Rule 63 Declaratory Relief and Similar Remedies Fulltexts

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RULE 63: DECLARATORY RELIEF AND SIMILAR REMEDIES
1. G.R. No. 137794. August 11, 2010.*

ERLINDA REYES and ROSEMARIE MATIENZO, petitioners, vs. HON. JUDGE BELEN B. ORTIZ, Presiding,
Branch 49, Metropolitan Trial Court, Caloocan City; SPOUSES BERNARD and FLORENCIA PERL,
represented by Attorney-in-Fact BENJAMIN MUCIO; HON. JUDGE VICTORIA ISABEL A. PAREDES,
Presiding, Branch 124, Regional Trial Court, Caloocan City and SEGUNDO BAUTISTA, respondents.
G.R. No. 149664. August 11, 2010.*
SPS. ALBERTO EMBORES and LOURDES EMBORES, SPS. ROBERTO AND EVELYN PALAD, DENNIS HENOSA
and CORAZON LAURENTE, petitioners, vs. HON. RAYMUNDO G. VALLEGA, Presiding Judge, Branch 52,
Metropolitan Trial Court, Caloocan City; HON. ELEANOR R. KWONG, Presiding Judge, Branch 51,
Metropolitan Trial Court, Caloocan City; HON. JUDGE BELEN B. ORTIZ, Presiding Judge, Branch 49,
Metropolitan Trial Court, Caloocan City; VICTORIA C. SALIRE-ALBIS, represented by her attorney-in-fact
MR. MENELIO C. SALIRE; MA. FE R. ROCO, ALFREDO TAN, MANUELITO ESTRELLA; and HON. JUDGE
ANTONIO FINEZA, Presiding Judge, Branch 131, Regional Trial Court, Caloocan City, respondents.
Actions; Declaratory Relief; Section 1 of Rule 63 of the Rules of Court can be dissected into two parts—the first
paragraph concerns declaratory relief, which has been defined as a special civil action by any person interested
under a deed, will, contract or other written instrument or whose rights are affected by a statute, ordinance,
executive order or regulation to determine any question of construction or validity arising under the instrument,
executive order or regulation, or statute and for a declaration of his rights and duties thereunder, and, the second
paragraph pertains to (1) an action for the reformation of an instrument; (2) an action to quiet title; and (3) an
action to consolidate ownership in a sale with a right to repurchase.—Petitioners insist that this is mainly a
petition for declaratory relief. Section 1, Rule 63 of the 1997 Rules of Court provides: SECTION 1. Who may file
petition.—Any person interested under a deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any other 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 the 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 foregoing
section can be dissected into two parts. The first paragraph concerns declaratory relief, which has been defined
as a special civil action by any person interested under a deed, will, contract or other written instrument or
whose rights are affected by a statute, ordinance, executive order or regulation to determine any question of
construction or validity arising under the instrument, executive order or regulation, or statute and for a
declaration of his rights and duties thereunder. The second paragraph pertains to (1) an action for the
reformation of an instrument; (2) an action to quiet title; and (3) an action to consolidate ownership in a sale
with a right to repurchase.
Same; Same; The subject matters to be tested in a petition for declaratory relief are exclusive—the subject matter
must refer to a deed, will, contract or other written instrument, or to a statute or ordinance, to warrant
declaratory relief and any other matter not mentioned therein is deemed excluded.—The first paragraph of
Section 1 of Rule 63 enumerates the subject matter to be inquired upon in a declaratory relief namely, deed,
will, contract or other written instrument, a statute, executive order or regulation, or any government
regulation. This Court, in Lerum v. Cruz, 87 Phil. 652 (1950), declared that the subject matters to be tested in a
petition for declaratory relief are exclusive, viz.: Under this rule, only a person who is interested “under a deed,
will, contract or other written instrument, and whose rights are affected by a statute or ordinance, may bring
an action to determine any question of construction or validity arising under the instrument or statute and for a
declaration of his rights or duties thereunder.” This means that the subject matter must refer to a deed,
will, contract or other written instrument, or to a statute or ordinance, to warrant declaratory relief.
Any other matter not mentioned therein is deemed excluded. This is under the principle of expressio
unius est exclussio alterius. (Emphasis supplied.)
Same; Same; Hierarchy of Courts; The Supreme Court will not entertain direct resort to it, except when the redress
sought cannot be obtained in the proper courts or when exceptional and compelling circumstances warrant
availment of a remedy within and calling for the exercise of this Court’s primary jurisdiction.—Despite this
procedural remedy available to them, petitioners, under the pretext that they were in a quandary as to their
Q. PADILLA | ProvRem
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rights under the Injunction order of the Quezon City RTC, directly filed the instant case here. Petitioners did not
bother to proffer a compelling reason for their direct resort to this Court. This procedural faux pas proves fatal.
The Court’s exhortation against taking a procedural shortcut cannot be overemphasized. In Ortega v. The
Quezon City Government, 469 SCRA 388 (2005), the Court accentuated: At all events, even if this petition delves
on questions of law, there is no statutory or jurisprudential basis for according to this Court original and
exclusive jurisdiction over declaratory relief which advances only questions of law. Finally, while a petition for
declaratory relief may be treated as one for prohibition if it has far reaching implications and raises questions
that need to be resolved, there is no allegation of facts by petitioner tending to show that she is entitled to such
a writ. The judicial policy must thus remain that this Court will not entertain direct resort to it, except
when the redress sought cannot be obtained in the proper courts or when exceptional and compelling
circumstances warrant availment of a remedy within and calling for the exercise of this Court’s primary
jurisdiction. (Emphasis supplied.)
Same; Same; Courts; Injunction; No court has the power to interfere by injunction with the judgments or decrees of
a court of concurrent or coordinate jurisdiction.—The foregoing order is not addressed to the Caloocan City RTC.
Neither can it be inferred from the language thereof that the Quezon City RTC intended to enjoin the Caloocan
City RTC from further proceeding with the Recovery case. The order merely mentions the Caloocan City MeTCs.
Nothing more. But more importantly, the Quezon City RTC could not have validly enjoined the Caloocan City
RTC without violating the doctrine that no court has the power to interfere by injunction with the judgments or
decrees of a court of concurrent or coordinate jurisdiction. Spouses Ching v. Court of Appeals, 398 SCRA 88
(2003), justifies this rule in this manner: Beginning with the case of Orais v. Escaño, down to the subsequent
cases of Nuñez v. Low, Cabigao v. del Rosario, Hubahib v. Insular Drug Co., Inc., National Power Corp. v. De Veyra,
Luciano v. Provincial Governor, De Leon v. Hon. Judge Salvador, Cojuangco v. Villegas, Darwin v. Tokonaga, we laid
down the long standing doctrine 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. A contrary rule would obviously lead to
confusion and seriously hamper the administration of justice. (Emphasis supplied.)
Same; Ejectment; The established rule is that a pending civil action for ownership such as annulment of title shall
not ipso facto suspend an ejectment proceeding.—Bereft of merit too is petitioners’ argument that the Caloocan
City MeTC cannot disregard the injunction order of the Quezon City RTC hearing the Annulment/Reversion
case. The established rule is that a pending civil action for ownership such as annulment of title shall not ipso
facto suspend an ejectment proceeding. The Court explained that the rationale for this is that in an ejectment
case, the issue is possession, while in an annulment case the issue is ownership. In fact, an ejectment case can
be tried apart from an annulment case. Although there is an exception to this rule, petitioners failed to justify
that this case falls within said exception.
SPECIAL CIVIL ACTIONS in the Supreme Court. Declaratory Relief, Certiorari and Prohibition.
