set forth in Rule 19.10
which states:

Rule 19.10. Rule on judicial review on arbitration in the Philippines.--As a general rule, the court can only
vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers
from any of the infirmities or grounds for vacating an arbitral award under Section 24 of Republic Act
No. 876 or under Rule 34 of the Model Law in a domestic arbitration, or for setting aside an award in an
international arbitration under Article 34 of the Model Law, or for such other grounds provided under
these Special Rules.

xxxx

The court shall not set aside or vacate the award of the arbitral tribunal merelyon the ground that the
arbitral tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute its
judgment for that of the arbitral tribunal. (Emphasis supplied)

The above rule embodied the stricter standard in deciding appeals from arbitral awards established by
jurisprudence. In the case of Asset Privatization Trust v. Court of Appeals,77 this Court held:

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law
or as to the facts.Courts are without power to amend or overrule merely because of disagreement with
matters of law or facts determined by the arbitrators.They will not review the findings of law and fact
contained in an award, and will not undertake to substitute their judgment for that of the arbitrators,
since any other rule would make an award the commencement, not the end, of litigation.Errors of law
and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are
insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration is, thus,
more limited than judicial review of a trial.78

Accordingly, we examine the merits of the petition before us solely on the statutory ground raised for
vacating the Second Partial Award: evident partiality, pursuant to Section 24 (b) of the Arbitration Law
(RA 876) and Rule 11.4 (b) of the Special ADR Rules.

Evident Partiality

Evident partiality is not defined in our arbitration laws. As one of the grounds for vacating an arbitral
award under the Federal Arbitration Act (FAA) in the United States (US), the term "encompasses both an
arbitrator’s explicit bias toward one party and an arbitrator’s inferred bias when an arbitrator fails to
disclose relevant information to the parties."79

From a recent decision80 of the Court of Appeals of Oregon, we quote a brief discussion of the common
meaning of evident partiality:

To determine the meaning of "evident partiality," we begin with the terms themselves. The common
meaning of "partiality" is "the inclination to favor one side."Webster’s Third New Int'l Dictionary 1646
(unabridged ed 2002); see also id. (defining "partial" as "inclined to favor one party in a cause or one
side of a question more than the other: biased, predisposed" (formatting in original)). "Inclination," in
turn, means "a particular disposition of mind or character : propensity, bent" or "a tendency to a
particular aspect, state, character, or action."Id. at 1143 (formatting in original); see also id. (defining
"inclined" as "having inclination, disposition, or tendency").

The common meaning of "evident" is "capable of being perceived esp[ecially] by sight : distinctly visible :
being in evidence : discernable[;] * * * clear to the understanding : obvious, manifest, apparent."Id. at
789 (formatting in original); see also id. (stating that synonyms of "evident" include "apparent, patent,
manifest, plain, clear, distinct, obvious, [and] palpable" and that, "[s]ince evident rather naturally
suggests evidence, it may imply the existence of signs and indications that must lead to an
identification or inference" (formatting in original)). (Emphasis supplied)

Evident partiality in its common definition thus implies "the existence of signs and indications that must
lead to an identification or inference" of partiality.81 Despite the increasing adoption of arbitration in
many jurisdictions, there seems to be no established standard for determining the existence of evident
partiality. In the US, evident partiality "continues to be the subject of somewhat conflicting and
inconsistent judicial interpretation when an arbitrator’s failure to disclose prior dealings is at issue."82

The first case to delineate the standard of evident partiality in arbitration proceedings
was Commonwealth Coatings Corp. v. Continental Casualty Co., et al.83 decided by the US Supreme Court
in 1968. The Court therein addressed the issue of whether the requirement of impartiality applies to an
arbitration proceeding. The plurality opinion written by Justice Black laid down the rule that the
arbitrators must disclose to the parties "any dealings that might create an impression of possible
bias,"84 and that underlying such standard is "the premise that any tribunal permitted by law to try cases
and controversies not only must be unbiased but also must avoid even the appearance of bias."85 In a
separate concurring opinion, Justice White joined by Justice Marshall, remarked that "[t]he Court does
not decide today that arbitrators are to be held to the standards of judicial decorum of Article III judges,
or indeed of any judges."86 He opined that arbitrators should not automatically be disqualified from an
arbitration proceeding because of a business relationship where both parties are aware of the
relationship in advance, or where the parties are unaware of the circumstances but the relationship is
trivial. However, in the event that the arbitrator has a "substantial interest" in the transaction at hand,
such information must be disclosed.

Subsequent cases decided by the US Court of Appeals Circuit Courts adopted different approaches,
given the imprecise standard of evident partiality in Commonwealth Coatings.

In Morelite Construction Corp. v. New York District Council Carpenters Benefit Funds,87 the Second Circuit
reversed the judgment of the district court and remanded with instructions to vacate the arbitrator’s
award, holding that the existence of a father-son relationship between the arbitrator and the president
of appellee union provided strong evidence of partiality and was unfair to appellant construction
contractor. After examining prior decisions in the Circuit, the court concluded that –

x x x we cannot countenance the promulgation of a standard for partiality as insurmountable as "proof

of actual bias" -- as the literal words of Section 10 might suggest. Bias is always difficult, and indeed
often impossible, to "prove." Unless an arbitrator publicly announces his partiality, or is overheard in a
moment of private admission, it is difficult to imagine how "proof" would be obtained. Such a standard,
we fear, occasionally would require that we enforce awards in situations that are clearly repugnant to
our sense of fairness, yet do not yield "proof" of anything.

If the standard of "appearance of bias" is too low for the invocation of Section 10, and "proof of actual
bias" too high, with what are we left? Profoundly aware of the competing forces that have already been
discussed, we hold that "evident partiality" within the meaning of 9 U.S.C. § 10 will be found where a
reasonable person would have to conclude that an arbitrator was partial to one party to the
arbitration.x x x88 (Emphasis supplied)

In Apperson v. Fleet Carrier Corporation,89 the Sixth Circuit agreed with the Morelite court’s analysis, and
accordingly held that to invalidate an arbitration award on the grounds of bias, the challenging party
must show that "a reasonable person would have to conclude that an arbitrator was partial" to the
other party to the arbitration.

This "myriad of judicial interpretations and approaches to evident partiality" resulted in a lack of a
uniform standard, leaving the courts "to examine evident partiality on a case-by-case basis."90 The case
at bar does not present a non-disclosure issue but conduct allegedly showing an arbitrator’s partiality to
one of the parties.

EPCIB/BDO, in moving to vacate the Second Partial Award claimed that the Arbitration Tribunal
exceeded its powers in deciding the issue of advance cost not contemplated in the TOR, and that
Chairman Barker acted with evident partiality in making such award. The RTC held that BDO failed to
substantiate these allegations. On appeal, the CA likewise found that the Arbitration Tribunal did not go
beyond the submission of the parties because the phrasing of the scope of the agreed issues in the TOR
("[t]he issues to be determined by the Tribunal are those issues arising from the said Request for
Arbitration, Answer and Reply and such other issues as may properly arise during the arbitration")is
broad enough to accommodate a finding on the liability and the repercussions of BDO’s failure to share
in the advances on costs. Section 10 of the SPA also gave the Arbitration Tribunal authority to decide
how the costs should be apportioned between them.

However, the CA found factual support in BDO’s charge of partiality, thus:

On the issue on evident partiality, the rationale in the American case of Commonwealth Coatings Corp.
v. Continental Cas. Co. appears to be very prudent. In Commonwealth, the United States Supreme Court
reasoned that courts "should…be even more scrupulous to safeguard the impartiality of arbitrators than
judges, since the former have completely free rein to decide the law as well as the facts, and are not
subject to appellate review" in general. This taken into account, the Court applies the standard
demanded of the conduct of magistrates by analogy. After all, the ICC Rules require that an arbitral
tribunal should act fairly and impartially. Hence, an arbitrator’s conduct should be beyond reproach
and suspicion. His acts should be free from the appearances of impropriety.

An examination of the circumstances claimed to be illustrative of Chairman Barker’s partiality is

indicative of bias. Although RCBC had repeatedly asked for reimbursement and the withdrawal of BDO’s
counterclaims prior to Chairman Barker’s December 18, 2007 letter, it is baffling why it is only in the
said letter that RCBC’s prayer was given a complexion of being an application for a partial award. To
the Court, the said letter signaled a preconceived course of action that the relief prayed for by RCBC
will be granted.

That there was an action to be taken beforehand is confirmed by Chairman Barker’s furnishing the
parties with a copy of the Secomb article. This article ultimately favored RCBC by advancing its
cause. Chairman Barker makes it appear that he intended good to be done in doing so but due process
dictates the cold neutrality of impartiality. This means that "it is not enough…[that] cases [be decided]
without bias and favoritism. Nor is it sufficient that…prepossessions [be rid of]. [A]ctuations should
moreover inspire that belief." These put into the equation, the furnishing of the Secomb article further
marred the trust reposed in Chairman Barker. The suspicion of his partiality on the subject matter
deepened. Specifically, his act established that he had pre-formed opinions.

Chairman Barker’s providing of copies of the said text is easily interpretable that he had prejudged the
matter before him. In any case, the Secomb article tackled bases upon which the Second Partial Award
was founded. The subject article reflected in advance the disposition of the ICC arbitral tribunal. The
award can definitely be viewed as an affirmation that the bases in the Secomb article were adopted
earlier on. To the Court, actuations of arbitrators, like the language of judges, "must be guarded and
measured lest the best of intentions be misconstrued."

x x x x91 (Emphasis supplied)

We affirm the foregoing findings and conclusion of the appellate court save for its reference to
the obiter in Commonwealth Coatings that arbitrators are held to the same standard of conduct
imposed on judges. Instead, the Court adopts the reasonable impression of partiality standard, which
requires a showing that a reasonable person would have to conclude that an arbitrator was partial to
the other party to the arbitration. Such interest or bias, moreover, "must be direct, definite and capable
of demonstration rather than remote, uncertain, or speculative."92When a claim of arbitrator’s evident
partiality is made, "the court must ascertain from such record as is available whether the arbitrators’
conduct was so biased and prejudiced as to destroy fundamental fairness."93
Applying the foregoing standard, we agree with the CA in finding that Chairman Barker’s act of
furnishing the parties with copies of Matthew Secomb’s article, considering the attendant
circumstances,is indicative of partiality such that a reasonable man would have to conclude that he was
favoring the Claimant, RCBC. Even before the issuance of the Second Partial Award for the
reimbursement of advance costs paid by RCBC, Chairman Barker exhibited strong inclination to grant
such relief to RCBC, notwithstanding his categorical ruling that the Arbitration Tribunal "has no
power under the ICC Rules to order the Respondents to pay the advance on costs sought by the ICC or to
give the Claimantany relief against the Respondents’ refusal to pay."94 That Chairman Barker was
predisposed to grant relief to RCBC was shown by his act of interpreting RCBC’s letter, which merely
reiterated its plea to declare the Respondents in default and consider all counterclaims withdrawn – as
what the ICC Rules provide – as an application to the Arbitration Tribunal to issue a partial award in
respect of BDO’s failure to share in the advance costs. It must be noted that RCBC in said letter did not
contemplate the issuance of a partial order, despite Chairman Barker’s previous letter which mentioned
the possibility of granting relief upon the parties making submissions to the Arbitration Tribunal.
Expectedly, in compliance with Chairman Barker’s December 18, 2007 letter, RCBC formally applied for
the issuance of a partial award ordering BDO to pay its share in the advance costs.

Mr. Secomb’s article, "Awards and Orders Dealing With the Advance on Costs in ICC Arbitration:
Theoretical Questions and Practical Problems"95 specifically dealt with the situation when one of the
parties to international commercial arbitration refuses to pay its share on the advance on costs. After a
brief discussion of the provisions of ICC Rules dealing with advance on costs, which did not provide for
issuance of a partial award to compel payment by the defaulting party, the author stated:

4. As we can see, the Rules have certain mechanisms to deal with defaulting parties. Occasionally,
however, parties have sought to use other methods to tackle the problem of a party refusing to pay its
part of the advance on costs. These have included seeking an order or award from the arbitral tribunal
condemning the defaulting party to pay its share of the advance on costs.1âwphi1 Such applications are
the subject of this article.96

By furnishing the parties with a copy of this article, Chairman Barker practically armed RCBC with
supporting legal arguments under the "contractual approach" discussed by Secomb. True enough, RCBC
in its Application for Reimbursement of Advance Costs Paid utilized said approach as it singularly
focused on Article 30(3)97 of the ICC Rules and fiercely argued that BDO was contractually bound to
share in the advance costs fixed by the ICC.98 But whether under the "contractual approach" or
"provisional approach" (an application must be treated as an interim measure of protection under
Article 23 [1] rather than enforcement of a contractual obligation), both treated in the Secomb article,
RCBC succeeded in availing of a remedy which was not expressly allowed by the Rules but in practice has
been resorted to by parties in international commercial arbitration proceedings. It may also be
mentioned that the author, Matthew Secomb, is a member of the ICC Secretariat and the "Counsel in
charge of the file", as in fact he signed some early communications on behalf of the ICC Secretariat
pertaining to the advance costs fixed by the ICC.99 This bolstered the impression that Chairman Barker
was predisposed to grant relief to RCBC by issuing a partial award.

Indeed, fairness dictates that Chairman Barker refrainfrom suggesting to or directing RCBC towards a
course of action to advance the latter’s cause, by providing it with legal arguments contained in an
article written by a lawyer who serves at the ICC Secretariat and was involved or had participation --
insofar as the actions or recommendations of the ICC – in the case. Though done purportedly to assist
both parties, Chairman Barker’s act clearly violated Article 15 of the ICC Rules declaring that "[i]n all
cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable
opportunity to present its case." Having pre-judged the matter in dispute, Chairman Barker had lost his
objectivity in the issuance of the Second Partial Award.

In fine, we hold that the CA did not err in concluding that the article ultimately favored RCBC as it
reflected in advance the disposition of the Arbitral Tribunal, as well as "signalled a preconceived course
of action that the relief prayed for by RCBC will be granted." This conclusion is further confirmed by the
Arbitral Tribunal’s pronouncements in its Second Partial Award which not only adopted the "contractual
approach" but even cited Secomb’s article along with other references, thus:

6.1 It appears to the Tribunal that the issue posed by this application is essentially a contractual one. x x
x

xxxx

6.5 Matthew Secomb, considered these points in the article in 14 ICC Bulletin No. 1 (2003) which was
sent to the parties. At Para. 19, the learned author quoted from an ICC Tribunal (Case No. 11330) as
follows:

"The Arbitral Tribunal concludes that the partiesin arbitrations conducted under the ICC Rules have a
mutually binding obligation to pay the advance on costs as determined by the ICC Court, based on Article
30-3 ICC Rules which – by reference – forms part of the parties’ agreement to arbitration under such
Rules."100

The Court, however, must clarify that the merits of the parties’ arguments as to the propriety of the
issuance of the Second Partial Award are not in issue here. Courts are generally without power to
amend or overrule merely because of disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact contained in an award, and will not
undertake to substitute their judgment for that of the arbitrators. A contrary rule would make an
arbitration award the commencement, not the end, of litigation.101 It is the finding of evident partiality
which constitutes legal ground for vacating the Second Partial Award and not the Arbitration Tribunal’s
application of the ICC Rules adopting the "contractual approach" tackled in Secomb’s article.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and
conciliation – are encouraged by this Court. By enabling parties to resolve their disputes amicably, they
provide solutions that are less time-consuming, less tedious, less confrontational, and more productive
of goodwill and lasting relationship.102Institutionalization of ADR was envisioned as "an important means
to achieve speedy and impartial justice and declog court dockets."103 The most important feature of
arbitration, and indeed, the key to its success, is the public’s confidence and trust in the integrity of the
process.104 For this reason, the law authorizes vacating an arbitral award when there is evident partiality
in the arbitrators.

Injunction Against Execution Of Arbitral Award

Before an injunctive writ can be issued, it is essential that the following requisites are present: (1) there
must be a right inesse or the existence of a right to be protected; and (2) the act against which
injunction to be directed is a violation of such right. The onus probandi is on movant to show that there
exists a right to be protected, which is directly threatened by the act sought to be enjoined. Further,
there must be a showing that the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a serious damage.105

Rule 19.22 of the Special ADR Rules states:

Rule 19.22. Effect of appeal.—The appeal shall not stay the award, judgment, final order or resolution
sought to be reviewed unless the Court of Appeals directs otherwise upon such terms as it may deem
just.

We find no reversible error or grave abuse of discretion in the CA’s denial of the application for stay
order or TRO upon its finding that BDO failed to establish the existence of a clear legal right to enjoin
execution of the Final Award confirmed by the Makati City RTC, Branch 148, pending resolution of its
appeal.It would be premature to address on the merits the issues raised by BDO in the present petition
considering that the CA still has to decide on the validity of said court's orders confirming the Final
Award. But more important, since BOO had already paid ₱637,941,185.55 m manager's check, albeit
under protest, and which payment was accepted by RCBC as full and complete satisfaction of the writ of
execution, there is no more act to be enjoined.

Settled is the rule that injunctive reliefs are preservative remedies for the protection of substantive
rights and interests. Injunction is not a cause of action in itself, but merely a provisional remedy, an
adjunct to a main suit. When the act sought to be enjoined has become fait accompli, the prayer for
provisional remedy should be denied. 106

Thus, the Court ruled in Gov. Looyuko107 that when the events sought to be prevented by injunction or
prohibition have already happened, nothing more could be enjoined or prohibited. Indeed, it is a
universal principle of law that an injunction will not issue to restrain the performance of an act already
done. This is so for the simple reason that nothing more can be done in reference thereto. A writ of
injunction becomes moot and academic after the act sought to be enjoined has already been
consummated.

WHEREFORE, premises considered, the petition m G.R. No. 199238 is DENIED. The Resolution dated
September 13,2011 ofthe Court of Appeals in CA-G.R. SP No. 120888 is AFFIRMED.

The petition in G.R. No. 196171 is DENIED. The Decision dated December 23, 2010 of the Court of
Appeals in CA-G.R. SP No. 113525 is hereby AFFIRMED.

SO ORDERED.
G.R. No. 184203, November 26, 2014

CITY OF LAPU-LAPU, Petitioner, v. PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

G.R. NO. 187583

PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S.

TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATAAN, Petitioners, v. PHILIPPINE
ECONOMIC ZONE AUTHORITY, Respondent.

DECISION

LEONEN, J.:

The Philippine Economic Zone Authority is exempt from payment of real property taxes.

These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the Province of
Bataan separately filed against the Philippine Economic Zone Authority (PEZA).

In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals’ decision2 dated January
11, 2008 and resolution3 dated August 6, 2008, dismissing the City’s appeal for being the wrong mode of
appeal. The City appealed the Regional Trial Court, Branch 111, Pasay City’s decision finding the PEZA
exempt from payment of real property taxes.

In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals’ decision4 dated
August 27, 2008 and resolution5 dated April 16, 2009, granting the PEZA’s petition for certiorari. The
Court of Appeals ruled that the Regional Trial Court, Branch 115, Pasay City gravely abused its discretion
in finding the PEZA liable for real property taxes to the Province of Bataan.

Facts common to the consolidated petitions

In the exercise of his legislative powers,6 President Ferdinand E. Marcos issued Presidential Decree No.
66 in 1972, declaring as government policy the establishment of export processing zones in strategic
locations in the Philippines. Presidential Decree No. 66 aimed “to encourage and promote foreign
commerce as a means of making the Philippines a center of international trade, of strengthening our
export trade and foreign exchange position, of hastening industrialization, of reducing domestic
unemployment, and of accelerating the development of the country.”7chanRoblesvirtualLawlibrary

To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate, administer,
and manage the export processing zones established in the Port of Mariveles, Bataan8 and such other
export processing zones that may be created by virtue of the decree.9chanRoblesvirtualLawlibrary

The decree declared the EPZA non-profit in character10 with all its revenues devoted to its development,
improvement, and maintenance.11 To maintain this non-profit character, the EPZA was declared exempt
from all taxes that may be due to the Republic of the Philippines, its provinces, cities, municipalities, and
other government agencies and instrumentalities.12 Specifically, Section 21 of Presidential Decree No.
66 declared the EPZA exempt from payment of real property taxes:chanroblesvirtuallawlibrary
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-
profit and shall devote and use all its returns from its capital investment, as well as excess revenues
from its operations, for the development, improvement and maintenance and other related
expenditures of the Authority to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section 1 of this Decree. In consonance therewith, the
Authority is hereby declared exempt:ChanRoblesVirtualawlibrary

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be
paid to the National Government, its provinces, cities, municipalities and other government agencies
and instrumentalities[.]

In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export Processing
Zone. Certain parcels of land of the public domain located in the City of Lapu-Lapu in Mactan, Cebu
were reserved to serve as site of the Mactan Export Processing Zone.

In 1995, the PEZA was created by virtue of Republic Act No. 7916 or “the Special Economic Zone Act of
1995”13 to operate, administer, manage, and develop economic zones in the country.14 The PEZA was
granted the power to register, regulate, and supervise the enterprises located in the economic
zones.15 By virtue of the law, the export processing zone in Mariveles, Bataan became the Bataan
Economic Zone16 and the Mactan Export Processing Zone the Mactan Economic
Zone.17chanRoblesvirtualLawlibrary

As for the EPZA, the law required it to “evolve into the PEZA in accordance with the guidelines and
regulations set forth in an executive order issued for [the] purpose.”18chanRoblesvirtualLawlibrary

On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA to
assume and exercise all of the EPZA’s powers, functions, and responsibilities “as provided in Presidential
Decree No. 66, as amended, insofar as they are not inconsistent with the powers, functions, and
responsibilities of the PEZA, as mandated under [the Special Economic Zone Act of 1995].”19 All of
EPZA’s properties, equipment, and assets, among others, were ordered transferred to the
PEZA.20chanRoblesvirtualLawlibrary

Facts of G.R. No. 184203

In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the Treasurer,
demanded from the PEZA ?32,912,350.08 in real property taxes for the period from 1992 to 1998 on the
PEZA’s properties located in the Mactan Economic Zone.

The City reiterated its demand in the letter22 dated May 21, 1998. It cited Sections 193 and 234 of the
Local Government Code of 1991 that withdrew the real property tax exemptions previously granted to
or presently enjoyed by all persons. The City pointed out that no provision in the Special Economic Zone
Act of 1995 specifically exempted the PEZA from payment of real property taxes, unlike Section 21 of
Presidential Decree No. 66 that explicitly provided for EPZA’s exemption. Since no legal provision
explicitly exempted the PEZA from payment of real property taxes, the City argued that it can tax the
PEZA.

The City made subsequent demands23 on the PEZA. In its last reminder24 dated May 13, 2002, the City
assessed the PEZA ?86,843,503.48 as real property taxes for the period from 1992 to 2002.

On September 11, 2002, the PEZA filed a petition for declaratory relief25 with the Regional Trial Court of
Pasay City, praying that the trial court declare it exempt from payment of real property taxes. The case
was raffled to Branch 111.

The City answered26 the petition, maintaining that the PEZA is liable for real property taxes. To support
its argument, the City cited a legal opinion dated September 6, 1999 issued by the Department of
Justice,27 which stated that the PEZA is not exempt from payment of real property taxes. The
Department of Justice based its opinion on Sections 193 and 234 of the Local Government Code that
withdrew the tax exemptions, including real property tax exemptions, previously granted to all persons.

A reply28 was filed by the PEZA to which the City filed a rejoinder.29chanRoblesvirtualLawlibrary

Pursuant to Rule 63, Section 3 of Rules of Court,30 the Office of the Solicitor General filed a comment31on
the PEZA’s petition for declaratory relief. It agreed that the PEZA is exempt from payment of real
property taxes, citing Sections 24 and 51 of the Special Economic Zone Act of 1995.

The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act of 1995
provides:chanroblesvirtuallawlibrary

SEC. 24. Exemption from National and Local Taxes. – Except for real property taxes on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises
within the ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.

Section 51 of the law, on the other hand, provides:chanroblesvirtuallawlibrary

SEC. 51. Ipso-Facto Clause. – All privileges, benefits, advantages or exemptions granted to special
economic zones under Republic Act No. 7227, shall ipso-facto be accorded to special economic zones
already created or to be created under this Act. The free port status shall not be vested upon new
special economic zones.

Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions granted
to special economic zones created under the Bases Conversion and Development Act of 1992 apply to
special economic zones created under the Special Economic Zone Act of 1995. Since these benefits
include exemption from payment of national or local taxes, these benefits apply to special economic
zones owned by the PEZA.

According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the Special
Economic Zone Act of 1995. It ruled that Section 24, which taxes real property owned by developers of
economic zones, only applies to private developers of economic zones, not to public developers like the
PEZA. The PEZA, therefore, is not liable for real property taxes on the land it owns.

Characterizing the PEZA as an agency of the National Government, the trial court ruled that the City had
no authority to tax the PEZA under Sections 133(o) and 234(a) of the Local Government Code of 1991.

In the resolution32 dated June 14, 2006, the trial court granted the PEZA’s petition for declaratory relief
and declared it exempt from payment of real property taxes.

The City filed a motion for reconsideration,33 which the trial court denied in its resolution34 dated
September 26, 2006.

The City then appealed35 to the Court of Appeals.

The Court of Appeals noted the following issues the City raised in its appellant’s brief: (1) whether the
trial court had jurisdiction over the PEZA’s petition for declaratory relief; (2) whether the PEZA is a
government agency performing governmental functions; and (3) whether the PEZA is exempt from
payment of real property taxes.

The issues presented by the City, according to the Court of Appeals, are pure questions of law which
should have been raised in a petition for review on certiorari directly filed before this court. Since the
City availed itself of the wrong mode of appeal, the Court of Appeals dismissed the City’s appeal in the
decision36 dated January 11, 2008.

The City filed a motion for extension of time to file a motion for reconsideration,37 which the Court of
Appeals denied in the resolution38 dated April 11, 2008.

Despite the denial of its motion for extension, the City filed a motion for reconsideration.39 In the
resolution40 dated August 6, 2008, the Court of Appeals denied that motion.

In its petition for review on certiorari with this court,41 the City argues that the Court of Appeals “hid
under the skirts of technical rules”42 in resolving its appeal. The City maintains that its appeal involved
mixed questions of fact and law. According to the City, whether the PEZA performed governmental
functions “cannot completely be addressed by law but [by] the factual and actual activities [the PEZA is]
carrying out.”43chanRoblesvirtualLawlibrary

Even assuming that the petition involves pure questions of law, the City contends that the subject
matter of the case “is of extreme importance with [far-reaching] consequence that [its magnitude]
would surely shape and determine the course of our nation’s future.”44 The Court of Appeals, the City
argues, should have resolved the case on the merits.

The City insists that the trial court had no jurisdiction to hear the PEZA’s petition for declaratory
relief. According to the City, the case involves real property located in the City of Lapu-Lapu. The
petition for declaratory relief should have been filed before the Regional Trial Court of the City of Lapu-
Lapu.45chanRoblesvirtualLawlibrary

Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly demanded
real property taxes from the PEZA. The City argues that the PEZA should have likewise impleaded these
local government units as respondents in its petition for declaratory relief. For its failure to do so, the
PEZA violated Rule 63, Section 2 of the Rules of Court, and the trial court should have dismissed the
petition.46chanRoblesvirtualLawlibrary

This court ordered the PEZA to comment on the City’s petition for review on
certiorari.47chanRoblesvirtualLawlibrary

At the outset of its comment, the PEZA argues that the Court of Appeals’ decision dated January 11,
2008 had become final and executory. After the Court of Appeals had denied the City’s appeal, the City
filed a motion for extension of time to file a motion for reconsideration. Arguing that the time to file a
motion for reconsideration is not extendible, the PEZA filed its motion for reconsideration out of
time. The City has no more right to appeal to this court.48chanRoblesvirtualLawlibrary

The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court of
Appeals. Since the City raised pure questions of law in its appeal, the PEZA argues that the proper
remedy is a petition for review on certiorari with this court, not an ordinary appeal before the appellate
court. The Court of Appeals, therefore, correctly dismissed outright the City’s appeal under Rule 50,
Section 2 of the Rules of Court.49chanRoblesvirtualLawlibrary

On the merits, the PEZA argues that it is an agency and instrumentality of the National Government. It is
therefore exempt from payment of real property taxes under Sections 133(o) and 234(a) of the Local
Government Code.50 It adds that the tax privileges under Sections 24 and 51 of the Special Economic
Zone Act of 1995 applied to it.51chanRoblesvirtualLawlibrary

Considering that the site of the Mactan Economic Zone is a reserved land under Proclamation No. 1811,
the PEZA claims that the properties sought to be taxed are lands of public dominion exempt from real
property taxes.52chanRoblesvirtualLawlibrary

As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had jurisdiction to
hear its petition for declaratory relief under Rule 63, Section 1 of the Rules of Court.53 It also argued
that it need not implead the Province of Bataan, the City of Baguio, and the Province of Cavite as
respondents considering that their demands came after the PEZA had already filed the petition in
court.54chanRoblesvirtualLawlibrary
Facts of G.R. No. 187583

After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA, the Province
of Bataan followed suit. In its letter55 dated May 29, 2003, the Province, through the Office of the
Provincial Treasurer, informed the PEZA that it would be sending a real property tax billing to the
PEZA. Arguing that the PEZA is a developer of economic zones, the Province claimed that the PEZA is
liable for real property taxes under Section 24 of the Special Economic Zone Act of 1995.

In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the service of the
real property tax billing. It cited its petition for declaratory relief against the City of Lapu-Lapu pending
before the Regional Trial Court, Branch 111, Pasay City as basis.

The Province argued that serving a real property tax billing on the PEZA “would not in any way affect
[its] petition for declaratory relief before [the Regional Trial Court] of Pasay City.”57 Thus, in its
letter58dated June 27, 2003, the Province notified the PEZA of its real property tax liabilities for June 1,
1995 to December 31, 2002 totalling ?110,549,032.55.

After having been served a tax billing, the PEZA again requested the Province to suspend collecting its
alleged real property tax liabilities until the Regional Trial Court of Pasay City resolves its petition for
declaratory relief.59chanRoblesvirtualLawlibrary

The Province ignored the PEZA’s request. On January 20, 2004, the Province served on the PEZA a
statement of unpaid real property tax for the period from June 1995 to December
2004.60chanRoblesvirtualLawlibrary

The PEZA again requested the Province to suspend collecting its alleged real property taxes.61 The
Province denied the request in its letter62 dated January 29, 2004, then served on the PEZA a warrant of
levy63 covering the PEZA’s real properties located in Mariveles, Bataan.