The facts are stated in the opinion of the Court.
Luis Sementilla, Jr. for E. Reyes and R. Matienzo.
Marlin F. Velasco for Sps. Bernard and Florencia Perl.
Medina, Libatique & Associates Law Office for Sps. Alberto and Lourdes Embores, et al.
Angel De Veyra for respondent S. Bautista.
Godofredo T. Robeniol for Alfredo Tan.
LEONARDO-DE CASTRO, J.:
The instant cases are consolidated Petitions 1 for Declaratory Relief, Certiorari, and Prohibition. The petitioners
in G.R. No. 137794 seek to declare null and void the proceedings in Civil Case No. 23477, an ejectment case,
before the Metropolitan Trial Court (MeTC), Caloocan City, Branch 49, and Civil Case No. C-17725, a complaint
for Recovery of Possession and Ownership, filed with the Regional Trial Court (RTC), Caloocan City, Branch
124;2 while the petitioners in G.R. No. 149664 pray for the nullity of the following ejectment proceedings before
the different branches of the Caloocan City MeTC: (1) Civil Case No. 99-25011, Branch 52; (2) Civil Case No.
22559 and Civil Case No. 18575, Branch 49 and its appeal to the RTC, Branch 131; (3) Civil Case No. 00-25892,
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Branch 51; and (4) Civil Case No. 00-25889, Branch 51. 3 G.R. No. 149664 was considered closed and terminated
by the Court’s Resolution dated August 30, 2006.4
The parcels of land which are the subject matter of these cases are part of the Tala Estate, situated between the
boundaries of Caloocan City and Quezon City and encompassing an area of 7,007.9515 hectares more or less. 5
In G.R. No. 137794, respondents Segundo Bautista and spouses Bernard and Florencia Perl sought the ouster
from the contested lots of Erlinda Reyes, spouses Rene and Rosemarie Matienzo and Sergio Abejero, who are
occupants of separate home lots in Camarin, Caloocan City.
The first case was commenced on December 11, 1996, by respondent Segundo Bautista, a registered owner of
the parcel of land occupied by spouses Rene and Rosemarie Matienzo. The case was a complaint for Recovery of
Possession and/or Ownership of Real Property (Recovery case) against the latter spouses with the RTC
Caloocan City, Branch 124.6 This was docketed as Civil Case No. C-17725.7
Shortly thereafter, a separate but related action, was initiated by the Republic of the Philippines, represented
by the Director of Lands on December 27, 1996, before the Quezon City RTC, Branch 85 (re-raffled to Branch
93).8 This was a complaint for Annulment of Title/Reversion (Annulment/Reversion case) against Biyaya
Corporation and the Register of Deeds of the Cities of Pasig, Caloocan, and Quezon, the City of Manila, and the
Administrator of the Land Registration Authority involving the Tala Estate. The case, docketed as Civil Case No.
Q-96-29810, sought to declare null and void the transfer certificates of title issued in the name of Biyaya
Corporation, and all derivative titles emanating therefrom, and to declare the land in suit to be reverted to it as
part of the patrimonial property of the State, and the same be awarded to the actual occupants. One of the
intervenors therein is Samahan ng Maliliit na Magkakapitbahay (SAMAKABA) of which petitioners Erlinda
Reyes and Rosemarie Matienzo are members.9
On May 28, 1997, the Quezon City RTC in the Annulment/Reversion case issued a Preliminary Injunction
(Injunction) freezing all ejectment cases involving the Tala Estate pending in the MeTCs of Quezon City and
Caloocan City.10
Believing that the Injunction issued by the Quezon City RTC can be beneficial to them in the Recovery case
pending before the Caloocan City RTC, on June 27, 1997, spouses Rene and Rosemarie Matienzo filed a motion
to suspend the proceedings of the Recovery case. 11 On December 8, 1997, the Caloocan City RTC, Branch 124
denied said motion.12 Spouses Matienzo moved for the reconsideration of the motion, but the same was denied
on May 14, 1998.13 The spouses received the order denying their motion for reconsideration on June 9,
1998.14 Trial on the merits started on December 2, 1998.15
The second case, an ejectment complaint, was commenced by spouses Bernard and Florencia Perl on June 25,
1997, against Erlinda Reyes before the Caloocan City MeTC, Branch 49. 16 It was docketed as Civil Case No.
23477. Shortly thereafter, on July 8, 1997, spouses Perl filed the third case, an ejectment action against Sergio
Abejero. The case, which was raffled off to Branch 49 of the Caloocan City MeTC, was docketed as Civil Case No.
23519.17 Subsequently, these two ejectment cases were consolidated (Ejectment cases).18 In her Answer and
during the preliminary conference, Erlinda Reyes moved for the suspension of the proceedings and/or for the
dismissal of these cases citing the Injunction issued in Civil Case No. Q-96-29810. 19 In its Order20 dated January
22, 1999, the MeTC did not entertain Reyes’s motion, instead, it required her to submit a position paper.
Erlinda Reyes received the order on March 11, 1999. 21 On April 16, 1999, the trial court issued a Decision
ordering Erlinda to vacate the contested property. 22
The Recovery case and the Ejectment cases converged when petitioners Rosemarie Matienzo and Erlinda
Reyes, joined on March 25, 1999 in filing directly with this Court the instant petition denominated as
“Declaratory Relief, Certiorari, and Prohibition,” mainly assailing the denial of their respective motions for
suspension.23 Petitioners Matienzo and Reyes asked that the proceedings in the Ejectment cases and the
Recovery case be declared null and void for violating the Injunction order of the Quezon City RTC. This case is
docketed as G.R. No. 137794.
During the pendency of G.R. No. 137794, certain events supervened when the Ejectment cases ran their course
and petitioner Reyes appealed the MeTC decision to the RTC. In the RTC, the Ejectment cases were docketed as
Civil Cases Nos. C-18904-05.24 Apparently, respondent-spouses Perl moved for the execution of the MeTC
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decision pending appeal, which the RTC granted as the Writ of Execution was thereafter issued on October 20,
2000.25 Petitioner Erlinda Reyes and company, thus, filed with this Court a motion to suspend the proceedings
in the RTC.26 On October 25, 2000, this Court issued a Temporary Restraining Order restraining the
implementation of the said writ of execution.27
G.R. No. 149664, on the other hand, emanated from four distinct ejectment complaints filed against petitioners
Corazon Laurente, spouses Alberto and Lourdes Embores, spouses Roberto and Evelyn Palad, and Dennis
Henosa.28 The parcels of land from which petitioners were sought to be evicted were located in Camarin,
Caloocan City and within the Tala Estate. 29 Petitioners were members of Alyansa Ng Mga Naninirahan Sa Tala
Friar Lands (ALNATFRAL), an intervenor in the Reversion case. 30 These ejectment cases were all filed after the
Injunction order was issued on May 28, 1997 by the Quezon City RTC in the Annulment/Reversion case. Thus,
petitioners separately invoked the said injunction in seeking the dismissal or suspension of the four ejectment
cases. Petitioners’ motions for suspension were dismissed and the trial court proceeded to render judgments
on these cases. Petitioners resorted directly to this Court in seeking the declaration of nullity of the proceedings
of these ejectment cases for violating the prevailing injunction issued by the Quezon City RTC.
Meanwhile, on March 4, 2003, the petitioners in G.R. No. 149664 filed a motion for consolidation asking that the
said case be consolidated with G.R. No. 137794.
On April 28, 2003, this Court resolved to consolidate the two cases.