The PEZA’s subsequent requests64 for suspension of collection were all denied by the Province.65 The
Province then served on the PEZA a notice of delinquency in the payment of real property taxes66 and a
notice of sale of real property for unpaid real property tax.67 The Province finally sent the PEZA a notice
of public auction of the latter’s properties in Mariveles, Bataan.68chanRoblesvirtualLawlibrary

On June 14, 2004, the PEZA filed a petition for injunction69 with prayer for issuance of a temporary
restraining order and/or writ of preliminary injunction before the Regional Trial Court of Pasay City,
arguing that it is exempt from payment of real property taxes. It added that the notice of sale issued by
the Province was void because it was not published in a newspaper of general circulation as required by
Section 260 of the Local Government Code.70chanRoblesvirtualLawlibrary

The case was raffled to Branch 115.

In its order71 dated June 18, 2004, the trial court issued a temporary restraining order against the
Province. After the PEZA had filed a P100,000.00 bond,72 the trial court issued a writ of preliminary
injunction,73 enjoining the Province from selling the PEZA’s real properties at public auction.

On March 3, 2006, the PEZA and Province both manifested that each would file a memorandum after
which the case would be deemed submitted for decision. The parties then filed their respective
memoranda.74chanRoblesvirtualLawlibrary

In the order75 dated January 31, 2007, the trial court denied the PEZA’s petition for injunction. The trial
court ruled that the PEZA is not exempt from payment of real property taxes. According to the trial
court, Sections 193 and 234 of the Local Government Code had withdrawn the real property tax
exemptions previously granted to all persons, whether natural or juridical.76 As to the tax exemptions
under Section 51 of the Special Economic Zone Act of 1995, the trial court ruled that the provision only
applies to businesses operating within the economic zones, not to the
PEZA.77chanRoblesvirtualLawlibrary

The PEZA filed before the Court of Appeals a petition for certiorari78 with prayer for issuance of a
temporary restraining order.

The Court of Appeals issued a temporary restraining order, enjoining the Province and its Provincial
Treasurer from selling PEZA's properties at public auction scheduled on October 17, 2007.79 It also
ordered the Province to comment on the PEZA’s petition.

In its comment,80 the Province alleged that it received a copy of the temporary restraining order only on
October 18, 2007 when it had already sold the PEZA’s properties at public auction. Arguing that the act
sought to be enjoined was already fait accompli, the Province prayed for the dismissal of the petition for
certiorari.

The PEZA then filed a supplemental petition for certiorari, prohibition, and mandamus81 against the
Province, arguing that the Provincial Treasurer of Bataan acted with grave abuse of discretion in issuing
the notice of delinquency and notice of sale. It maintained that it is exempt from payment of real
property taxes because it is a government instrumentality. It added that its lands are property of public
dominion which cannot be sold at public auction.

The PEZA also filed a motion82 for issuance of an order affirming the temporary restraining order and a
writ of preliminary injunction to enjoin the Province from consolidating title over the PEZA’s properties.

In its resolution83 dated January 16, 2008, the Court of Appeals admitted the supplemental petition for
certiorari, prohibition, and mandamus. It required the Province to comment on the supplemental
petition and to file a memorandum on the PEZA’s prayer for issuance of temporary restraining order.

The Province commented84 on the PEZA’s supplemental petition, to which the PEZA
replied.85chanRoblesvirtualLawlibrary

The Province then filed a motion86 for leave to admit attached rejoinder with motion to dismiss. In the
rejoinder with motion to dismiss,87 the Province argued for the first time that the Court of Appeals had
no jurisdiction over the subject matter of the action.

According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the PEZA sought
to reverse a Regional Trial Court decision in a local tax case, the Province claimed that the court with
appellate jurisdiction over the action is the Court of Tax Appeals. The PEZA then prayed that the Court
of Appeals dismiss the petition for certiorari for lack of jurisdiction over the subject matter of the action.

The Court of Appeals held that the issue before it was whether the trial court judge gravely abused his
discretion in dismissing the PEZA’s petition for prohibition. This issue, according to the Court of Appeals,
is properly addressed in a petition for certiorari over which it has jurisdiction to resolve. It, therefore,
maintained jurisdiction to resolve the PEZA’s petition for certiorari.88chanRoblesvirtualLawlibrary

Although it admitted that appeal, not certiorari, was the PEZA’s proper remedy to reverse the trial
court’s decision,89 the Court of Appeals proceeded to decide the petition for certiorari in “the broader
interest of justice.”90chanRoblesvirtualLawlibrary

The Court of Appeals ruled that the trial court judge gravely abused his discretion in dismissing the
PEZA’s petition for prohibition. It held that Section 21 of Presidential Decree No. 66 and Section 51 of
the Special Economic Zone Act of 1995 granted the PEZA exemption from payment of real property
taxes.91 Based on the criteria set in Manila International Airport Authority v. Court of Appeals,92 the
Court of Appeals found that the PEZA is an instrumentality of the national government. No taxes,
therefore, could be levied on it by local government units.93chanRoblesvirtualLawlibrary

In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZA’s petition for
certiorari. It set aside the trial court’s decision and nullified all the Province’s proceedings with respect
to the collection of real property taxes from the PEZA.

The Province filed a motion for reconsideration,95 which the Court of Appeals denied in the
resolution96dated April 16, 2009 for lack of merit.

In its petition for review on certiorari with this court,97 the Province of Bataan insists that the Court of
Appeals had no jurisdiction to take cognizance of the PEZA’s petition for certiorari. The Province
maintains that the Court of Tax Appeals had jurisdiction to hear the PEZA’s petition since it involved a
local tax case decided by a Regional Trial Court.98chanRoblesvirtualLawlibrary

The Province reiterates that the PEZA is not exempt from payment of real property taxes. The Province
points out that the EPZA, the PEZA’s predecessor, had to be categorically exempted from payment of
real property taxes. The EPZA, therefore, was not inherently exempt from payment of real property
taxes and so is the PEZA. Since Congress omitted from the Special Economic Zone Act of 1995 a
provision specifically exempting the PEZA from payment of real property taxes, the Province argues that
the PEZA is a taxable entity. It cited the rule in statutory construction that provisions omitted in revised
statutes are deemed repealed.99chanRoblesvirtualLawlibrary
With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax exemptions
and benefits, the Province argues that these provisions only apply to business establishments operating
within special economic zones,100 not to the PEZA.

This court ordered the PEZA to comment on the Province’s petition for review on
certiorari.101chanRoblesvirtualLawlibrary

In its comment,102 the PEZA argues that the Court of Appeals had jurisdiction to hear its petition for
certiorari since the issue was whether the trial court committed grave abuse of discretion in denying its
petition for injunction. The PEZA maintains that it is exempt from payment of real property taxes under
Section 21 of Presidential Decree No. 66 and Section 51 of the Special Economic Zone Act of 1995.

The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari.

On the PEZA’s motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu and the
Province of Bataan.105chanRoblesvirtualLawlibrary

The issues for our resolution are the following:

I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapu’s appeal for raising pure
questions of law;

II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear, try, and decide the
City of Lapu-Lapu’s petition for declaratory relief;

III. Whether the petition for injunction filed before the Regional Trial Court, Branch 115, Pasay City, is a
local tax case appealable to the Court of Tax Appeals; and

IV. Whether the PEZA is exempt from payment of real property taxes.

We deny the consolidated petitions.

I.

The Court of Appeals did not err in

dismissing the City of Lapu-Lapu’s
appeal for raising pure questions of law

Under the Rules of Court, there are three modes of appeal from Regional Trial Court decisions. The first
mode is through an ordinary appeal before the Court of Appeals where the decision assailed was
rendered in the exercise of the Regional Trial Court’s original jurisdiction. Ordinary appeals are
governed by Rule 41, Sections 3 to 13 of the Rules of Court. In ordinary appeals, questions of fact or
mixed questions of fact and law may be raised.106chanRoblesvirtualLawlibrary
The second mode is through a petition for review before the Court of Appeals where the decision
assailed was rendered by the Regional Trial Court in the exercise of its appellate jurisdiction. Rule 42 of
the Rules of Court governs petitions for review before the Court of Appeals. In petitions for review
under Rule 42, questions of fact, of law, or mixed questions of fact and law may be
raised.107chanRoblesvirtualLawlibrary

The third mode is through an appeal by certiorari before this court under Rule 45 where only questions
of law shall be raised.108chanRoblesvirtualLawlibrary

A question of fact exists when there is doubt as to the truth or falsity of the alleged facts.109 On the
other hand, there is a question of law if the appeal raises doubt as to the applicable law on a certain set
of facts.110chanRoblesvirtualLawlibrary

Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed outright and shall
not be referred to the proper court:chanroblesvirtuallawlibrary

SEC. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal under Rule 41 taken from the
Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues
purely of law not being reviewable by said court. Similarly, an appeal by notice of appeal instead of by
petition for review from the appellate judgment of a Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court
but shall be dismissed outright.

Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which provided that improper
appeals to the Court of Appeals shall not be dismissed but shall be certified to the proper court for
resolution:chanroblesvirtuallawlibrary

Sec. 3. Where appealed case erroneously, brought. — Where the appealed case has been erroneously
brought to the Court of Appeals, it shall not dismiss the appeal, but shall certify the case to the proper
court, with a specific and clear statement of the grounds therefor.

With respect to appeals by certiorari directly filed before this court but which raise questions of fact,
paragraph 4(b) of Circular No. 2-90 dated March 9, 1990 states that this court “retains the option, in the
exercise of its sound discretion and considering the attendant circumstances, either itself to take
cognizance of and decide such issues or to refer them to the Court of Appeals for determination.”

In Indoyon, Jr. v. Court of Appeals,111 we said that this court “cannot tolerate ignorance of the law on
appeals.”112 It is not this court’s task to determine for litigants their proper remedies under the
Rules.113chanRoblesvirtualLawlibrary

We agree that the City availed itself of the wrong mode of appeal before the Court of Appeals. The City
raised pure questions of law in its appeal. The issue of whether the Regional Trial Court of Pasay had
jurisdiction over the PEZA’s petition for declaratory relief is a question of law, jurisdiction being a matter
of law.114 The issue of whether the PEZA is a government instrumentality exempt from payment of real
property taxes is likewise a question of law since this question is resolved by examining the provisions of
the PEZA’s charter as well as other laws relating to the PEZA.115chanRoblesvirtualLawlibrary

The Court of Appeals, therefore, did not err in dismissing the City’s appeal pursuant to Rule 50, Section 2
of the Rules of Court.

Nevertheless, considering the important questions involved in this case, we take cognizance of the City’s
petition for review on certiorari in the interest of justice.

In Municipality of Pateros v. The Honorable Court of Appeals,116 the Municipality of Pateros filed an
appeal under Rule 42 before the Court of Appeals, which the Court of Appeals denied outright for raising
pure questions of law. This court agreed that the Municipality of Pateros “committed a procedural
infraction”117 and should have directly filed a petition for review on certiorari before this
court. Nevertheless, “in the interest of justice and in order to write finis to [the] controversy,”118 this
court “opt[ed] to relax the rules”119 and proceeded to decide the case. This court
said:chanroblesvirtuallawlibrary

While it is true that rules of procedure are intended to promote rather than frustrate the ends of justice,
and while the swift unclogging of the dockets of the courts is a laudable objective, it nevertheless must
not be met at the expense of substantial justice.

The Court has allowed some meritorious cases to proceed despite inherent procedural defects and
lapses. This is in keeping with the principle that rules of procedure are mere tools designed to facilitate
the attainment of justice, and that strict and rigid application of rules which should result in
technicalities that tend to frustrate rather than promote substantial justice must always be avoided. It is
a far better and more prudent cause of action for the court to excuse a technical lapse and afford the
parties a review of the case to attain the ends of justice, rather than dispose of the case on technicality
and cause grave injustice to the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice.120

Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates or otherwise
administers special economic zones all over the country. Resolving the substantive issue of whether the
PEZA is taxable for real property taxes will clarify the taxing powers of all local government units where
special economic zones are operated. This case, therefore, should be decided on the merits.

II.

The Regional Trial Court of Pasay had

no jurisdiction to hear, try, and decide
the PEZA’s petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63
provides:chanroblesvirtuallawlibrary

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

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

The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the subject
matter of litigation in an action for declaratory relief being incapable of pecuniary estimation.121 Section
19 of the Judiciary Reorganization Act of 1980 provides:chanroblesvirtuallawlibrary

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]

Consistent with the law, the Rules state that a petition for declaratory relief is filed “in the appropriate
Regional Trial Court.”122

A special civil action for declaratory relief is filed for a judicial determination of any question of
construction or validity arising from, and for a declaration of rights and duties, under any of the
following subject matters: a deed, will, contract or other written instrument, statute, executive order or
regulation, ordinance, or any other governmental regulation.123 However, a declaratory judgment may
issue only if there has been “no breach of the documents in question.”124 If the contract or statute
subject matter of the action has already been breached, the appropriate ordinary civil action must be
filed.125 If adequate relief is available through another form of action or proceeding, the other action
must be preferred over an action for declaratory relief.126chanRoblesvirtualLawlibrary

In Ollada v. Central Bank of the Philippines,127 the Central Bank issued CB-IED Form No. 5 requiring
certified public accountants to submit an accreditation under oath before they were allowed to certify
financial statements submitted to the bank. Among those financial statements the Central Bank
disallowed were those certified by accountant Felipe B. Ollada. 128chanRoblesvirtualLawlibrary

Claiming that the requirement “restrained the legitimate pursuit of one’s trade,”129 Ollada filed a
petition for declaratory relief against the Central Bank.

This court ordered the dismissal of Ollada’s petition “without prejudice to [his] seeking relief in another
appropriate action.”130 According to this court, Ollada’s right had already been violated when the
Central Bank refused to accept the financial statements he prepared. Since there was already a breach,
a petition for declaratory relief was not proper. Ollada must pursue the “appropriate ordinary civil
action or proceeding.”131 This court explained:chanroblesvirtuallawlibrary

Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under the
provisions of Rule 66 of the Rules of Court. On the question of when a special civil action of this nature
would prosper, we have already held that the complaint for declaratory relief will not prosper if filed
after a contract, statute or right has been breached or violated. In the present case such is precisely the
situation arising from the facts alleged in the petition for declaratory relief. As vigorously claimed by
petitioner himself, respondent had already invaded or violated his right and caused him injury — all
these giving him a complete cause of action enforceable in an appropriate ordinary civil action or
proceeding. The dismissal of the action was, therefore, proper in the light of our ruling in De Borja vs.
Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No. L-3439, July 31, 1951, where we held that
an action for declaratory relief should be filed before there has been a breach of a contract, statutes or
right, and that it is sufficient to bar such action, that there had been a breach — which would constitute
actionable violation. The rule is that an action for Declaratory Relief is proper only if adequate relief is
not available through the means of other existing forms of action or proceeding (1 C.J.S. 1027-1028). 132

It is also required that the parties to the action for declaratory relief be those whose rights or interests
are affected by the contract or statute in question.133 “There must be an actual justiciable controversy
or the ‘ripening seeds’ of one”134 between the parties. The issue between the parties “must be ripe for
judicial determination.”135 An action for declaratory relief based on theoretical or hypothetical
questions cannot be filed for our courts are not advisory courts.136chanRoblesvirtualLawlibrary

In Republic v. Roque,137 this court dismissed respondents’ petition for declaratory relief for lack of
justiciable controversy. According to this court, “[the respondents’] fear of prospective prosecution
[under the Human Security Act] was solely based on remarks of certain government officials which were
addressed to the general public.”138chanRoblesvirtualLawlibrary

In Velarde v. Social Justice Society,139 this court refused to resolve the issue of “whether or not [a
religious leader’s endorsement] of a candidate for elective office or in urging or requiring the members
of his flock to vote for a specific candidate is violative [of the separation clause].”140 According to the
court, there was no justiciable controversy and ordered the dismissal of the Social Justice Society’s
petition for declaratory relief. This court explained:chanroblesvirtuallawlibrary

Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the
petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or
candidates for elective offices; and that such actual or threatened endorsement "will enable [them] to
elect men to public office who [would] in turn be forever beholden to their leaders, enabling them to
control the government"[;] and "pos[ing] a clear and present danger of serious erosion of the people’s
faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the
ultimate result of elections," which would then be violative of the separation clause.