On July 28, 2006, petitioners in G.R. No. 149664 filed a Motion to Withdraw and/or Dismiss Instant
Petition31 stating that since a decision in the Annulment/Reversion case (Civil Case No. Q-96-29810) was
already issued (although they did not attach a copy thereof), the petition is therefore rendered moot and
academic as the injunction order was effective only pending determination of the merits.
On August 30, 2006, the Court granted the motion to withdraw petition in G.R. No. 149664 and considered the
same closed and terminated.32 On October 11, 2006, G.R. No. 149664 became final and executory.
What remains to be resolved, therefore, are the issues raised in G.R. No. 137794.
In their bid to declare null and void the proceedings in the Recovery case and the Ejectment cases, petitioners
argued that the Caloocan City MeTC, where the Ejectment cases were filed, and the Caloocan City RTC where
the Recovery case was pending, were divested of jurisdiction since the Quezon City RTC acquired jurisdiction
over the subject matter.33 Petitioners specifically alleged that the MeTC’s refusal to suspend the Ejectment cases
despite the Injunction order is tantamount or amounting to lack of or excess of jurisdiction. As to the Caloocan
City RTC, its desistance to heed the Injunction is unjustified and contrary to well-settled
jurisprudence.34 Petitioners were of the view that the interference by the Quezon City RTC was justified since
no third-party claim is involved.35
The Office of the Solicitor General (OSG) adopts the position of petitioners in praying that the orders denying
the motion to suspend proceedings and the proceedings that transpired in the Ejectment cases be set aside for
having been issued with grave abuse of discretion. 36 Citing Honda Giken Kogyo-Kabushiki Kaisha v. San
Diego,37 where it was held that a writ of injunction may be issued to a court by another court superior in rank,
the OSG maintains that the Injunction issued by the Quezon City RTC in Civil Case No. Q-96-29810 covers all
metropolitan trial courts including the Ejectment cases in Caloocan City MeTC, Branch 49. 38 The OSG also
maintains that the Injunction was in accordance with the settled jurisprudence where the reversion case is
being filed by the State.
Respondent Segundo Bautista contends that petitioners resorted to a wrong remedy. He argues that the action
for declaratory relief can only prosper if the statute, deed, or contract has not been violated. 39 Hence, where the
law or contract has already been breached prior to the filing of the declaratory relief, courts can no longer
assume jurisdiction since this action is not geared towards the settling of issues arising from breach or
violation of the rights and obligations of the parties under a statute, deed, and contract, but rather it is intended
to secure an authoritative statement for guidance in their enforcement or compliance of the same. 40 Since the
Injunction order of the Quezon City RTC had already been violated as early as December 8, 1997 by the
Caloocan City RTC in the Recovery case, or before the filing of this instant petition, resort to Rule 63 of the
Rules of Court would not lie. Respondent Bautista insists that the instant recourse of petitioner Matienzo was
resorted to as a ploy to substitute the filing of certiorari under Rule 65, which she already lost since the 60-day
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period had already expired.41 Respondent points out that direct resort to this Court violates the rule on the
hierarchy of courts. Since it was the Caloocan City RTC which denied petitioner Matienzo’s motion to suspend
proceedings, the petition for declaratory relief should have been filed with the Court of Appeals. Direct filing
with this Court is not justified as, other than making motherhood statements, petitioner Matienzo failed to state
clearly the exceptional and compelling circumstances to justify the exercise of this Court’s primary
jurisdiction.42 He likewise contends that the Caloocan City RTC did not err in not suspending the proceedings in
the Recovery case, notwithstanding the Injunction issued by the Quezon City RTC, since the said injunction
applied only to the MeTCs of Quezon City and Caloocan City so the RTC was excluded from the injunction order.
He avers that it is the Caloocan City RTC which is vested with the jurisdiction to hear and decide the case until
its final conclusion since it had acquired the same ahead of the Quezon City RTC. He states that being co-equal,
the Quezon City RTC had no authority to stop by injunction the Caloocan City RTC and even though there are
instances where another court may exercise coordinate jurisdiction in cases where there are justifiable
grounds, here, petitioner Matienzo has not alleged any of those circumstances.
Petitioners insist that this is mainly a petition for declaratory relief. Section 1, Rule 63 of the 1997 Rules of
Court provides:
“SECTION 1. Who may file petition.—Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other
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 the 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 foregoing section can be dissected into two parts. The first paragraph concerns declaratory relief, which
has been defined as a special civil action by any person interested under a deed, will, contract or other written
instrument or whose rights are affected by a statute, ordinance, executive order or regulation to determine any
question of construction or validity arising under the instrument, executive order or regulation, or statute and
for a declaration of his rights and duties thereunder. The second paragraph pertains to (1) an action for the
reformation of an instrument; (2) an action to quiet title; and (3) an action to consolidate ownership in a sale
with a right to repurchase.43 The first paragraph of Section 1 of Rule 63 enumerates the subject matter to be
inquired upon in a declaratory relief namely, deed, will, contract or other written instrument, a statute,
executive order or regulation, or any government regulation. This Court, in Lerum v. Cruz,44 declared that the
subject matters to be tested in a petition for declaratory relief are exclusive, viz.:
“Under this rule, only a person who is interested “under a deed, will, contract or other written instrument, and
whose rights are affected by a statute or ordinance, may bring an action to determine any question of
construction or validity arising under the instrument or statute and for a declaration of his rights or duties
thereunder.” This means that the subject matter must refer to a deed, will, contract or other written
instrument, or to a statute or ordinance, to warrant declaratory relief. Any other matter not mentioned
therein is deemed excluded. This is under the principle of expressio unius est exclussio alterius. ”
(Emphasis supplied.)
The foregoing holding was reiterated in Natalia Realty, Inc. v. Court of Appeals,45 wherein this Court stressed
that court orders or decisions cannot be made the subject matter of a declaratory relief, thus:
“Judge Querubin’s query is not an action for declaratory relief. Section 1 of Rule 64 [now Rule 63] of the Rules
of Court provides the requisites of an action for declaratory relief. In interpreting these requisites, the Court
has ruled that:
x x x x
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The letter of Judge Querubin pertained to final orders and decisions of the courts that are clearly not
the proper subjects of a petition for declaratory relief. Thus, the requisites prescribed by the Rules of Court
in an action for declaratory relief are not applicable to the letter of Judge Querubin.” 46 (Emphasis supplied.)
Then again in a recent ruling of this Court, it was emphasized:
“A petition for declaratory relief cannot properly have a court decision as its subject matter. In Tanda v.
Aldaya [98 Phil. 244 (1956)], we ruled that:
[A] court decision cannot be interpreted as included within the purview of the words “other written
instrument,” as contended by appellant, for the simple reason that the Rules of Court already provide for the
ways by which an ambiguous or doubtful decision may be corrected or clarified without need of resorting to
the expedient prescribed by Rule 66 [now Rule 64].”47 (Emphasis supplied.)
In the instant case, petitioners Erlinda Reyes and Rosemarie Matienzo assailed via Declaratory Relief under
Rule 63 of the Rules of Court, the orders of the trial courts denying their motions to suspend proceedings. This
recourse by petitioners, unfortunately, cannot be countenanced since a court order is not one of those subjects
to be examined under Rule 63.
The proper remedy that petitioner Erlinda Reyes could have utilized from the denial of her motion to suspend
proceedings in the Caloocan City MeTC was to file a motion for reconsideration and, if it is denied, to file a
petition for certiorari before the RTC pursuant to Rule 65 of the Rules of Court. On the other hand, petitioner
Matienzo should have filed a special civil action on certiorari also under Rule 65 with the Court of Appeals from
the denial of her motion by the Caloocan City RTC. The necessity of filing the petition to the RTC in the case of
Erlinda Reyes and to the Court of Appeals in the case of Matienzo is dictated by the principle of the hierarchy of
courts.48 Both petitions must be filed within 60 days from the receipt or notice of the denial of the motion to
suspend proceedings or from the denial of the motion for reconsideration. Section 4 of Rule 65 partly provides:
“Sec. 4. When and where to file the petition.—The petition shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed,
whether such motion is required or not, the petition shall be filed not later than sixty (60) days counted from
the notice of the denial of said motion.