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to
constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent
on the part of any of the respondents below to champion an electoral candidate, or to urge their so-
called flock to vote for, or not to vote for, a particular candidate. It is a time-honored rule that sheer
speculation does not give rise to an actionable right.

Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened, imminent
and inevitable violation that should be prevented by the declaratory relief sought. The judicial power
and duty of the courts to settle actual controversies involving rights that are legally demandable and
enforceable cannot be exercised when there is no actual or threatened violation of a legal right.

All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be
resolved." In other words, it merely sought an opinion of the trial court on whether the speculated acts
of religious leaders endorsing elective candidates for political offices violated the constitutional principle
on the separation of church and state. SJS did not ask for a declaration of its rights and duties; neither
did it pray for the stoppage of any threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion.141

In sum, a petition for declaratory relief must satisfy six requisites:chanroblesvirtuallawlibrary

[F]irst, the subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; second, the terms of said documents and the
validity thereof are doubtful and require judicial construction; third, there must have been no breach of
the documents in question; fourth, there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; fifth, the issue must be ripe for judicial
determination; and sixth, adequate relief is not available through other means or other forms of action
or proceeding.142 (Emphases omitted)

We rule that the PEZA erred in availing itself of a petition for declaratory relief against the City. The City
had already issued demand letters and real property tax assessment against the PEZA, in violation of the
PEZA’s alleged tax-exempt status under its charter. The Special Economic Zone Act of 1995, the subject
matter of PEZA’s petition for declaratory relief, had already been breached. The trial court, therefore,
had no jurisdiction over the petition for declaratory relief.

There are several aspects of jurisdiction.143 Jurisdiction over the subject matter is “the power to hear
and determine cases of the general class to which the proceedings in question belong.”144 It is conferred
by law, which may either be the Constitution or a statute.145 Jurisdiction over the subject matter means
“the nature of the cause of action and the relief sought.”146 Thus, the cause of action and character of
the relief sought as alleged in the complaint are examined to determine whether a court had jurisdiction
over the subject matter.147 Any decision rendered by a court without jurisdiction over the subject
matter of the action is void.148chanRoblesvirtualLawlibrary

Another aspect of jurisdiction is jurisdiction over the person. It is “the power of [a] court to render a
personal judgment or to subject the parties in a particular action to the judgment and other rulings
rendered in the action.”149 A court automatically acquires jurisdiction over the person of the plaintiff
upon the filing of the initiatory pleading.150 With respect to the defendant, voluntary appearance in
court or a valid service of summons vests the court with jurisdiction over the defendant’s
person.151 Jurisdiction over the person of the defendant is indispensable in actions in personam or those
actions based on a party’s personal liability.152 The proceedings in an action in personam are void if the
court had no jurisdiction over the person of the defendant.153chanRoblesvirtualLawlibrary

Jurisdiction over the res or the thing under litigation is acquired either “by the seizure of the property
under legal process, whereby it is brought into actual custody of the law; or as a result of the institution
of legal proceedings, in which the power of the court is recognized and made effective.”154 Jurisdiction
over the res is necessary in actions in rem or those actions “directed against the thing or property or
status of a person and seek judgments with respect thereto as against the whole world.”155 The
proceedings in an action in rem are void if the court had no jurisdiction over the thing under
litigation.156chanRoblesvirtualLawlibrary

In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the action,
specifically, over the remedy sought. As this court explained in Malana v.
Tappa:157chanRoblesvirtualLawlibrary

. . . an action for declaratory relief presupposes that there has been no actual breach of the instruments
involved or of rights arising thereunder. Since the purpose of an action for declaratory relief is to secure
an authoritative statement of the rights and obligations of the parties under a statute, deed, or contract
for their guidance in the enforcement thereof, or compliance therewith, and not to settle issues arising
from an alleged breach thereof, it may be entertained only before the breach or violation of the statute,
deed, or contract to which it refers. A petition for declaratory relief gives a practical remedy for ending
controversies that have not reached the state where another relief is immediately available; and
supplies the need for a form of action that will set controversies at rest before they lead to a repudiation
of obligations, an invasion of rights, and a commission of wrongs.

Where the law or contract has already been contravened prior to the filing of an action for declaratory
relief, the courts can no longer assume jurisdiction over the action. In other words, a court has no more
jurisdiction over an action for declaratory relief if its subject has already been infringed or transgressed
before the institution of the action.158(Emphasis supplied)

The trial court should have dismissed the PEZA’s petition for declaratory relief for lack of jurisdiction.

Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer depends
on whether the assessment was erroneous or illegal.

An erroneous assessment “presupposes that the taxpayer is subject to the tax but is disputing the
correctness of the amount assessed.”159 With an erroneous assessment, the taxpayer claims that the
local assessor erred in determining any of the items for computing the real property tax, i.e., the value
of the real property or the portion thereof subject to tax and the proper assessment levels. In case of an
erroneous assessment, the taxpayer must exhaust the administrative remedies provided under the Local
Government Code before resorting to judicial action.
The taxpayer must first pay the real property tax under protest. Section 252 of the Local Government
Code provides:chanroblesvirtuallawlibrary

SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer first pays
the tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in
writing must be filed within thirty (30) days from payment of the tax to the provincial, city treasurer or
municipal treasurer, in the case of a municipality within Metropolitan Manila Area, who shall decide the
protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the
tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future
tax liability.

(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II of
this Code.

Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal with the
Local Board of Assessment Appeals within 60 days from receipt of the decision on the
protest:chanroblesvirtuallawlibrary

SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of the provincial or city by filing a petition
under oath in the form prescribed for the purpose, together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal.

Payment under protest and appeal to the Local Board of Assessment Appeals are “successive
administrative remedies to a taxpayer who questions the correctness of an assessment.”160 The Local
Board Assessment Appeals shall not entertain an appeal “without the action of the local assessor”161 on
the protest.

If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals, the
taxpayer may appeal with the Central Board of Assessment Appeals within 30 days from receipt of the
Local Board’s decision:chanroblesvirtuallawlibrary

SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall decide the appeal
within one hundred twenty (120) days from the date of receipt of such appeal. The Board, after hearing,
shall render its decision based on substantial evidence or such relevant evidence on record as a
reasonable mind might accept as adequate to support the conclusion.

(b) In the exercise of its appellate jurisdiction, the Board shall have the power to summon witnesses,
administer oaths, conduct ocular inspection, take depositions, and issue subpoena and subpoena duces
tecum. The proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts
without necessarily adhering to technical rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having legal interest
therein and the provincial or city assessor with a copy of the decision of the Board. In case the provincial
or city assessor concurs in the revision or the assessment, it shall be his duty to notify the owner of the
property or the person having legal interest therein of such fact using the form prescribed for the
purpose. The owner of the property or the person having legal interest therein or the assessor who is not
satisfied with the decision of the Board, may, within thirty (30) days after receipt of the decision of said
Board, appeal to the Central Board of Assessment Appeals, as herein provided. The decision of the
Central Board shall be final and executory. (Emphasis supplied)

On the other hand, an assessment is illegal if it was made without authority under the law.162 In case of
an illegal assessment, the taxpayer may directly resort to judicial action without paying under protest
the assessed tax and filing an appeal with the Local and Central Board of Assessment Appeals.

In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of assessment with
respect to Ty’s real properties in Pasig. Without resorting to the administrative remedies under the
Local Government Code, Ty filed before the Regional Trial Court a petition, praying that the trial court
nullify the notice of assessment. In assessing the real property taxes due, the Municipal Assessor used a
schedule of market values solely prepared by him. This, Ty argued, was void for being contrary to the
Local Government Code requiring that the schedule of market values be jointly prepared by the
provincial, city, and municipal assessors of the municipalities within the Metropolitan Manila Area.

This court ruled that the assessment was illegal for having been issued without authority of the
Municipal Assessor. Reconciling provisions of the Real Property Tax Code and the Local Government
Code, this court held that the schedule of market values must be jointly prepared by the provincial, city,
and municipal assessors of the municipalities within the Metropolitan Manila Area.

As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in directly
resorting to judicial action. According to this court, payment under protest is required only “where
there is a question as to the reasonableness of the amount assessed.”164 As to appeals before the Local
and Central Board of Assessment Appeals, they are “fruitful only where questions of fact are
involved.”165chanRoblesvirtualLawlibrary

Ty raised the issue of the legality of the notice of assessment, an issue that did not go into the
reasonableness of the amount assessed. Neither did the issue involve a question of fact. Ty raised a
question of law and, therefore, need not resort to the administrative remedies provided under the Local
Government Code.

In the present case, the PEZA did not avail itself of any of the remedies against a notice of assessment. A
petition for declaratory relief is not the proper remedy once a notice of assessment was already issued.
Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial
action. The PEZA should have filed a complaint for injunction, the “appropriate ordinary civil
action”166 to enjoin the City from enforcing its demand and collecting the assessed taxes from the
PEZA. After all, a declaratory judgment as to the PEZA’s tax-exempt status is useless unless the City is
enjoined from enforcing its demand.

Injunction “is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from
doing a certain act.”167 “It may be the main action or merely a provisional remedy for and as incident in
the main action.”168 The essential requisites of a writ of injunction are: “(1) there must be a right in esse
or the existence of a right to be protected; and (2) the act against which the injunction is directed to
constitute a violation of such right.”169chanRoblesvirtualLawlibrary

We note, however, that the City confused the concepts of jurisdiction and venue in contending that the
Regional Trial Court of Pasay had no jurisdiction because the real properties involved in this case are
located in the City of Lapu-Lapu.

On the one hand, jurisdiction is “the power to hear and determine cases of the general class to which
the proceedings in question belong.”170 Jurisdiction is a matter of substantive law.171 Thus, an action
may be filed only with the court or tribunal where the Constitution or a statute says it can be
brought.172 Objections to jurisdiction cannot be waived and may be brought at any stage of the
proceedings, even on appeal.173 When a case is filed with a court which has no jurisdiction over the
action, the court shall motu proprio dismiss the case.174chanRoblesvirtualLawlibrary

On the other hand, venue is “the place of trial or geographical location in which an action or proceeding
should be brought.”175 In civil cases, venue is a matter of procedural law.176 A party’s objections to
venue must be brought at the earliest opportunity either in a motion to dismiss or in the answer;
otherwise the objection shall be deemed waived.177 When the venue of a civil action is improperly laid,
the court cannot motu proprio dismiss the case.178chanRoblesvirtualLawlibrary

The venue of an action depends on whether the action is a real or personal action. Should the action
affect title to or possession of real property, or interest therein, it is a real action. The action should be
filed in the proper court which has jurisdiction over the area wherein the real property involved, or a
portion thereof, is situated.179 If the action is a personal action, the action shall be filed with the proper
court where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.180chanRoblesvirtualLawlibrary

The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial Court of
Pasay. In essence, the City was contending that the PEZA’s petition is a real action as it affects title to or
possession of real property, and, therefore, the PEZA should have filed the petition with the Regional
Trial Court of Lapu-Lapu City where the real properties are located.

However, whatever objections the City has against the venue of the PEZA’s action for declaratory relief
are already deemed waived. Objections to venue must be raised at the earliest possible
opportunity.181 The City did not file a motion to dismiss the petition on the ground that the venue was
improperly laid. Neither did the City raise this objection in its answer.

In any event, the law sought to be judicially interpreted in this case had already been breached. The
Regional Trial Court of Pasay, therefore, had no jurisdiction over the PEZA’s petition for declaratory
relief against the City.

III.

The Court of Appeals had no jurisdiction

over the PEZA’s petition for certiorari
against the Province of Bataan

Appeal is the remedy “to obtain a reversal or modification of a judgment on the merits.”182 A judgment
on the merits is one which “determines the rights and liabilities of the parties based on the disclosed
facts, irrespective of the formal, technical or dilatory objections.”183 It is not even necessary that the
case proceeded to trial.184 So long as the “judgment is general”185 and “the parties had a full legal
opportunity to be heard on their respective claims and contentions,” 186 the judgment is on the merits.

On the other hand, certiorari is a special civil action filed to annul or modify a proceeding of a tribunal,
board, or officer exercising judicial or quasi-judicial functions.187 Certiorari, which in Latin means “to be
more fully informed,”188 was originally a remedy in the common law. This court discussed the history of
the remedy of certiorari in Spouses Delos Santos v. Metropolitan Bank and Trust
Company:189chanRoblesvirtualLawlibrary

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of
Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the record
of a cause pending before them, so as to give the party more sure and speedy justice, for the writ would
enable the superior court to determine from an inspection of the record whether the inferior court’s
judgment was rendered without authority. The errors were of such a nature that, if allowed to stand,
they would result in a substantial injury to the petitioner to whom no other remedy was available. If the
inferior court acted without authority, the record was then revised and corrected in matters of law. The
writ of certiorari was limited to cases in which the inferior court was said to be exceeding its jurisdiction
or was not proceeding according to essential requirements of law and would lie only to review judicial or
quasi-judicial acts.190

In our jurisdiction, the term “certiorari” is used in two ways. An appeal before this court raising pure
questions of law is commenced by filing a petition for review on certiorari under Rule 45 of the Rules of
Court. An appeal by certiorari, which continues the proceedings commenced before the lower
courts,191is filed to reverse or modify judgments or final orders.192 Under the Rules, an appeal by
certiorari must be filed within 15 days from notice of the judgment or final order, or of the denial of the
appellant’s motion for new trial or reconsideration.193chanRoblesvirtualLawlibrary
A petition for certiorari under Rule 65, on the other hand, is an independent and original action filed to
set aside proceedings conducted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction.194 Under the Rules, a petition for certiorari may only be filed
if there is no appeal or any plain, speedy, or adequate remedy in the ordinary course of law.195 The
petition must be filed within 60 days from notice of the judgment, order, or
resolution.196chanRoblesvirtualLawlibrary

Because of the longer period to file a petition for certiorari, some litigants attempt to file petitions for
certiorari as substitutes for lost appeals by certiorari. However, Rule 65 is clear that a petition for
certiorari will not prosper if appeal is available. Appeal is the proper remedy even if the error, or one of
the errors, raised is grave abuse of discretion on the part of the court rendering judgment.197 If appeal is
available, a petition for certiorari cannot be filed.

In this case, the trial court’s decision dated January 31, 2007 is a judgment on the merits. Based on the
facts disclosed by the parties, the trial court declared the PEZA liable to the Province of Bataan for real
property taxes. The PEZA’s proper remedy against the trial court’s decision, therefore, is appeal.

Since the PEZA filed a petition for certiorari against the trial court’s decision, it availed itself of the wrong
remedy. As the Province of Bataan contended, the trial court’s decision dated January 31, 2007 “is only
an error of judgment appealable to the higher level court and may not be corrected by filing a petition
for certiorari.”198 That the trial court judge allegedly committed grave abuse of discretion does not
make the petition for certiorari the correct remedy. The PEZA should have raised this ground in an
appeal filed within 15 days from notice of the assailed resolution.

This court, “in the liberal spirit pervading the Rules of Court and in the interest of substantial
justice,”199has treated petitions for certiorari as an appeal: “(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.”200 Considering that “the nature of an action is determined by the allegations of the complaint or
the petition and the character of the relief sought,”201 a petition which “actually avers errors of
judgment rather than errors than that of jurisdiction”202 may be considered a petition for review.

However, suspending the application of the Rules has its disadvantages. Relaxing procedural rules may
reduce the “effective enforcement of substantive rights,”203 leading to “arbitrariness, caprice,
despotism, or whimsicality in the settlement of disputes.”204 Therefore, for this court to suspend the
application of the Rules, the accomplishment of substantial justice must outweigh the importance of
predictability of court procedures.

The PEZA’s petition for certiorari may be treated as an appeal. First, the petition for certiorari was filed
within the 15-day reglementary period for filing an appeal. The PEZA filed its petition for certiorari
before the Court of Appeals on October 15, 2007,205 which was 12 days from October 3, 2007206 when
the PEZA had notice of the trial court’s order denying the motion for reconsideration.

Second, the petition for certiorari raised errors of judgment. The PEZA argued that the trial court erred
in ruling that it is not exempt from payment of real property taxes given Section 21 of Presidential
Decree No. 66 and Sections 11 and 51 of the Special Economic Zone Act of
1995.207chanRoblesvirtualLawlibrary

Third, there is sufficient reason to relax the rules given the importance of the substantive issue
presented in this case.

However, the PEZA’s petition for certiorari was filed before the wrong court. The PEZA should have filed
its petition before the Court of Tax Appeals.

The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases decided by Regional
Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended by Republic Act No. 9282,
provides:chanroblesvirtuallawlibrary

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

....

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[.]

The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended,
include cases involving real property taxes. Real property taxation is governed by Book II of the Local
Government Code on “Local Taxation and Fiscal Matters.” Real property taxes are collected by the Local
Treasurer,208 not by the Bureau of Internal Revenue in charge of collecting national internal revenue
taxes, fees, and charges.209chanRoblesvirtualLawlibrary

Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No. 9282, separately
provides for the exclusive appellate jurisdiction of the Court of Tax Appeals over decisions of the Central
Board of Assessment Appeals involving the assessment or collection of real property
taxes:chanroblesvirtuallawlibrary

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

....

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[.]
This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking cognizance of
trial court decisions involving the collection of real property tax cases. Sections 256210 and 266211 of the
Local Government Code expressly allow local government units to file “in any court of competent
jurisdiction” civil actions to collect basic real property taxes. Should the trial court rule against them,
local government units cannot be barred from appealing before the Court of Tax Appeals – the “highly
specialized body specifically created for the purpose of reviewing tax
cases.”212chanRoblesvirtualLawlibrary

We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the exclusive original
jurisdiction over petitions for certiorari assailing interlocutory orders issued by Regional Trial Courts in a
local tax case. We explained in The City of Manila v. Hon. Grecia-Cuerdo213 that while the Court of Tax
Appeals has no express grant of power to issue writs of certiorari under Republic Act No. 1125,214 as
amended, the tax court’s judicial power as defined in the Constitution215 includes the power to
determine “whether or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the [Regional Trial Court] in issuing an interlocutory order of jurisdiction in
cases falling within the exclusive appellate jurisdiction of the tax court.”216 We further
elaborated:chanroblesvirtuallawlibrary

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.

....

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.

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.217 (Citations omitted)

In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a local tax case
originally decided by the trial court in its original jurisdiction. Since the PEZA assailed a judgment, not an
interlocutory order, of the Regional Trial Court, the PEZA’s proper remedy was an appeal to the Court of
Tax Appeals.

Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion of all other
courts, the Court of Appeals had no jurisdiction to take cognizance of the PEZA’s petition. The Court of
Appeals acted without jurisdiction in rendering the decision in CA-G.R. SP No. 100984. Its decision in CA-
G.R. SP No. 100984 is void.218chanRoblesvirtualLawlibrary

The filing of appeal in the wrong court does not toll the period to appeal. Consequently, the decision of
the Regional Trial Court, Branch 115, Pasay City, became final and executory after the lapse of the 15th
day from the PEZA’s receipt of the trial court’s decision.219 The denial of the petition for injunction
became final and executory.

IV.

The remedy of a taxpayer depends on the

stage in which the local government unit is
enforcing its authority to impose real
property taxes

The proper remedy of a taxpayer depends on the stage in which the local government unit is enforcing
its authority to collect real property taxes. For the guidance of the members of the bench and the bar,
we reiterate the taxpayer’s remedies against the erroneous or illegal assessment of real property taxes.

Exhaustion of administrative remedies under the Local Government Code is necessary in cases of
erroneous assessments where the correctness of the amount assessed is assailed. The taxpayer must
first pay the tax then file a protest with the Local Treasurer within 30 days from date of payment of
tax.220 If protest is denied or upon the lapse of the 60-day period to decide the protest, the taxpayer
may appeal to the Local Board of Assessment Appeals within 60 days from the denial of the protest or
the lapse of the 60-day period to decide the protest.221 The Local Board of Assessment Appeals has 120
days to decide the appeal.222chanRoblesvirtualLawlibrary

If the taxpayer is unsatisfied with the Local Board’s decision, the taxpayer may appeal before the Central
Board of Assessment Appeals within 30 days from receipt of the Local Board’s
decision.223chanRoblesvirtualLawlibrary

The decision of the Central Board of Assessment Appeals is appealable before the Court of Tax Appeals
En Banc.224 The appeal before the Court of Tax Appeals shall be filed following the procedure under Rule
43 of the Rules of Court.225chanRoblesvirtualLawlibrary

The Court of Tax Appeals’ decision may then be appealed before this court through a petition for review
on certiorari under Rule 45 of the Rules of Court raising pure questions of
law.226chanRoblesvirtualLawlibrary

In case of an illegal assessment where the assessment was issued without authority, exhaustion of
administrative remedies is not necessary and the taxpayer may directly resort to judicial action.227 The
taxpayer shall file a complaint for injunction before the Regional Trial Court228 to enjoin the local
government unit from collecting real property taxes.

The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a petition for
certiorari, before the Court of Tax Appeals, the complaint being a local tax case decided by the Regional
Trial Court.229 The appeal shall be filed within fifteen (15) days from notice of the trial court’s decision.

The Court of Tax Appeals’ decision may then be appealed before this court through a petition for review
on certiorari under Rule 45 of the Rules of Court raising pure questions of
law.230chanRoblesvirtualLawlibrary

In case the local government unit has issued a notice of delinquency, the taxpayer may file a complaint
for injunction to enjoin the impending sale of the real property at public auction. In case the local
government unit has already sold the property at public auction, the taxpayer must first deposit with the
court the amount for which the real property was sold, together with interest of 2% per month from the
date of sale to the time of the institution of action. The taxpayer may then file a complaint to assail the
validity of the public auction.231 The decisions of the Regional Trial Court in these cases shall be
appealable before the Court of Tax Appeals,232 and the latter’s decisions appealable before this court
through a petition for review on certiorari under Rule 45 of the Rules of
Court.233chanRoblesvirtualLawlibrary

V.

The PEZA is exempt from payment

of real property taxes

The jurisdictional errors in this case render these consolidated petitions moot. We do not review void
decisions rendered without jurisdiction.

However, the PEZA alleged that several local government units, including the City of Baguio and the
Province of Cavite, have issued their respective real property tax assessments against the PEZA. Other
local government units will likely follow suit, and either the PEZA or the local government units taxing
the PEZA may file their respective actions against each other.

In the interest of judicial economy234 and avoidance of conflicting decisions involving the same
issues,235we resolve the substantive issue of whether the PEZA is exempt from payment of real property
taxes.

Real property taxes are annual taxes levied on real property such as lands, buildings, machinery, and
other improvements not otherwise specifically exempted under the Local Government Code.236 Real
property taxes are ad valorem, with the amount charged based on a fixed proportion of the value of the
property.237 Under the law, provinces, cities, and municipalities within the Metropolitan Manila Area
have the power to levy real property taxes within their respective
territories.238chanRoblesvirtualLawlibrary

The general rule is that real properties are subject to real property taxes. This is true especially since the
Local Government Code has withdrawn exemptions from real property taxes of all persons, whether
natural or juridical:chanroblesvirtuallawlibrary

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit
or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts
and government-owned or –controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property taxes previously granted to, or
presently enjoyed by, all persons, whether natural or juridical, including government-owned or -
controlled corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied)

The person liable for real property taxes is the “taxable person who had actual or beneficial use and
possession [of the real property for the taxable period,] whether or not [the person owned the property
for the period he or she is being taxed].”239chanRoblesvirtualLawlibrary

The exceptions to the rule are provided in the Local Government Code. Under Section 133(o), local
government units have no power to levy taxes of any kind on the national government, its agencies and
instrumentalities and local government units:chanroblesvirtuallawlibrary

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise
provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:

....

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities
and local government units.

Specifically on real property taxes, Section 234 enumerates the persons and real property exempt from
real property taxes:chanroblesvirtuallawlibrary

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or
religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts
and government-owned or –controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or
presently enjoyed by, all persons, whether natural or juridical, including all government-owned or -
controlled corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied)

For persons granted tax exemptions or incentives before the effectivity of the Local Government Code,
Section 193 withdrew these tax exemption privileges. These persons consist of both natural and
juridical persons, including government-owned or controlled corporations:chanroblesvirtuallawlibrary

SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this code, tax
exemptions or incentives granted to or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. 6938, non stock and non profit hospitals and educational institutions, are hereby
withdrawn upon effectivity of this Code.

As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.

Nevertheless, local government units may grant tax exemptions under such terms and conditions as
they may deem necessary:chanroblesvirtuallawlibrary

SEC. 192. Authority to Grant Tax Exemption Privileges. – Local government units may, through
ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions
as they may deem necessary.

In Mactan Cebu International Airport Authority v. Hon. Marcos,240 this court classified the exemptions
from real property taxes into ownership, character, and usage exemptions.

Ownership exemptions are exemptions based on the ownership of the real property. The exemptions of
real property owned by the Republic of the Philippines, provinces, cities, municipalities, barangays, and
registered cooperatives fall under this classification.241chanRoblesvirtualLawlibrary

Character exemptions are exemptions based on the character of the real property. Thus, no real
property taxes may be levied on charitable institutions, houses and temples of prayer like churches,
parsonages, or convents appurtenant thereto, mosques, and non profit or religious
cemeteries.242chanRoblesvirtualLawlibrary

Usage exemptions are exemptions based on the use of the real property. Thus, no real property taxes
may be levied on real property such as: (1) lands and buildings actually, directly, and exclusively used for
religious, charitable or educational purpose; (2) machineries and equipment actually, directly and
exclusively used by local water districts or by government-owned or controlled corporations engaged in
the supply and distribution of water and/or generation and transmission of electric power; and (3)
machinery and equipment used for pollution control and environmental
protection.243chanRoblesvirtualLawlibrary

Persons may likewise be exempt from payment of real properties if their charters, which were enacted
or reenacted after the effectivity of the Local Government Code, exempt them payment of real property
taxes.244chanRoblesvirtualLawlibrary

V. (A)

The PEZA is an instrumentality of the national government

An instrumentality is “any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a
charter.”245chanRoblesvirtualLawlibrary
Examples of instrumentalities of the national government are the Manila International Airport
Authority,246 the Philippine Fisheries Development Authority,247 the Government Service Insurance
System,248 and the Philippine Reclamation Authority.249 These entities are not integrated within the
department framework but are nevertheless vested with special functions to carry out a declared policy
of the national government.

Similarly, the PEZA is an instrumentality of the national government. It is not integrated within the
department framework but is an agency attached to the Department of Trade and Industry.250 Book IV,
Chapter 7, Section 38(3)(a) of the Administrative Code of 1987 defines
“attachment”:chanroblesvirtuallawlibrary

SEC. 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or in
other laws defining the special relationships of particular agencies, administrative relationships shall be
categorized and defined as follows:

....

(3) Attachment.–(a) This refers to the lateral relationship between the department or its equivalent and
the attached agency or corporation for purposes of policy and program coordination. The coordination
may be accomplished by having the department represented in the governing board of the attached
agency or corporation, either as chairman or as a member, with or without voting rights, if this is
permitted by the charter; having the attached corporation or agency comply with a system of periodic
reporting which shall reflect the progress of the programs and projects; and having the department or
its equivalent provide general policies through its representative in the board, which shall serve as the
framework for the internal policies of the attached corporation or agency[.]

Attachment, which enjoys “a larger measure of independence”251 compared with other administrative
relationships such as supervision and control, is further explained in Beja, Sr. v. Court of
Appeals:252chanRoblesvirtualLawlibrary

An attached agency has a larger measure of independence from the Department to which it is attached
than one which is under departmental supervision and control or administrative supervision. This is
borne out by the “lateral relationship” between the Department and the attached agency. The
attachment is merely for “policy and program coordination.” With respect to administrative matters, the
independence of an attached agency from Departmental control and supervision is further reinforced by
the fact that even an agency under a Department’s administrative supervision is free from Departmental
interference with respect to appointments and other personnel actions “in accordance with the
decentralization of personnel functions” under the Administrative Code of 1987. Moreover, the
Administrative Code explicitly provides that Chapter 8 of Book IV on supervision and control shall not
apply to chartered institutions attached to a Department.253

With the PEZA as an attached agency to the Department of Trade and Industry, the 13-person PEZA
Board is chaired by the Department Secretary.254 Among the powers and functions of the PEZA is its
ability to coordinate with the Department of Trade and Industry for policy and program formulation and
implementation.255 In strategizing and prioritizing the development of special economic zones, the PEZA
coordinates with the Department of Trade and Industry.256chanRoblesvirtualLawlibrary

The PEZA also administers its own funds and operates autonomously, with the PEZA Board formulating
and approving the PEZA’s annual budget.257 Appointments and other personnel actions in the PEZA are
also free from departmental interference, with the PEZA Board having the exclusive and final authority
to promote, transfer, assign and reassign officers of the PEZA.258chanRoblesvirtualLawlibrary

As an instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop special
economic zones in the Philippines.259 Special economic zones are areas with highly developed or which
have the potential to be developed into agro-industrial, industrial tourist/recreational, commercial,
banking, investment and financial centers.260 By operating, administering, managing, and developing
special economic zones which attract investments and promote use of domestic labor, the PEZA carries
out the following policy of the Government:chanroblesvirtuallawlibrary

SECTION 2. Declaration of Policy. — It is the declared policy of the government to translate into practical
realities the following State policies and mandates in the 1987 Constitution, namely:

(a) “The State recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments.” (Sec. 20, Art. II)

(b) “The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive.” (Sec. 12, Art. XII)

In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate
a sound and balanced industrial, economic and social development of the country in order to provide
jobs to the people especially those in the rural areas, increase their productivity and their individual and
family income, and thereby improve the level and quality of their living condition through the
establishment, among others, of special economic zones in suitable and strategic locations in the
country and through measures that shall effectively attract legitimate and productive foreign
investments.261

Being an instrumentality of the national government, the PEZA cannot be taxed by local government
units.

Although a body corporate vested with some corporate powers,262 the PEZA is not a government-owned
or controlled corporation taxable for real property taxes.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the term
“government-owned or controlled corporation”:chanroblesvirtuallawlibrary

SEC. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:
....

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-
stock corporation, vested with functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of
its capital stock: Provided, That government-owned or controlled corporations may be further
categorized by the Department of the Budget, the Civil Service Commission, and the Commission on
Audit for purposes of the exercise and discharge of their respective powers, functions and
responsibilities with respect to such corporations.