If the petition relates to an act or an omission of a municipal trial court x x x, it shall be filed with the Regional
Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed
with the Court of Appeals or with the Sandiganbayan, whether or not the same is in aid of the court’s appellate
jurisdiction.”
Despite this procedural remedy available to them, petitioners, under the pretext that they were in a quandary
as to their rights under the Injunction order of the Quezon City RTC, directly filed the instant case here.
Petitioners did not bother to proffer a compelling reason for their direct resort to this Court. This
procedural faux pas proves fatal. The Court’s exhortation against taking a procedural shortcut cannot be
overemphasized. In Ortega v. The Quezon City Government,49 the Court accentuated:
“At all events, even if this petition delves on questions of law, there is no statutory or jurisprudential basis for
according to this Court original and exclusive jurisdiction over declaratory relief which advances only
questions of law.
Finally, while a petition for declaratory relief may be treated as one for prohibition if it has far reaching
implications and raises questions that need to be resolved, there is no allegation of facts by petitioner tending
to show that she is entitled to such a writ. The judicial policy must thus remain that this Court will not
entertain direct resort to it, except when the redress sought cannot be obtained in the proper courts or
when exceptional and compelling circumstances warrant availment of a remedy within and calling for
the exercise of this Court’s primary jurisdiction.” (Emphasis supplied.)
To make matters worse, petitioner Matienzo obviously availed of the instant declaratory relief to substitute for
a petition for certiorari, a remedy which she sadly lost by inaction. It must be recalled that on December 8,
1997, the Caloocan City RTC, Branch 124 denied Matienzo’s motion to suspend proceedings.50 She moved for
reconsideration, but the same was denied on May 14, 1998. 51 She received the Order denying her motion for
reconsideration on June 9, 1998.52 She had 60 days therefrom to question the same before the Quezon City RTC.
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It was only on March 25, 1999 that petitioner Matienzo assailed the order denying her motion for
reconsideration, albeit wrongly before this Court. 53 From this, it can be inferred that petitioner Matienzo’s
recourse is a belated attempt designed to salvage her lost opportunity to assail the order denying her motion to
suspend proceedings.
Also unavailing are the contentions of petitioners that the Caloocan City RTC and MeTC committed grave abuse
of discretion when they denied petitioners’ motions to suspend proceedings. The pertinent portion of the
Injunction order of the Quezon City RTC reads:
“WHEREFORE, premises considered, this Court has to grant, as it hereby grants the application for the issuance
of the writ of preliminary injunction. Let a writ of preliminary Injunction be issued ordering defendant
representing Biyaya Corporation, its agents, assigns, and transferees, as well as all other persons representing
themselves as owners of certain portions of the land in question, otherwise known as the Tala Estate, to
immediately cease and desist from doing or causing to do, further acts of disposition of the lots subject of the
present complaint, such as the filing of ejectment cases in the Municipal Trial Courts of Quezon City and
Caloocan City and, the demolition and ejectment therefrom of the members of the herein Intervenors.
Accordingly, the Metropolitan Trial Courts of Quezon City and Caloocan City are specifically ordered to cease
and desist from further conducting trials and proceedings in the ejectment cases filed and to be filed involving
the lots of the present complaint, until further orders from this Court.” 54 (Emphasis supplied.)
The foregoing order is not addressed to the Caloocan City RTC. Neither can it be inferred from the language
thereof that the Quezon City RTC intended to enjoin the Caloocan City RTC from further proceeding with the
Recovery case. The order merely mentions the Caloocan City MeTCs. Nothing more. But more importantly, the
Quezon City RTC could not have validly enjoined the Caloocan City RTC without violating the doctrine that no
court has the power to interfere by injunction with the judgments or decrees of a court of concurrent or
coordinate jurisdiction.55 Spouses Ching v. Court of Appeals56 justifies this rule in this manner:
“Beginning with the case of Orais v. Escaño, down to the subsequent cases of Nuñez v. Low, Cabigao v. del
Rosario, Hubahib v. Insular Drug Co., Inc., National Power Corp. v. De Veyra, Luciano v. Provincial Governor, De
Leon v. Hon. Judge Salvador, Cojuangco v. Villegas, Darwin v. Tokonaga, we laid down the long standing
doctrine 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. A contrary rule would obviously lead to confusion and seriously hamper the
administration of justice.” (Emphasis supplied.)
In Compania General de Tabacos de Filipinas v. Court of Appeals,57 two civil cases with identical causes of action
were filed in different RTCs, one ahead of the other. The second RTC which acquired jurisdiction over the case
issued a preliminary injunction enjoining the proceedings in the RTC which first acquired jurisdiction of the
case. Ruling against the injunction issued by the RTC, this Court stressed:
“Hence, nothing can be clearer than that Judge Rapatalo had indeed issued the questioned writ of preliminary
injunction with grave abuse of discretion amounting to excess or lack of jurisdiction for the blatant disregard
of the basic precept that no court has the power to interfere by injunction with the judgments or orders
of a co-equal and coordinate court of concurrent jurisdiction having the power to grant the relief sought
by injunction.
This Court explained in Parco vs. Court of Appeals that:
x x x Jurisdiction is vested in the court not in any particular branch or judge, and as a corollary rule, the various
branches of the Court of First Instance of a judicial district are a coordinate and co-equal courts one branch
stands on the same level as the other. Undue interference by one on the proceedings and processes of another
is prohibited by law. In the language of this Court, the various branches of the Court of First Instance of a
province or city, having as they have the same or equal authority and exercising as they do concurrent and
coordinate jurisdiction should not, cannot, and are not permitted to interfere with their respective cases, much
less with their orders or judgments x x x.
Needless to say, adherence to a different rule would sow confusion and wreak havoc on the orderly
administration of justice, and in the ensuing melee, hapless litigants will be at a loss as to where to appear and
plead their cause.”58 (Emphasis supplied.)
8
While there are recognized exceptions to the foregoing rule, other than citing said cases, 59 petitioners did not
explain the applicability of said exceptional cases to their petition.Bereft of merit too is petitioners’ argument
that the Caloocan City MeTC cannot disregard the injunction order of the Quezon City RTC hearing the
Annulment/Reversion case. The established rule is that a pending civil action for ownership such as annulment
of title shall not ipso facto suspend an ejectment proceeding.60 The Court explained that the rationale for this is
that in an ejectment case, the issue is possession, while in an annulment case the issue is ownership. 61 In fact, an
ejectment case can be tried apart from an annulment case. 62 Although there is an exception to this rule,
petitioners failed to justify that this case falls within said exception. The words of the Court on this matter are
instructive:
“In the absence of a concrete showing of compelling equitable reasons at least comparable and under
circumstances analogous to Amagan, we cannot override the established rule that a pending civil action for
ownership shall not ipso facto suspend an ejectment proceeding. Additionally, to allow a suspension on
the basis of the reasons the petitioners presented in this case would create the dangerous precedent of
allowing an ejectment suit to be suspended by an action filed in another court by parties who are not involved
or affected by the ejectment suit.”63 (Emphases supplied.)