Government entities are created by law, specifically, by the Constitution or by statute. In the case of
government-owned or controlled corporations, they are incorporated by virtue of special charters263 to
participate in the market for special reasons which may be related to dysfunctions or inefficiencies of
the market structure. This is to adjust reality as against the concept of full competition where all market
players are price takers. Thus, under the Constitution, government-owned or controlled corporations
are created in the interest of the common good and should satisfy the test of economic
viability.264 Article XII, Section 16 of the Constitution provides:chanroblesvirtuallawlibrary

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.

Economic viability is “the capacity to function efficiently in business.”265 To be economically viable, the
entity “should not go into activities which the private sector can do
better.”266chanRoblesvirtualLawlibrary

To be considered a government-owned or controlled corporation, the entity must have been organized
as a stock or non-stock corporation.267chanRoblesvirtualLawlibrary

Government instrumentalities, on the other hand, are also created by law but partake of sovereign
functions. When a government entity performs sovereign functions, it need not meet the test of
economic viability. In Manila International Airport Authority v. Court of Appeals,268 this court
explained:chanroblesvirtuallawlibrary

In contrast, government instrumentalities vested with corporate powers and performing governmental
or public functions need not meet the test of economic viability. These instrumentalities perform
essential public services for the common good, services that every modern State must provide its
citizens. These instrumentalities need not be economically viable since the government may even
subsidize their entire operations. These instrumentalities are not the "government-owned or controlled
corporations" referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities
vested with corporate powers but performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with corporate powers provided these
instrumentalities perform essential government functions or public services. However, when the
legislature creates through special charters corporations that perform economic or commercial
activities, such entities — known as "government-owned or controlled corporations" — must meet the
test of economic viability because they compete in the market place.

....

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:chanroblesvirtuallawlibrary

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it makes its
claim upon the taxpayers' money through new equity infusions from the government and what is always
invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the
entire government, about P28 billion of this will go into equity infusions to support a few government
financial institutions. And this is all taxpayers' money which could have been relocated to agrarian
reform, to social services like health and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.

....

Clearly, the test of economic viability does not apply to government entities vested with corporate
powers and performing essential public services. The State is obligated to render essential public
services regardless of the economic viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State from withholding such essential
services from the public.269 (Emphases and citations omitted)

The law created the PEZA’s charter. Under the Special Economic Zone Act of 1995, the PEZA was
established primarily to perform the governmental function of operating, administering, managing, and
developing special economic zones to attract investments and provide opportunities for preferential use
of Filipino labor.

Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a stock270 or non-stock271 corporation. Nothing in the PEZA’s
charter provides that the PEZA’s capital is divided into shares.272 The PEZA also has no members who
shall share in the PEZA’s profits.

The PEZA does not compete with other economic zone authorities in the country. The government may
even subsidize the PEZA’s operations. Under Section 47 of the Special Economic Zone Act of 1995, “any
sum necessary to augment [the PEZA’s] capital outlay shall be included in the General Appropriations
Act to be treated as an equity of the national government.”273chanRoblesvirtualLawlibrary

The PEZA, therefore, need not be economically viable. It is not a government-owned or controlled
corporation liable for real property taxes.

V. (B)

The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA

The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its revenues devoted for
its development, improvement, and maintenance. Consistent with this non-profit character, the EPZA
was explicitly declared exempt from real property taxes under its charter. Section 21 of Presidential
Decree No. 66 provides:chanroblesvirtuallawlibrary

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-
profit and shall devote and use all its returns from its capital investment, as well as excess revenues
from its operations, for the development, improvement and maintenance and other related
expenditures of the Authority to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section 1 of this Decree. In consonance therewith, the
Authority is hereby declared exempt:ChanRoblesVirtualawlibrary

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be
paid to the National Government, its provinces, cities, municipalities and other government agencies
and instrumentalities[.]

The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the PEZA from
payment of real property taxes.

Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its charter. A
provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is unnecessary. The
PEZA assumed the real property exemption of the EPZA under Presidential Decree No. 66.

Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA “to evolve into the PEZA in
accordance with the guidelines and regulations set forth in an executive order issued for this
purpose.” President Ramos then issued Executive Order No. 282 in 1995, ordering the PEZA to assume
the EPZA’s powers, functions, and responsibilities under Presidential Decree No. 66 not inconsistent
with the Special Economic Zone Act of 1995:chanroblesvirtuallawlibrary

SECTION 1. Assumption of EPZA’s Powers and Functions by PEZA. All the powers, functions and
responsibilities of EPZA as provided under its Charter, Presidential Decree No. 66, as amended, insofar
as they are not inconsistent with the powers, functions and responsibilities of the PEZA, as mandated
under Republic Act No. 7916, shall hereafter be assumed and exercised by the PEZA. Henceforth, the
EPZA shall be referred to as the PEZA.

The following sections of the Special Economic Zone Act of 1995 provide for the PEZA’s powers,
functions, and responsibilities:chanroblesvirtuallawlibrary

SEC. 5. Establishment of ECOZONES. – To ensure the viability and geographical dispersal of ECOZONES
through a system of prioritization, the following areas are initially identified as ECOZONES, subject to the
criteria specified in Section 6:

....

The metes and bounds of each ECOZONE are to be delineated and more particularly described in a
proclamation to be issued by the President of the Philippines, upon the recommendation of the
Philippine Economic Zone Authority (PEZA), which shall be established under this Act, in coordination
with the municipal and / or city council, National Land Use Coordinating Committee and / or the
Regional Land Use Committee.

SEC. 6. Criteria for the Establishment of Other ECOZONES. – In addition to the ECOZONES identified in
Section 5 of this Act, other areas may be established as ECOZONES in a proclamation to be issued by the
President of the Philippines subject to the evaluation and recommendation of the PEZA, based on a
detailed feasibility and engineering study which must conform to the following criteria:

(a) The proposed area must be identified as a regional growth center in the Medium-Term Philippine
Development Plan or by the Regional Development Council;

(b) The existence of required infrastructure in the proposed ECOZONE, such as roads, railways,
telephones, ports, airports, etc., and the suitability and capacity of the proposed site to absorb such
improvements;

(c) The availability of water source and electric power supply for use of the ECOZONE;

(d) The extent of vacant lands available for industrial and commercial development and future
expansion of the ECOZONE as well as of lands adjacent to the ECOZONE available for development of
residential areas for the ECOZONE workers;

(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and around the
ECOZONE;
(f) The area must have a significant incremental advantage over the existing economic zones and its
potential profitability can be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be established to curtail smuggling activities.

Other areas which do not meet the foregoing criteria may be established as ECOZONES: Provided, That
the said area shall be developed only through local government and/or private sector initiative under
any of the schemes allowed in Republic Act No. 6957 (the build-operate-transfer law), and without any
financial exposure on the part of the national government: Provided, further, That the area can be easily
secured to curtail smuggling activities: Provided, finally, That after five (5) years the area must have
attained a substantial degree of development, the indicators of which shall be formulated by the PEZA.

SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial / Trading, Tourist,

Investment and Financial Community. - Within the framework of the Constitution, the interest of
national sovereignty and territorial integrity of the Republic, ECOZONE shall be developed, as much as
possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading, agro-
industrial, tourist, banking, financial and investment center with minimum government intervention.
Each ECOZONE shall be provided with transportation, telecommunications, and other facilities needed
to generate linkage with industries and employment opportunities for its own inhabitants and those of
nearby towns and cities.

The ECOZONE shall administer itself on economic, financial, industrial, tourism development and such
other matters within the exclusive competence of the national government.

The ECOZONE may establish mutually beneficial economic relations with other entities within the
country, or, subject to the administrative guidance of the Department of Foreign Affairs and/or the
Department of Trade and Industry, with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up enterprises
in the ECOZONE, either by themselves or in joint venture with Filipinos in any sector of industry,
international trade and commerce within the ECOZONE. Their assets, profits and other legitimate
interests shall be protected: Provided, That the ECOZONE through the PEZA may require a minimum
investment for any ECOZONE enterprises in freely convertible currencies: Provided, further, That the
new investment shall fall under the priorities, thrusts and limits provided for in the Act.

SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. – The ECOZONE shall be
managed and operated by the PEZA as separate customs territory.

The PEZA is hereby vested with the authority to issue certificate of origin for products manufactured or
processed in each ECOZONE in accordance with the prevailing rules or origin, and the pertinent
regulations of the Department of Trade and Industry and/or the Department of Finance.
SEC. 9. Defense and Security. – The defense of the ECOZONE and the security of its perimeter fence shall
be the responsibility of the national government in coordination with the PEZA. Military forces sent by
the national government for the purpose of defense shall not interfere in the internal affairs of any of
the ECOZONE and expenditure for these military forces shall be borne by the national government. The
PEZA may provide and establish the ECOZONES’ internal security and firefighting forces.

SEC. 10. Immigration. – Any investor within the ECOZONE whose initial investment shall not be less than
One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent children under
twenty-one (21) years of age shall be granted permanent resident status within the ECOZONE. They shall
have freedom of ingress and egress to and from the ECOZONE without any need of special authorization
from the Bureau of Immigration.

The PEZA shall issue working visas renewable every two (2) years to foreign executives and other aliens,
processing highly-technical skills which no Filipino within the ECOZONE possesses, as certified by the
Department of Labor and Employment. The names of aliens granted permanent resident status and
working visas by the PEZA shall be reported to the Bureau of Immigration within thirty (30) days after
issuance thereof.

SEC. 13. General Powers and Functions of the Authority. – The PEZA shall have the following powers and
functions:

(a) To operate, administer, manage and develop the ECOZONE according to the principles and provisions
set forth in this Act;

(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized
manner;

(c) To coordinate with local government units and exercise general supervision over the development,
plans, activities and operations of the ECOZONES, industrial estates, export processing zones, free trade
zones, and the like;

(d) In coordination with local government units concerned and appropriate agencies, to construct,
acquire, own, lease, operate and maintain on its own or through contract, franchise, license, bulk
purchase from the private sector and build-operate-transfer scheme or joint venture, adequate facilities
and infrastructure, such as light and power systems, water supply and distribution systems,
telecommunication and transportation, buildings, structures, warehouses, roads, bridges, ports and
other facilities for the operation and development of the ECOZONE;

(e) To create, operate and/or contract to operate such agencies and functional units or offices of the
authority as it may deem necessary;

(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise dispose of personal
or real property; sue and be sued; and otherwise carry out its duties and functions as provided for in this
Act;
(g) To coordinate the formulation and preparation of the development plans of the different entities
mentioned above;

(h) To coordinate with the National Economic Development Authority (NEDA), the Department of Trade
and Industry (DTI), the Department of Science and Technology (DOST), and the local government units
and appropriate government agencies for policy and program formulation and implementation; and

(i) To monitor and evaluate the development and requirements of entities in subsection (a) and
recommend to the local government units or other appropriate authorities the location, incentives,
basic services, utilities and infrastructure required or to be made available for said entities.

SEC. 17. Investigation and Inquiries. – Upon a written formal complaint made under oath, which on its
face provides reasonable basis to believe that some anomaly or irregularity might have been committed,
the PEZA or the administrator of the ECOZONE concerned, shall have the power to inquire into the
conduct of firms or employees of the ECOZONE and to conduct investigations, and for that purpose may
subpoena witnesses, administer oaths, and compel the production of books, papers, and other
evidences: Provided, That to arrive at the truth, the investigator(s) may grant immunity from
prosecution to any person whose testimony or whose possessions of documents or other evidence is
necessary or convenient to determine the truth in any investigation conducted by him or under the
authority of the PEZA or the administrator of the ECOZONE concerned.

SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of development of each
ECOZONE established pursuant to this Act shall be formulated by the PEZA, in coordination with the
Department of Trade and Industry and the National Economic and Development Authority; Provided,
That such development strategy is consistent with the priorities of the national government as outlined
in the medium-term Philippine development plan. It shall be the policy of the government and the PEZA
to encourage and provide Incentives and facilitate private sector participation in the construction and
operation of public utilities and infrastructure in the ECOZONE, using any of the schemes allowed in
Republic Act No. 6957 (the build-operate-transfer law).

SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities and
neighboring cities and

municipalities, immediately conduct a survey of the physical, natural assets and potentialities of the
ECOZONE areas under its

jurisdiction.

SEC. 26. Domestic Sales. – Goods manufactured by an ECOZONE enterprise shall be made available for
immediate retail sales in the domestic market, subject to payment of corresponding taxes on the raw
materials and other regulations that may be adopted by the Board of the PEZA.

However, in order to protect the domestic industry, there shall be a negative list of Industries that will
be drawn up by the PEZA. Enterprises engaged in the industries included in the negative list shall not be
allowed to sell their products locally. Said negative list shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade and Industry and the Bureau of Customs, shall
jointly issue the necessary implementing rules and guidelines for the effective Implementation of this
section.

SEC. 29. Eminent Domain. – The areas comprising an ECOZONE may be expanded or reduced when
necessary. For this purpose, the government shall have the power to acquire, either by purchase,
negotiation or condemnation proceedings, any private lands within or adjacent to the ECOZONE for:

a. Consolidation of lands for zone development purposes;

b. Acquisition of right of way to the ECOZONE; and

c. The protection of watershed areas and natural assets valuable to the prosperity of the ECOZONE.

If in the establishment of a publicly-owned ECOZONE, any person or group of persons who has been
occupying a parcel of land within the Zone has to be evicted, the PEZA shall provide the person or group
of persons concerned with proper disturbance compensation: Provided, however, That in the case of
displaced agrarian reform beneficiaries, they shall be entitled to the benefits under the Comprehensive
Agrarian Reform Law, including but not limited to Section 36 of Republic Act No. 3844, in addition to a
homelot in the relocation site and preferential employment in the project being undertaken.

SEC. 32. Shipping and Shipping Register. – Private shipping and related business including private
container terminals may operate freely in the ECOZONE, subject only to such minimum reasonable
regulations of local application which the PEZA may prescribe.

The PEZA shall, in coordination with the Department of Transportation and Communications, maintain a
shipping register for each ECOZONE as a business register of convenience for ocean-going vessels and
issue related certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the ECOZONE, subject
only to such reasonable requirement as may be prescribed by the PEZA In coordination with the
appropriate agencies of the national government.

SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate agencies, shall take
concrete and appropriate steps and enact the proper measure for the protection of the local
environment.

SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate business or
operations shall comply with such requirements and procedures which the PEZA shall set, particularly
those relating to the clearing of debts. The assets of the closed enterprise can be transferred and the
funds con be remitted out of the ECOZONE subject to the rules, guidelines and procedures prescribed
jointly by the Bangko Sentral ng Pilipinas, the Department of Finance and the PEZA.

SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated ECOZONE shall
register with the PEZA to avail of all incentives and benefits provided for in this Act.

SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the purpose of
facilitating the registration of new enterprises in the ECOZONE. Thus, all appropriate government
agencies that are Involved In registering, licensing or issuing permits to investors shall assign their
representatives to the ECOZONE to attend to Investor’s requirements.

SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of Tabor and
Employment, shall prescribe a master employment contract for all ECOZONE enterprise staff members
and workers, the terms of which provide salaries and benefits not less than those provided under this
Act, the Philippine Labor Code, as amended, and other relevant issuances of the national government.

SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and Employment,
shall promulgate appropriate measures and programs leading to the expansion of the services of the
ECOZONE to help the local governments of nearby areas meet the needs of the migrant workers.

SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the value of
training expenses incurred in developing skilled or unskilled labor or for managerial or other
management development programs incurred by enterprises in the ECOZONE can be deducted from the
national government's share of three percent (3%) as provided In Section 24.

The PEZA, the Department of Labor and Employment, and the Department of Finance shall jointly make
a review of the incentive scheme provided In this section every two (2) years or when circumstances so
warrant.

SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine the
development goals for the ECOZONE within the framework of national development plans, policies and
goals, and the administrator shall, upon approval by the PEZA Board, submit the ECOZONE plans,
programs and projects to the regional development council for inclusion in and as inputs to the overall
regional development plan.

SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the local
government units comprising the ECOZONE shall retain their basic autonomy and identity. The cities
shall be governed by their respective charters and the municipalities shall operate and function In
accordance with Republic Act No. 7160, otherwise known as the Local Government

Code of 1991.

SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. – Privately-owned industrial estates
shall retain their autonomy and independence and shall be monitored by the PEZA for the
implementation of incentives.
SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments over industrial
estates and agri-export processing estates shall be transferred to the PEZA. The resources of
government-owned Industrial estates and similar bodies except the Bases Conversion Development
Authority and those areas identified under Republic Act No. 7227, are hereby transferred to the PEZA as
the holding agency. They are hereby detached from their mother agencies and attached to the PEZA for
policy, program and operational supervision.

The Boards of the affected government-owned industrial estates shall be phased out and only the
management level and an appropriate number of personnel shall be retained.

Government personnel whose services are not retained by the PEZA or any government office within the
ECOZONE shall be entitled to separation pay and such retirement and other benefits they are entitled to
under the laws then in force at the time of their separation: Provided, That in no case shall the
separation pay be less than one and one-fourth (1 1/4) month of every year of service.

The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent with any of
the powers, functions, and responsibilities of the PEZA. The EPZA’s non-profit character, including the
EPZA’s exemption from real property taxes, must be deemed assumed by the PEZA.

In addition, the Local Government Code exempting instrumentalities of the national government from
real property taxes was already in force274 when the PEZA’s charter was enacted in 1995. It would have
been redundant to provide for the PEZA’s exemption in its charter considering that the PEZA is already
exempt by virtue of Section 133(o) of the Local Government Code.

As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the EPZA’s
charter was enacted. Unlike the Local Government Code, Commonwealth Act No. 470 does not contain
a provision specifically exempting instrumentalities of the national government from payment of real
property taxes.275 It was necessary to put an exempting provision in the EPZA’s charter.

Contrary to the PEZA’s claim, however, Section 24 of the Special Economic Zone Act of 1995 is not a
basis for the PEZA’s exemption. Section 24 of the Special Economic Zone Act of 1995
provides:chanroblesvirtuallawlibrary

Sec. 24. Exemption from National and Local Taxes. — Except for real property taxes on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises
within the ECOZONE shall be paid and remitted as follows:chanroblesvirtuallawlibrary

(a) Three percent (3%) to the National Government;

(b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's
office of the municipality or city where the enterprise is located. (Emphasis supplied)
Tax exemptions provided under Section 24 apply only to business establishments operating within
economic zones. Considering that the PEZA is not a business establishment but an instrumentality
performing governmental functions, Section 24 is inapplicable to the PEZA.

Also, contrary to the PEZA’s claim, developers of economic zones, whether public or private developers,
are liable for real property taxes on lands they own. Section 24 does not distinguish between a public
and private developer. Thus, courts cannot distinguish.276 Unless the public developer is exempt under
the Local Government Code or under its charter enacted after the Local Government Code’s effectivity,
the public developer must pay real property taxes on their land.

At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a developer or operator of
special economic zones. The PEZA is an instrumentality of the national government exempt from
payment of real property taxes under Section 133(o) of the Local Government Code. As this court said
in Manila International Airport Authority, “there must be express language in the law empowering local
governments to tax national government instrumentalities. Any doubt whether such power exists is
resolved against local governments.”277chanRoblesvirtualLawlibrary

V. (C)

Real properties under the PEZA’s title are owned by the Republic of the Philippines

Under Section 234(a) of the Local Government Code, real properties owned by the Republic of the
Philippines are exempt from real property taxes:chanroblesvirtuallawlibrary

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real
property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person[.]

Properties owned by the state are either property of public dominion or patrimonial property. Article
420 of the Civil Code of the Philippines enumerates property of public
dominion:chanroblesvirtuallawlibrary

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without belonging for public use, and are intended for some public
service or for the development of the national wealth.
Properties of public dominion are outside the commerce of man. These properties are exempt from
“levy, encumbrance or disposition through public or private sale.”278 As this court explained in Manila
International Airport Authority:chanroblesvirtuallawlibrary

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition
through public or private sale. Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy. Essential public services will stop if properties
of public dominion are subject to encumbrances, foreclosures and auction sale[.]279

On the other hand, all other properties of the state that are not intended for public use or are not
intended for some public service or for the development of the national wealth are patrimonial
properties. Article 421 of the Civil Code of the Philippines provides:chanroblesvirtuallawlibrary

Art. 421. All other property of the State, which is not of the character stated in the preceding article, is
patrimonial property.

Patrimonial properties are also properties of the state, but the state may dispose of its patrimonial
property similar to private persons disposing of their property. Patrimonial properties are within the
commerce of man and are susceptible to prescription, unless otherwise
provided.280chanRoblesvirtualLawlibrary

In this case, the properties sought to be taxed are located in publicly owned economic zones. These
economic zones are property of public dominion. The City seeks to tax properties located within the
Mactan Economic Zone,281 the site of which was reserved by President Marcos under Proclamation No.
1811, Series of 1979. Reserved lands are lands of the public domain set aside for settlement or public
use, and for specific public purposes by virtue of a presidential proclamation.282 Reserved lands are
inalienable and outside the commerce of man,283 and remain property of the Republic until withdrawn
from public use either by law or presidential proclamation.284 Since no law or presidential proclamation
has been issued withdrawing the site of the Mactan Economic Zone from public use, the property
remains reserved land.

As for the Bataan Economic Zone, the law consistently characterized the property as a port. Under
Republic Act No. 5490, Congress declared Mariveles, Bataan “a principal port of entry”285 to serve as site
of a foreign trade zone where foreign and domestic merchandise may be brought in without being
subject to customs and internal revenue laws and regulations of the Philippines.286 Section 4 of Republic
Act No. 5490 provided that the foreign trade zone in Mariveles, Bataan “shall at all times remain to be
owned by the Government”:chanroblesvirtuallawlibrary

SEC. 4. Powers and Duties. – The Foreign Trade Zone Authority shall have the following powers and
duties:

a. To fix and delimit the site of the Zone which at all times remain to be owned by the Government,
and which shall have a contiguous and adequate area with well defined and policed boundaries,
with adequate enclosures to segregate the Zone from the customs territory for protection of
 revenues, together with suitable provisions for ingress and egress of persons, conveyance,
vessels and merchandise sufficient for the purpose of this Act[.] (Emphasis supplied)

The port in Mariveles, Bataan then became the Bataan Economic Zone under the Special Economic Zone
Act of 1995.287 Republic Act No. 9728 then converted the Bataan Economic Zone into the Freeport Area
of Bataan.288chanRoblesvirtualLawlibrary

A port of entry, where imported goods are unloaded then introduced in the market for public
consumption, is considered property for public use. Thus, Article 420 of the Civil Code classifies a port
as property of public dominion. The Freeport Area of Bataan, where the government allows tax and
duty-free importation of goods,289 is considered property of public dominion. The Freeport Area of
Bataan is owned by the state and cannot be taxed under Section 234(a) of the Local Government Code.

Properties of public dominion, even if titled in the name of an instrumentality as in this case, remain
owned by the Republic of the Philippines. If property registered in the name of an instrumentality is
conveyed to another person, the property is considered conveyed on behalf of the Republic of the
Philippines. Book I, Chapter 12, Section 48 of the Administrative Code of 1987
provides:chanroblesvirtuallawlibrary

SEC. 48. Official Authorized to Convey Real Property. – Whenever real property of the government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:

....

(2) For property belonging to the Republic of the Philippines, but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

In Manila International Airport Authority, this court explained:chanroblesvirtuallawlibrary

[The exemption under Section 234(a) of the Local Government Code] should be read in relation with
Section 133(o) of the same Code, which prohibits local governments from imposing “[t]axes, fess or
charges of any kind on the National Government, its agencies and instrumentalities x x x.” The real
properties owned by the Republic are titled either in the name of the Republic itself or in the name of
agencies or instrumentalities of the National Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or instrumentalities of the national
government. Such real properties remained owned by the Republic of the Philippines and continue to be
exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption/ Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the “beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.” . . .290 (Emphasis in the original; italics
supplied)

Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons may not
be taxed with real property taxes. The PEZA may only lease its lands and buildings to PEZA-registered
economic zone enterprises and entities.291 These PEZA-registered enterprises and entities, which
operate within economic zones, are not subject to real property taxes. Under Section 24 of the Special
Economic Zone Act of 1995, no taxes, whether local or national, shall be imposed on all business
establishments operating within the economic zones:chanroblesvirtuallawlibrary

SEC. 24. Exemption from National and Local Taxes. – Except for real property on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises
within the ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.292 (Emphasis supplied)

In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of 5% final tax on
gross income paid by all business establishments operating within the Mactan Economic
Zone:chanroblesvirtuallawlibrary

SEC. 24. Exemption from National and Local Taxes. – Except for real property on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within
the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises
within the ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.293 (Emphasis supplied)

For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income paid by all business
establishments operating within the Freeport Area of Bataan:chanroblesvirtuallawlibrary

Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No taxes, local and
national, shall be imposed on business establishments operating within the FAB. In lieu thereof, said
business establishments shall pay a five percent (5%) final tax on their gross income earned in the
following percentages:

(a) One per centum (1%) to the National Government;

(b) One per centum (1%) to the Province of Bataan;

(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and

(d) Two per centum (2%) to the Authority of the Freeport of Area of Bataan.294 (Emphasis supplied)

Petitioners, therefore, are not deprived of revenues from the operations of economic zones within their
respective territorial jurisdictions. The national government ensured that local government units
comprising economic zones shall retain their basic autonomy and
identity.295chanRoblesvirtualLawlibrary

All told, the PEZA is an instrumentality of the national government. Furthermore, the lands owned by
the PEZA are real properties owned by the Republic of the Philippines. The City of Lapu-Lapu and the
Province of Bataan cannot collect real property taxes from the PEZA.chanrobleslaw

WHEREFORE, the consolidated petitions are DENIED.

SO ORDERED
G.R. No. 167290, November 26, 2014

HERMANO OIL MANUFACTURING & SUGAR CORPORATION, Petitioner, v. TOLL REGULATORY BOARD,
ENGR. JAIME S. DUMLAO, JR., PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC) AND
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Respondents.

DECISION

BERSAMIN, J.:

The issue to be determined concerns the demand of the petitioner to have access to the North Luzon
Expressway (NLEX) by way of an easement of right of way. The demand was rebuffed by the
respondents, and upheld by both the trial and appellate courts.

The Case

On appeal by review on certiorari is the decision promulgated on October 27, 2004,1 whereby the Court
of Appeals (CA) affirmed the dismissal of the petitioner’s complaint for specific performance by the
Regional Trial Court (RTC) in Malolos, Bulacan, Branch 7, through the order issued on March 6, 2002.2

Antecedents

The petitioner owned a parcel of land located at the right side of the Sta. Rita Exit of the NLEX situated
at Barangay Sta. Rita, Guiguinto, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-134222
in its name issued by the Registry of Deeds of Bulacan.3 The parcel of land was bounded by an access
fence along the NLEX. In its letter dated September 7, 2001,4 the petitioner requested that respondent
Toll Regulatory Board (TRB) grant an easement of right of way, contending that it had been totally
deprived of the enjoyment and possession of its property by the access fence that had barred its entry
into and exit from the NLEX. On September 26, 2001, however, the TRB denied the petitioner’s request,
explaining thusly:chanroblesvirtuallawlibrary

It is with regret that we cannot favorably consider your client’s request at this point in time. Said request
is inconsistent with the provision of Section 7.0 of Republic Act No. 2000, also known as the Limited
Access Highway Act. Moreover, allowing easement of right-of-way may have detrimental/adverse effect
on the scheduled rehabilitation and improvement of the North Luzon Expressway Interchanges, as well
as on the operational problems, i.e. traffic conflicts that may arise, if approved.5

Thereafter, the petitioner sued the TRB and Engr. Jaime S. Dumlao, the TRB’s Executive Director, in the
RTC,6 demanding specific performance, the grant of the easement of right of way and damages (Civil
Case No. 37-M-2002). The petitioner amended its complaint to implead the Philippine National
Construction Corporation (PNCC) and the Department of Public Works and Highways (DPWH) as
indispensable parties.7

The petitioner alleged in its amended complaint that the access fence had totally deprived it of the use
and enjoyment of its property by preventing ingress and egress to its property; that the only access
leading to its property was the road network situated in front of its property; that it was thereby
deprived of its property without due process of law and just compensation; and that it was also denied
equal protection of the law because adjacent property owners had been given ingress and egress access
to their properties. It prayed that the RTC:chanroblesvirtuallawlibrary

1. Immediately issue a writ of preliminary injunction/temporary restraining order enjoining the

defendants, its agents and/or representatives from depriving plaintiff to ingress and egress of its
property;

2. After due hearing:chanroblesvirtuallawlibrary

a) Render the foregoing writ of preliminary injunction perpetual;

b) Granting plaintiff a right of way;

c) Declare the condemnation of plaintiff’s property as null and void. Alternatively, plaintiff prays that
defendants be ordered to pay plaintiff a just and fair compensation of the latter’s property in the
amount of not less than Four Thousand Pesos (Ps. 4,000.00) per square meter;

d) To pay plaintiff the amount of THREE HUNDRED THOUSAND PESOS (Ps. 300,000.00) and Ps. 5,000.00
per court appearance by way of Attorney’s fees;

e) To pay plaintiff Moral and Exemplary Damages in the amount of Ps. 200,000.00; and

f) To pay plaintiff the costs of suit.

Plaintiff further prays for such other reliefs and remedies as may be deemed just and equitable under
the premises.8

Appearing for the TRB, the Office of the Solicitor General (OSG) filed a Motion to Dismiss with Opposition
to the Application for the Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunctionbased on the following grounds:9

I.

THE HONORABLE COURT HAS NO JURISDICTION OVER THE CASE

II.

THE PETITION STATES NO CAUSE OF ACTION CONSIDERING THAT:

A. PLAINTIFF IS NOT THE REAL PARTY IN INTEREST

B. EASEMENT WILL NOT LIE BECAUSE THE LIMITED ACCESS TO THE NORTH LUZON EXPRESSWAY IS
ALLOWED UNDER REPUBLIC ACT 2000

C. THE STATE CANNOT BE SUED WITHOUT ITS CONSENT

III.
THE REQUISITES FOR THE ISSUANCE OF TEMPORARY RESTRAINING ORDER AND/OR WRIT OF
INJUNCTION ARE NOT PRESENT

IV.

THE COMPLAINT HAS NO LEGAL BASIS, THE PROPER REMEDY AVAILABLE IN THIS CASE IS NOT
COMPLAINT BUT A PETITION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.

In its order dated March 6, 2002,10 the RTC granted the motion to dismiss, observing as
follows:chanroblesvirtuallawlibrary

The present action against the defendants Toll Regulatory Board and its Executive Director, Engr. Jaime
S. Dumlao, Jr., could be considered as a suit against the state without its consent as among the reliefs
prayed for in the complaint is to require the said defendants to pay, jointly and severally, a just and
reasonable compensation of the plaintiff’s property which, if awarded in the judgment against said
defendants, would ultimately involve an appropriation by the state of the amount needed to pay the
compensation and damages so awarded. Moreover, as pointed out by the defendants-movants,
defendant Jaime S. Dumlao, Jr. is sued in his official capacity so that the instant complaint against him is
tantamount to a claim against the state which cannot be sued without its consent.