Hence, petitioners’ posture that the Ejectment cases should be suspended due to the pendency of the
Annulment/Reversion case is not meritorious.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED. The Temporary Restraining
Order dated October 25, 2000 issued by this Court is LIFTED.
SO ORDERED.
Corona (C.J., Chairperson), Bersamin, ** Del Castillo and Perez, JJ., concur.

Petition dismissed.
Notes.—There is no statutory or jurisprudential basis for according to the Supreme Court original and
exclusive jurisdiction over declaratory relief which advances only questions of law. (Ortega vs. Quezon City
Government, 469 SCRA 388 [2005])
A petition for declaratory relief is not among the petitions within the original jurisdiction of the Supreme Court.
(Mangahas vs. Paredes, 515 SCRA 709 [2007])
2. G.R. No. 175064. September 18, 2009.*

PROVINCE OF CAMARINES SUR, represented by Governor Luis Raymund F. Villafuerte, Jr.,
petitioner, vs. HONORABLE COURT OF APPEALS; and CITY OF NAGA, represented by Mayor Jesse M.
Robredo, respondents.
Questions of Law; A question of law arises when there is doubt as to what the law is on a certain state of facts.—A
perusal of the petition referred to the Court of Appeals lays bare the fact that the same was undoubtedly a
Petition for Review on Certiorari under Rule 45 of the Rules of Court. Not only does the title of the Petition
indicate it as such, but a close reading of the issues and allegations set forth therein also discloses that it
involved pure questions of law. A question of law arises when there is doubt as to what the law is on a certain
state of facts. For a question to be one of law, the same must not involve an examination of the probative value
of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. The Court of Appeals, thus, could not fault Camarines Sur
for failing to allege, much less prove, grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the RTC when such is not required for a Petition for Review on Certiorari.
Certiorari; The doctrine that certiorari cannot be resorted to as a substitute for the lost remedy of appeals applies
only when a party actually files a petition for certiorari, under Rule 65 in lieu of a petition for review under rule
45, since the latter remedy was already lost through the fault of the petitioning party.—The doctrine
that certiorari cannot be resorted to as a substitute for the lost remedy of appeal applies only when a party
actually files a Petition for Certiorari under Rule 65 in lieu of a Petition for Review under Rule 45, since the
9
latter remedy was already lost through the fault of the petitioning party. In the instant case, Camarines Sur
actually filed a Petition for Review under Rule 45; the Court of Appeals only mistook the same for a Petition
for Certiorari under Rule 65. Be that as it may, the Court still finds that the questions of law invoked by
Camarines Sur must be resolved against it.
Declaratory Relief; Declaratory relief is defined as an action by any person interested in a deed, will, contract or
other written instrument, executive order or resolution, to determine any question of construction or validity
arising from the instrument, executive order or regulation or statute; and for a declaration of his rights and duties
thereunder.—Declaratory relief is defined as an action by any person interested in a deed, will, contract or
other written instrument, executive order or resolution, to determine any question of construction or validity
arising from the instrument, executive order or regulation, or statute; and for a declaration of his rights and
duties thereunder. The only issue that may be raised in such a petition is the question of construction or
validity of provisions in an instrument or statute. The requisites of an action for declaratory relief are: (1) there
must be a justiciable controversy between persons whose interests are adverse; (2) the party seeking the relief
has a legal interest in the controversy; and (3) the issue is ripe for judicial determination. The Court rules that
the City of Naga properly resorted to the filing of an action for declaratory relief.
Property; As regards properties for public use, the principle is the same: property for public use can be used by
everybody, even by strangers or aliens, in accordance with its nature; but nobody can exercise over it the rights of
a private owner.—As regards properties for public use, the principle is the same: property for public use can be
used by everybody, even by strangers or aliens, in accordance with its nature; but nobody can exercise over it
the rights of a private owner.
Public Land; The Court recognized that a public plaza is a pubic land belonging to, and subject to the
administration and control of, the Republic of the Philippines.—In Municipality of San Carlos, Pangasinan v. Morfe,
5 SCRA 625 (1962) the Court recognized that a public plaza is a public land belonging to, and, subject to the
administration and control of, the Republic of the Philippines. Absent an express grant by the Spanish
Government or that of the Philippines, the local government unit where the plaza was situated, which in that
case was the Municipality of San Carlos, had no right to claim it as its patrimonial property. The Court further
held that whatever right of administration the Municipality of San Carlos may have exercised over said plaza
was not proprietary, but governmental in nature. The same did not exclude the national government. On the
contrary, it was possessed on behalf and in representation thereof, the municipal government of San Carlos
being—in the performance of its political functions—a mere agency of the Republic, acting for its benefit.
Tax Declarations; Well-settled is the rule that a tax declaration is not conclusive evidence of ownership or of the
right to possess land, when not supported by any other evidence.—Camarines Sur cannot claim that Plaza Rizal is
part of its patrimonial property. The basis for the claim of ownership of Camarines Sur, i.e., the tax declaration
covering Plaza Rizal in the name of the province, hardly convinces this Court. Well-settled is the rule that a tax
declaration is not conclusive evidence of ownership or of the right to possess land, when not supported by any
other evidence. The same is merely an indicia of a claim of ownership. In the same manner, the Certification
dated 14 June 1996 issued by the Department of Environment and Natural Resources–Community
Environment and Natural Resources Office (DENR-CENRO) in favor of Camarines Sur, merely stating that the
parcel of land described therein, purportedly Plaza Rizal, was being claimed solely by Camarines Sur, hardly
constitutes categorical proof of the alleged ownership of the said property by the province.
Public Land; Being a property for public use within the territorial jurisdiction of the City of Naga, Plaza Rizal
should be under the administration control and supervision of the sad city. —Being a property for public use
within the territorial jurisdiction of the City of Naga, Plaza Rizal should be under the administrative control and
supervision of the said city.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The Provincial Legal Officer for petitioner.
The City Legal Officer for respondent.
CHICO-NAZARIO, J.:
10
This Petition for Certiorari1 under Rule 65 of the Rules of Court seeks to annul and set aside the Decision 2 dated
28 June 2004 and the Resolution 3 dated 11 August 2006 of the Court of Appeals in CA-G.R. SP No. 56243. The
assailed Decision of the appellate court denied due course the Petition for Review on Certiorari4 filed by
petitioner Province of Camarines Sur (Camarines Sur), while the assailed Resolution denied the Motion for
Reconsideration of the earlier Decision.
The property subject of the instant case is a parcel of land, known as Plaza Rizal, situated within the territory of
herein respondent City of Naga and with an aggregate area of 4,244 square meters, more or less. Plaza Rizal is
located in front of the old provincial capitol building, where the Provincial Government of Camarines Sur used
to have its seat, at the time when the then Municipality of Naga was still the provincial capital.
On 18 June 1948, Republic Act No. 305 5 took effect and, by virtue thereof, the Municipality of Naga was
converted into the City of Naga. Subsequently, on 16 June 1955, Republic Act No. 1336 6 was approved,
transferring the site of the provincial capitol of Camarines Sur from the City of Naga to the barrio of Palestina,
Municipality of Pili.7 The Municipality of Pili was also named as the new provincial capital. 8
On 13 January 1997, the City of Naga filed a Complaint 9 for Declaratory Relief and/or Quieting of Title against
Camarines Sur before the Regional Trial Court (RTC) of the City of Naga, Branch 61, which was docketed as Civil
Case No. 97-3691.
The City of Naga alleged that, for a considerable length of time, Camarines Sur possessed and claimed
ownership of Plaza Rizal because of a tax declaration over the said property in the name of the province. As a
result, Camarines Sur had long exercised administrative control and management of Plaza Rizal, to the
exclusion of the City of Naga. The City of Naga could not introduce improvements on Plaza Rizal, and its
constituents could not use the property without securing a permit from the proper officials of Camarines Sur.
The situation had created a conflict of interest between the parties herein and had generated animosities
among their respective officials.
The City of Naga stressed that it did not intend to acquire ownership of Plaza Rizal. Being a property of the
public domain, Plaza Rizal could not be claimed by any subdivision of the state, as it belonged to the public in
general. Instead, the City of Naga sought a declaration that the administrative control and management of Plaza
Rizal should be vested in it, given that the said property is situated within its territorial jurisdiction. The City of
Naga invoked Section 2, Article I of Republic Act No. 305, the Charter of the City of Naga, which states:
“SEC. 2. Territory of the City of Naga.—The city of Naga which is hereby created, shall comprise the present
territorial jurisdiction of the municipality of Naga, in the Province of Camarines Sur.”
On 21 February 1997, Camarines Sur filed an Answer with Motion to Dismiss. 10 It argued that it was the legal
and absolute owner of Plaza Rizal and, therefore, had the sole right to maintain, manage, control, and supervise
the said property. Camarines Sur asserted that the City of Naga was without any cause of action because the
Complaint lacked any legal or factual basis. Allegedly, Section 2 of Republic Act No. 305 merely defined the
territorial jurisdiction of the City of Naga and did not vest any color of right to the latter to manage and control
any property owned by Camarines Sur. Furthermore, the remedy of Declaratory Relief was inappropriate
because there was no justiciable controversy, given that the City of Naga did not intend to acquire ownership of
Plaza Rizal; and Camarines Sur, being the owner of Plaza Rizal, had the right to the management, maintenance,
control, and supervision thereof. There was likewise no actual or impending controversy, since Plaza Rizal had
been under the control and supervision of Camarines Sur since time immemorial. The remedy of Quieting of
Title was inappropriate, as the City of Naga had no legal or equitable title to or interest in Plaza Rizal that
needed protection. Lastly, Camarines Sur stated that Plaza Rizal was not a property of public domain, but a
property owned by Camarines Sur which was devoted to public use.
In an Order11 dated 28 May 1997, the RTC denied the Motion to Dismiss of Camarines Sur, since the grounds
cited therein were legal issues that were evidentiary in nature and could only be threshed out in a full-blown
trial.
On 10 March 1999, the RTC rendered a Decision 12 in favor of the City of Naga, the pertinent portions of which
provide:
“As understood in the Law of Nations, the right of jurisdiction accorded a sovereign state consists of first, its
personal jurisdiction, which in a sense is its authority over its nationals who are in a foreign country
and second, territorial jurisdiction, which is its authority over persons and properties within the territorial
11
boundaries
x x x.
“The territorial jurisdiction of a state is based on the right of domain. The domain of a State includes
normally only the expanse of its territory over which it exercises the full rights of sovereignty.” x x x
“Sovereignty, in turn, refers to the supreme power of a State to command and enforce obedience; it is the
power, to which, legally speaking all interest[s] are practically subject and all wills subordinate.” x x x
Indeed, from the point of view of national law, it is in a sense absolute control over a definite territory. x
x x.
In summation therefore from the above-quoted citations, when territorial jurisdiction is being referred to, it
means the entire territory over which a State (or any local government unit) can exercise absolute control.
In the instant case, [Camarines Sur] thru (sic) counsel admitted during the pre-trial conference that indeed, the
property in question, which is Plaza Rizal, is within the territorial jurisdiction of the [City of Naga]. Thus,
applying the above-quoted principles concerning territorial jurisdiction, [Camarines Sur] is barred by its
express admission from claiming that it is the Province of Camarines Sur who has the right to administratively
control, manage and supervise said Plaza Rizal.
[The contention of Camarines Sur] that [Section 2, Article I] of [Republic Act No.] 305 merely defines [the]
territory of the City of Naga has no strong leg to stand on.
The unequivocal and specific import of said provision provides the extent into which the City of Naga can
exercise its powers and functions over all its constituents and properties found within its territory. Further,
Art. II, Sec. 9, par. b of [Republic Act No.] 305 provides one of the general powers and duties of the City Mayor,
to wit:
“To safeguard all the lands, buildings, records, moneys, credits and other property and rights of the
city, and subject to the [provisions] of this Charter, have control of all its property.”
Considering that the Province [of Camarines Sur] expressly acknowledged that [Section 2, Article I] of [Republic
Act No.] 305 merely defines the territory of [the City of Naga], then it is safe to assume that it also accept that
the City of Naga as represented by the City Mayor exercises control of all the properties of the City, for
properties as used in the above-quoted provision refers to lands, buildings, records, moneys[,] credits and
other property and rights of the city. x x x Since [Section 2, Article I] of [Republic Act No.] 305 defines the
territory of [the City of] Naga and Plaza Rizal is within its territorial jurisdiction, ergo, it is the City [of Naga]
who has the right of administrative control and management of Plaza Rizal.”
The RTC thus decreed:

“WHEREFORE, premises considered, [Section 2, Article I] of [Republic Act No.] 305 is hereby interpreted and
declared in this Court to mean that the administrative control and management of Plaza Rizal is within the City
of Naga and not with the Province of Camarines Sur.”13
Camarines Sur received a copy of the foregoing Decision on 16 March 1999, and filed a Motion for
Reconsideration14 of the same on 30 March 1999. The RTC denied the Motion for Reconsideration of Camarines
Sur in an Order15 dated 1 September 1999. The RTC reiterated that the enactment of Republic Act No. 305,
which converted the Municipality of Naga into an independent city, had ipso facto ceased the power of
administrative control and supervision exercised by Camarines Sur over the property within the territorial
jurisdiction of the Municipality of Naga and vested into the City of Naga. The administrative control and
supervision exercised by Camarines Sur over Plaza Rizal, since the time of the creation of the City of Naga and
up to the time of the filing of the instant case, was by mere tolerance on the part of the said city. Furthermore,
the claim of ownership of Plaza Rizal by Camarines Sur was wanting, given that there was no express legislative
action therefor. Public streets, squares, plazas and the like, are not the private property of either the City of
Naga or Camarines Sur.
Camarines Sur received a copy of the RTC Order dated 1 September 1999, denying its Motion for
Reconsideration, on 3 September 1999. On 8 September 1999, Camarines Sur filed with the RTC a Notice of
Appeal.16 In an Order17 dated 13 September 1999, the RTC disapproved the Notice of Appeal for non-
compliance with the material data rule, which requires the statement of such data as will show that the appeal
was perfected on time.
12
On 13 September 1999, Camarines Sur filed a second Notice of Appeal, 18 which was again disapproved by the
RTC in an Order19 dated 14 September 1999 for having been filed outside of the reglementary period. The RTC
noted that Camarines Sur received a copy of the RTC Decision dated 10 March 1999 on 16 March 1999. It thus
had a period of 15 days therefrom to file a motion for reconsideration or appeal. Camarines Sur filed its Motion
for Reconsideration on 30 March 1999 or on the fourteenth day of the reglementary period. Said Motion for
Reconsideration was denied by the RTC in an Order dated 1 September 1999, which was received by Camarines
Sur on 3 September 1999. Thereafter, Camarines Sur only had two days left to file its Notice of Appeal, but the
province filed said Notice on 8 September 1999, or five days after receipt of the Order denying its Motion for
Reconsideration.20
On 18 October 1999, Camarines Sur filed before the Court a Petition for Review on Certiorari,21 which was
docketed as G.R. No. 139838. Camarines Sur questioned in its Petition the act of the RTC of giving due course to
the Complaint for Declaratory Relief and/or Quieting of Title and the interpretation of said trial court of Section
2, Article 1 of Republic Act No. 305.