This principle applies with equal force as regards new defendant Department of Public Works and
Highways (DPWH).

Defendant Philippine National Construction Corporation (PNCC), on the other hand, was impleaded as
additional defendant being the entity that operates the North Luzon Expressway and was primarily
responsible in depriving the plaintiff of the use and enjoyment of its property by reason of the
construction of the access or right of way fence that prevents ingress to and egress from the subject
property, considering further that the other defendants had refused to grant plaintiff’s request for an
easement of right of way.

The main objective and prayer of the plaintiff is for this court to issue a writ of injunction that will
restrain the defendants from depriving it of ingress and egress to its property in question or to grant to
it a right of way to its property.

Suffice it to say that the main relief sought by the plaintiff is beyond the jurisdiction of this court to grant
as provided for under Presidential Decree No. 1818 and Republic Act No. 8975 which essentially prohibit
the courts from issuing temporary restraining orders and/or writs of injunction against government
infrastructure projects, and which expressly declares any such TRO or writ of injunction void under
Section 3 of R.A. No. 8975.

In view of all the foregoing, the motion to dismiss is hereby GRANTED.

WHEREFORE, the instant complaint is hereby DISMISSED.

SO ORDERED.11

The petitioner sought reconsideration, but the RTC denied its motion on July 25, 2002.12

The petitioner appealed.13

Judgment of the CA

On October 27, 2004, the CA promulgated its assailed judgment, affirming the RTC’s dismissal of the
complaint, to wit:chanroblesvirtuallawlibrary

The law is clear. Plaintiff-appellant does not deny that the NLEX is a limited access facility. Neither did it
put forward any reason why it should not be covered by the said law. Plaintiff-appellant, therefore,
cannot expect any court to issue a decision in its favor in violation of an existing law. The Court further
notes that plaintiff-appellant skirted this issue in its pleadings perhaps because it recognizes the fact
that its prayers in the complaint before the trial court is in violation of the said law.

Moreover, as pointed out by defendants-appellees (Rollo, p. 19 and 127-128), when plaintiff-appellant

acquired the property on December 14, 1999 (See: Records, p. 33), the NLEX was already in existence
and as a matter of fact Entry No. 189568 in the title indicated that a portion of the property was already
sold to the Republic of the Philippines (See: Dorsal portion, Records, p. 33). It is basic that a person
cannot demand an easement of right of way if the isolation of the property was due to owner’s own act
(Art. 649, NCC; Villanueva v Velasco, 346 SCRA 99 [2000]). In the present case, when the plaintiff-
appellant bought the property in 1999, the NLEX was already in existence and so was the access fence.
In short, its predecessors-in-interest allowed the property to be isolated. Plaintiff-appellant is now
bound by the acts of its predecessors-in-interest.

Moreover, as admitted by plaintiff-appellant in its amended complaint, there is a road network in front
of the property which serves as its access (Records, p. 28). It is settled that to be able to demand a
compulsory right of way, the dominant estate must not have adequate access to a public highway
(Villanueva v Velasco, supra). Plaintiff-appellant did not complaint about the adequacy of the existing
road works.

Also, as pointed out by defendants-appellees, the action below was one for specific performance which
is proper only in case of contractual breach. In the present case, plaintiff-appellant cannot claim that
defendants-appellees committed a breach of contract because there is precisely no contract between
them.

As to the matter of non-suability, the Court notes that while defendant-appellee PNCC is a government
owned and controlled corporation, the other defendants-appellees are either agencies of the State
(DPWH and TRB) or an employee of a government agency. Plaintiff-appellant argued that the principle
of non-suability of the state does not apply when the government acted in a non-governmental capacity.
The Court, however, notes that plaintiff-appellant merely cites cases to this effect but did not put
forward any argument why the maintenance of NLEX should be considered as a non-governmental
function. It cannot be denied that the maintenance of the highways is part of the necessary functions of
the government of maintaining public infrastructures.

Coming now to PNCC although it is not strictly a government agency, its function is a necessary incident
to a government function and, hence, it should likewise enjoy immunity from suit (See: Union Insurance
Society of Canton, Ltd. v Republic of the Philippines, 46 SCRA 120 [1972]).

As to the assertion that no expropriation proceeding was taken against the subject property, the Court
agrees with the PNCC that these arguments were not raised in the Court below and, hence, is no longer
proper at this stage. Moreover, the Court notes that the proper party to complain against the alleged
lack of proper expropriation proceeding is the previous owner, when portion of the property was sold to
the Republic of the Philippines in 1979.

WHEREFORE, the appealed Order dated March 6, 2002 of the Regional Trial Court of Malolos, Bulacan,
Branch 7, in Civil Case No. 37-M-2002 is hereby AFFIRMED.

SO ORDERED.14

Issues

The present appeal is anchored on the following grounds, namely:chanroblesvirtuallawlibrary

FIRST

THE DECISION OF THE COURT OF APPEALS IS REPUGNANT TO THE DUE PROCESS AND EQUAL
PROTECTION CLAUSE ENSHRINED IN OUR CONSTITUTION AND PREVAILING JURISPRUDENCE.

SECOND

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING THAT ENTRY NO.
189568 IN THE TITLE OF HEREIN PETITIONER WAS ALREADY IN EXISTENCE WHICH SHOWED THAT EVEN
BEFORE THE ACQUISITION OF THE PROPERTY IN 1999, THE NLEX WAS ALREADY IN EXISTENCE AND SO
WAS THE ACCESS FENCE. THUS, ITS PREDECESSORS-IN-INTEREST ALLOWED THE PROPERTY TO BE
ISOLATED.

THIRD

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENT PNCC, ALTHOUGH NOT
STRICTLY A GOVERNMENT AGENCY, SHOULD LIKEWISE ENJOY IMMUNITY FROM SUIT.15

The foregoing grounds boil down to the issue of whether Civil Case No. 37-M-2002 was properly
dismissed.

Ruling
We concur with both lower courts.

In our view, the TRB, Dumlao and the DPWH correctly invoked the doctrine of sovereign immunity in
their favor. The TRB and the DPWH performed purely or essentially government or public functions. As
such, they were invested with the inherent power of sovereignty. Being unincorporated agencies or
entities of the National Government, they could not be sued as such. On his part, Dumlao was acting as
the agent of the TRB in respect of the matter concerned.

In Air Transportation Office v. Ramos,16 we expounded on the doctrine of sovereign immunity in the
following manner:chanroblesvirtuallawlibrary

An unincorporated government agency without any separate juridical personality of its own enjoys
immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for
damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated.
However, the need to distinguish between an unincorporated government agency performing
governmental function and one performing proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is governmental or incidental to such function; it has
not been upheld in favor of the latter whose function was not in pursuit of a necessary function of
government but was essentially a business.

Nonetheless, the petitioner properly argued that the PNCC, being a private business entity, was not
immune from suit. The PNCC was incorporated in 1966 under its original name of Construction
Development Corporation of the Philippines (CDCP) for a term of fifty years pursuant to the Corporation
Code.17 In 1983, the CDCP changed its corporate name to the PNCC to reflect the extent of the
Government’s equity investment in the company, a situation that came about after the government
financial institutions converted their loans into equity following the CDCP’s inability to pay the
loans.18Hence, the Government owned 90.3% of the equity of the PNCC, and only 9.70% of the PNCC’s
voting equity remained under private ownership.19 Although the majority or controlling shares of the
PNCC belonged to the Government, the PNCC was essentially a private corporation due to its having
been created in accordance with the Corporation Code, the general corporation statute.20 More
specifically, the PNCC was an acquired asset corporation under Administrative Order No. 59, and was
subject to the regulation and jurisdiction of the Securities and Exchange Commission.21 Consequently,
the doctrine of sovereign immunity had no application to the PNCC.

The foregoing conclusion as to the PNCC notwithstanding, the Court affirms the dismissal of the
complaint due to lack of jurisdiction and due to lack of cause of action.

It appears that the petitioner’s complaint principally sought to restrain the respondents from
implementing an access fence on its property, and to direct them to grant it a right of way to the NLEX.
Clearly, the reliefs being sought by the petitioner were beyond the jurisdiction of the RTC because no
court except the Supreme Court could issue an injunction against an infrastructure project of the
Government. This is because Presidential Decree No. 1818, issued on January 16, 1981, prohibited
judges from issuing restraining orders against government infrastructure projects, stating in its sole
provision: “No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary
injunction or preliminary order, preliminary mandatory injunction in any case, dispute or controversy
involving an infrastructure project.” Presidential Decree No. 1818 was amended by Republic Act No.
8975,22 approved on November 7, 2000, whose pertinent parts provide:chanroblesvirtuallawlibrary

Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions.- No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivisions, officials or any person or entity, whether public or private, acting under the
government's direction, to restrain, prohibit or compel the following acts:

(a) Acquisition, clearance and development of the right-of-way and/or site or location of any national
government project;

(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof;

(c) Commencement, prosecution, execution, implementation, operation of any such contract or project;

(d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including
but not limited to cases filed by bidders or those claiming to have rights through such bidders involving
such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a
constitutional issue, such that unless a temporary restraining order is issued, grave injustice and
irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which
bond shall accrue in favor of the government if the court should finally decide that the applicant was not
entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order a
rebidding of the same, without prejudice to any liability that the guilty party may incur under existing
laws.

Section 4. Nullity of Writs and Orders.- Any temporary restraining order, preliminary injunction or
preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and
effect.

Section 5. Designation of Regional Trial Courts.- The Supreme Court may designate regional trial courts
to act as commissioners with the sole function of receiving facts of the case involving acquisition,
clearance and development of right-of-way for government infrastructure projects. The designated
regional trial court shall within thirty (30) days from the date of receipt of the referral, forward its
findings of facts to the Supreme Court for appropriate action. x x x
As to what was embraced by the term infrastructure project as used in Presidential Decree No. 1818, the
Court has ruled in Francisco, Jr. v. UEM-MARA Philippines Corporation:23

PD 1818 proscribes the issuance of a writ of preliminary injunction in any case involving an
infrastructure project of the government. The aim of the prohibition, as expressed in its second whereas
clause, is to prevent delay in the implementation or execution of government infrastructure projects
(particularly through the use of provisional remedies) to the detriment of the greater good since it
disrupts the pursuit of essential government projects and frustrates the economic development effort of
the nation.

Petitioner argues that the collection of toll fees is not an infrastructure project of the government. He
cites the definition of “infrastructure projects” we used in Republic v. Silerio:chanroblesvirtuallawlibrary

The term “infrastructure projects” means “construction, improvement and rehabilitation of roads, and
bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage,
water supply and sewage systems, shore protection, power facilities, national buildings, school
buildings, hospital buildings, and other related construction projects that form part of the government
capital investment.”

xxxx

The definition of infrastructure projects specifically includes the improvement and rehabilitation of
roads and not just its construction. Accordingly, even if the Coastal Road was merely upgraded and not
constructed from scratch, it is still covered by the definition. Moreover, PD 1818 itself states that any
person, entity or governmental official cannot be prohibited from continuing the execution or
implementation of such project or pursuing any lawful activity necessary for such execution or
implementation. Undeniably, the collection of toll fees is part of the execution or implementation of the
MCTEP as agreed upon in the TOA. The TOA is valid since it has not been nullified. Thus it is a legitimate
source of rights and obligations. It has the force and effect of law between the contracting parties and is
entitled to recognition by this Court. The MCTEP is an infrastructure project of the government forming
part of the government capital investment considering that under the TOA, the government owns the
expressways comprising the project. (Emphasis supplied.)

There can be no question that the respondents’ maintenance of safety measures, including the
establishment of the access fence along the NLEX, was a component of the continuous improvement
and development of the NLEX. Consequently, the lower courts could not validly restrain the
implementation of the access fence by granting the petitioner its right of way without exceeding its
jurisdiction.

Nor did the establishment of the access fence violate the petitioner’s constitutional and legal rights.

It is relevant to mention that the access fence was put up pursuant to Republic Act No. 2000 (Limited
Access Highway Act), the enforcement of which was under the authority of the DOTC. Clarifying the
DOTC’s jurisdiction under this law in Mirasol v. Department of Public Works and Highways,24 the Court
has said–
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957. Section 4
of RA 2000 provides that “[t]he Department of Public Works and Communications is authorized to do so
design any limited access facility and to so regulate, restrict, or prohibit access as to best serve the
traffic for which such facility is intended.” The RTC construed this authorization to regulate, restrict, or
prohibit access to limited access facilities to apply to the Department of Public Works and Highways
(DPWH).

The RTC’s ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority
from its predecessor, the Department of Public Works and Communications, which is expressly
authorized to regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA 2000.
However, such assumption fails to consider the evolution of the Department of Public Works and
Communications.

xxxx

Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works and
Highways became the Department of Public Works and Highways (DPWH) and the former Ministry of
Transportation and Communications became the Department of Transportation and Communications
(DOTC).

DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April 1993
and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and
Regulations on Limited Access Facilities. However, on 23 July 1979, long before these department orders
and regulations were issued, the Ministry of Public Works, Transportation and Communications was
divided into two agencies – the Ministry of Public Works and the Ministry of Transportation and
Communications – by virtue of EO 546. The question is, which of these two agencies is now authorized to
regulate, restrict, or prohibit access to limited access facilities?

Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public
works functions of the Ministry of Public Works, Transportation and Communications. On the other
hand, among the functions of the Ministry of Transportation and Communications (now Department
of Transportation and Communications [DOTC]) were to (1) formulate and recommend national
policies and guidelines for the preparation and implementation of an integrated and comprehensive
transportation and communications systems at the national, regional, and local levels; and (2)
regulate, whenever necessary, activities relative to transportation and communications and prescribe
and collect fees in the exercise of such power. Clearly, under EO 546, it is the DOTC, not the DPWH,
which has authority to regulate, restrict, or prohibit access to limited access facilities.

Even under Executive Order No. 125 (EO 125) and Executive Order No. 125-A (EO 125-A), which
further reorganized the DOTC, the authority to administer and enforce all laws, rules and regulations
relative to transportation is clearly with the DOTC.

Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain expressways
as limited access facilities. Under the law, it is the DOTC which is authorized to administer and enforce
all laws, rules and regulations in the field of transportation and to regulate related
activities. (Emphasis supplied.)

Moreover, the putting up of the access fence on the petitioner’s property was in the valid exercise of
police power, assailable only upon proof that such putting up unduly violated constitutional limitations
like due process and equal protection of the law.25 In Mirasol v. Department of Public Works and
Highways, the Court has further noted that:chanroblesvirtuallawlibrary

A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain
destinations, its use, operation, and maintenance require close regulation. Public interest and safety
require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a
special kind of road, it is but reasonable that not all forms of transport could use it.26

Clearly, therefore, the access fence was a reasonable restriction on the petitioner’s property given the
location thereof at the right side of Sta. Rita Exit of the NLEX. Although some adjacent properties were
accorded unrestricted access to the expressway, there was a valid and reasonable classification for
doing so because their owners provided ancillary services to motorists using the NLEX, like gasoline
service stations and food stores.27 A classification based on practical convenience and common
knowledge is not unconstitutional simply because it may lack purely theoretical or scientific
uniformity.28

Lastly, the limited access imposed on the petitioner’s property did not partake of a compensable taking
due to the exercise of the power of eminent domain. There is no question that the property was not
taken and devoted for public use. Instead, the property was subjected to a certain restraint, i.e. the
access fence, in order to secure the general safety and welfare of the motorists using the NLEX. There
being a clear and valid exercise of police power, the petitioner was certainly not entitled to any just
compensation.29

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated
on October 27, 2004; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.