In a Resolution22 dated 17 November 1999, the Court referred the Petition for Review filed by Camarines Sur to
the Court of Appeals for appropriate action, holding that the latter had jurisdiction concurrent with that of the
former over the case, and no special and important reason was cited for the Court to take cognizance of the case
in the first instance. Before the appellate court, the Petition for Review of Camarines Sur was docketed as CA-
G.R. SP No. 56243.
On 28 June 2004, the Court of Appeals promulgated the assailed Decision denying the Petition in CA-G.R. SP No.
56243. It pronounced:
“We deny the petition.
Where an appeal would have been an adequate remedy but it was lost through petitioner’s inexcusable
negligence, certiorari is not in order. x x x Certiorari cannot be resorted to as a substitute for the lost remedy of
appeal x x x. It is notable that Camarines Sur took this recourse of petition for certiorari only after it twice
attempted to avail of appeal, but both of which were DISAPPROVED. Because it made these attempts to appeal,
it goes without saying that Camarines Sur believed that the errors it claimed were committed by the court a
quo were correctible only by appeal and not by certiorari. Thus, when it subsequently filed the instant petition,
it was availing of it as a disallowed substitute remedy for a lost appeal. Time and again it has been ruled that
[the] remedies of appeal and certiorari are mutually exclusive and not alternative or successive
x x x.
But disregarding for the nonce the lost appeal and its disallowed substitution by certiorari, still the petition
would fail because of the absence of grave abuse of discretion. The court a quo had declared that:
The existence of the Municipality of Naga was governed by the provisions of Chapter 57 of the Old
Revised Administrative Code, otherwise known as the Regular Municipal Law. A law under which the
municipalities in regularly organized provinces like the province of Camarines Sur may be organized. As
a consequence of its creation, the Municipality of Naga acquired title to all the property, powers, rights
and obligations falling within its territorial limits (62 C.J.S. 193). Being a political subdivision created
within an organized province, the administration of the higher political subdivision, the province of
Camarines Sur x x x has stood as trustee of all the properties belonging to the State within its territorial
limits. This is the legal and logical reason why[,] before the conversion of the municipality of Naga to a
City[,] [Camarines Sur] was exercising control and supervision over Plaza Rizal. x x x
This finds support in one of the provisions of the old Administrative Code of the Philippine Islands where it was
provided that:
SEC. 2168. Beginning of the corporate existence of new municipality.—x x x.
When a township or other local territorial division is converted or fused into a municipality all
property rights vested in the original territorial organization shall become vested in the government of
the municipality. x x x.
When Naga was converted from a municipality into a city, all properties under its territorial jurisdiction
including Plaza Rizal was vested upon it.”23 (Emphasis ours.)
The fallo of the Court of Appeals decision reads:
“WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.”24
13
Camarines Sur sought a reconsideration25 of the aforequoted Decision, but the Court of Appeals denied the
same in the assailed Resolution dated 11 August 2006.
Camarines Sur, thus, filed the instant Petition, raising the sole issue of:
“WHETHER OR NOT THE HONORABLE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT TREATED THE [PETITION FOR REVIEW UNDER
RULE 45 FILED BY CAMARINES SUR] AS ONE FOR CERTIORARI UNDER RULE 65 THEREBY DENYING DUE
COURSE AND DISMISSING THE PETITION AND EVEN THE MOTION FOR RECONSIDERATION ON THE GROUND
THAT THE PETITION WAS AVAILED OF AS A SUBSTITUTE FOR THE LOST APPEAL AND FOR ABSENCE OF
GRAVE ABUSE OF DISCRETION.”
Camarines Sur argues that the Court of Appeals went beyond its authority and gravely abused its discretion
when it treated and resolved the Petition for Review on Certiorari under Rule 45 of the Rules of Court as a
Petition for Certiorari under Rule 65, which must allege grave abuse of discretion on the part of the RTC, and
which cannot be made a substitute for a lost appeal. Camarines Sur insists that what it filed was a Petition
under Rule 45, which raised all reversible errors committed by the RTC and presented all questions of laws.
Moreover, as the Court of Appeals upheld the Decision dated 16 March 1999 of the RTC based on a wrong
premise and application of legal principles, Camarines Sur pleads for this Court to decide on the questions of
law raised in the dismissed Petition.
First, Camarines Sur avers that the filing of the Complaint for Declaratory Relief and/or Quieting of Title was
improper as it was hinged on a pretended controversy. Essentially, the complaint of the City of Naga did not
show “an active antagonistic assertion of a legal right, on one side, and a denial thereof, on the other.” Such
action sought merely to create an unwarranted inference not of a clear right, but of a theoretical implication
that a property, even if not legally owned or possessed by a city, could be administratively controlled and
managed by it on the sheer expediency of being located within its territorial jurisdiction. Thus, there was no
actual controversy between Camarines Sur and the City of Naga, considering that Camarines Sur had always
managed and administratively controlled the same, the projects installed thereon and the programs and
activities held therein, without any question from the previous Mayors of the City of Naga or from any national
official, department, bureau or agency.
Second, Camarines Sur contends that since Plaza Rizal is admittedly located within the territorial jurisdiction of
the City of Naga, the question of law is whether the management and administrative control of said land should
be vested in the City of Naga, simply because of Article 1, Section 2 of the Charter of the City of Naga. Naga
never possessed administrative control and management of Plaza Rizal when it was still a municipality, and it
cannot be deemed to have been vested with the same, just because it was converted into the City of Naga—
especially when the City admits it does not intend to acquire ownership of Plaza Rizal.
Petition for Review v. Petition for Certiorari
At the outset, the Court holds that the Court of Appeals indeed committed grave abuse of discretion amounting
to lack or excess of jurisdiction in erroneously and inexplicably resolving the Petition, which was initially filed
by Camarines Sur before the Court, but later referred to the appellate court, as if the same were a Petition
for Certiorari under Rule 65 of the Rules of Court. This mistake is evident in the preliminary statement of the
case, as found in the first paragraph of the Decision dated 28 June 2004, where the Court of Appeals stated that:
“The petitioner Province of Camarines Sur (or Camarines Sur for brevity), represented by Gov. Luis Villafuerte,
asks through this Petition for Certiorari that the Decision of Branch 61 of the Regional Trial Court stationed at
Naga City x x x be reversed and set aside x x x.”26 (Emphasis ours.)
For a Petition for Certiorari under Rule 65 of the Rules of Court to prosper, the following requisites must be
present:
(1) the writ is directed against a tribunal, a board or an officer exercising judicial or quasi-judicial functions; (2)
such tribunal, board or officer has acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate
remedy in the ordinary course of law.27
14
There is grave abuse of discretion “when there is a capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, such as where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, and it must be so patent and gross so as to amount 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.” 28
On the other hand, Rule 45 of the Rules of Court pertains to a Petition for Review on Certiorari, whereby “a
party desiring to appeal by certiorari from a judgment, final order or resolution of the x x x the Regional Trial
Court x x x, may file with the Supreme Court a verified petition for review on certiorari. The petition may
include an application for a writ of preliminary injunction or other provisional remedies and shall raise only
questions of law, which must be distinctly set forth.” 29
A perusal of the petition referred to the Court of Appeals lays bare the fact that the same was undoubtedly a
Petition for Review on Certiorari under Rule 45 of the Rules of Court. Not only does the title of the Petition
indicate it as such, but a close reading of the issues and allegations set forth therein also discloses that it
involved pure questions of law. A question of law arises when there is doubt as to what the law is on a certain
state of facts. For a question to be one of law, the same must not involve an examination of the probative value
of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. 30 The Court of Appeals, thus, could not fault Camarines Sur
for failing to allege, much less prove, grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the RTC when such is not required for a Petition for Review on Certiorari.
Likewise, the doctrine that certiorari cannot be resorted to as a substitute for the lost remedy of appeal applies
only when a party actually files a Petition for Certiorari under Rule 65 in lieu of a Petition for Review under
Rule 45, since the latter remedy was already lost through the fault of the petitioning party. In the instant case,
Camarines Sur actually filed a Petition for Review under Rule 45; the Court of Appeals only mistook the same
for a Petition for Certiorari under Rule 65.
Be that as it may, the Court still finds that the questions of law invoked by Camarines Sur must be resolved
against it.
Declaratory Relief
Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written
instrument, executive order or resolution, to determine any question of construction or validity arising from
the instrument, executive order or regulation, or statute; and for a declaration of his rights and duties
thereunder.31 The only issue that may be raised in such a petition is the question of construction or validity of
provisions in an instrument or statute.32
The requisites of an action for declaratory relief are: (1) there must be a justiciable controversy between
persons whose interests are adverse; (2) the party seeking the relief has a legal interest in the controversy; and
(3) the issue is ripe for judicial determination. 33
The Court rules that the City of Naga properly resorted to the filing of an action for declaratory relief.
In the instant case, the controversy concerns the construction of the provisions of Republic Act No. 305 or the
Charter of the City of Naga. Specifically, the City of Naga seeks an interpretation of Section 2, Article I of its
Charter, as well as a declaration of the rights of the parties to this case thereunder.
To recall, Section 2, Article I of Republic Act No. 305 defines the territory of the City of Naga, providing that the
City shall comprise the present territorial jurisdiction of the Municipality of Naga. By virtue of this provision,
the City of Naga prays that it be granted the right to administratively control and supervise Plaza Rizal, which is
undisputedly within the territorial jurisdiction of the City.
Clearly, the interests of the City of Naga and Camarines Sur in this case are adverse. The assertion by the City of
Naga of a superior right to the administrative control and management of Plaza Rizal, because said property of
the public domain is within its territorial jurisdiction, is clearly antagonistic to and inconsistent with the
insistence of Camarines Sur. The latter asserted in its Complaint for Declaratory Relief and/or Quieting of Title
15
that it should maintain administrative control and management of Plaza Rizal having continuously possessed
the same under a claim of ownership, even after the conversion of the Municipality of Naga into an independent
component city. The City of Naga further asserted that as a result of the possession by Camarines Sur, the City
of Naga could not introduce improvements on Plaza Rizal; its constituents were denied adequate use of said
property, since Camarines Sur required that the latter’s permission must first be sought for the use of the same;
and it was still Camarines Sur that was able to continuously use Plaza Rizal for its own programs and projects.
The City of Naga undoubtedly has a legal interest in the controversy, given that Plaza Rizal is undisputedly
within its territorial jurisdiction. Lastly, the issue is ripe for judicial determination in that, in view of the
conflicting interests of the parties to this case, litigation is inevitable, and there is no adequate relief available in
any other form or proceeding.34
Administrative control and supervision of Plaza Rizal

Republic Act No. 305 took effect on 18 June 1948. At that time, the Spanish Civil Code of 1889 was still in effect
in the Philippines. Properties of local government units under the Spanish Civil Code were limited to properties
of public use and patrimonial property.35 Article 344 of the Spanish Civil Code provides:
“Art. 344. Property of public use, in provinces and in towns, comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public works of general service paid for by
such towns or provinces.
All other property possessed by either is patrimonial and shall be governed by the provisions of this code,
unless otherwise provided by special laws.”
Under the 1950 Civil Code, the properties of local government units are set forth in Article 424 thereof, which
reads:
“Art. 424. Property for public use, in the provinces, cities, and municipalities, consist of the provincial roads,
city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public
service paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws.”
Manifestly, the definition of what constitutes the properties for public use and patrimonial properties of local
government units has practically remained unchanged.
As regards properties for public use, the principle is the same: property for public use can be used by
everybody, even by strangers or aliens, in accordance with its nature; but nobody can exercise over it the rights
of a private owner.36
It is, therefore, vital to the resolution of this case that the exact nature of Plaza Rizal be ascertained. In this
regard, the description thereof by Camarines Sur is enlightening, viz.:
“The land subject of the Action filed by the City of Naga against the Province of Camarines Sur was a garden that
served as the front lawn of the old capitol site in Naga. A monument in honor of our national hero was built by
the Provincial Government of Camarines Sur sometime in 1911 on a portion of subject land. Within the same
land, a structure as a memorial for Ninoy Aquino was also constructed by the Provincial Government of
Camarines Sur; and nearby, a stage in honor of President Manuel Quezon was also built. In the post-martial
[law] period there was inscribed in the wall of the said garden the following words: “Freedom Park of
Camarines Sur.”
A historical marker was erected in the said place which attests to the long standing ownership, possession and
management by the Province of Camarines Sur of said place.
All the improvements in said place, such as the construction of monuments and memorial structures, the
concreting of its flooring and the walkways, planting of trees and ornamental plants, the construction of the
skating or skateboard ring, a public TV facility, an internet café, a gazebo where people from all walks of life
discuss religion, political, social and economic issues, a portable stage where cultural shows are held, a giant
chessboard on the tiled ground with large pieces for playing, where portable booths are installed for the trade
16
fairs during fiesta or Christmas season, where year-round lights are wrapped around the trees, all of which
have been constructed, operated and maintained by the Province of Camarines Sur (not by Naga City) where
millions of pesos had been spent for construction and millions of pesos are budgeted annually for maintenance,
operating expenses and personnel services by the Province of Camarines Sur.” 37
Unmistakable from the above description is that, at present, Plaza Rizal partakes of the nature of a public park
or promenade. As such, Plaza Rizal is classified as a property for public use.
In Municipality of San Carlos, Pangasinan v. Morfe,38 the Court recognized that a public plaza is a public land
belonging to, and, subject to the administration and control of, the Republic of the Philippines. Absent an
express grant by the Spanish Government or that of the Philippines, the local government unit where the plaza
was situated, which in that case was the Municipality of San Carlos, had no right to claim it as its patrimonial
property. The Court further held that whatever right of administration the Municipality of San Carlos may have
exercised over said plaza was not proprietary, but governmental in nature. The same did not exclude the
national government. On the contrary, it was possessed on behalf and in representation thereof, the municipal
government of San Carlos being—in the performance of its political functions—a mere agency of the Republic,
acting for its benefit.
Applying the above pronouncements to the instant case, Camarines Sur had the right to administer and possess
Plaza Rizal prior to the conversion of the then Municipality of Naga into the independent City of Naga, as the
plaza was then part of the territorial jurisdiction of the said province. Said right of administration by Camarines
Sur was governmental in nature, and its possession was on behalf of and in representation of the Republic of
the Philippines, in the performance of its political functions.
Thereafter, by virtue of the enactment of Republic Act No. 305 and as specified in Section 2, Article I thereof, the
City of Naga was created out of the territory of the old Municipality of Naga. Plaza Rizal, which was located in
the said municipality, thereby ceased to be part of the territorial jurisdiction of Camarines Sur and was, instead
transferred to the territorial jurisdiction of the City of Naga. Theretofore, the local government unit that is the
proper agent of the Republic of the Philippines that should administer and possess Plaza Rizal is the City of
Naga.
Camarines Sur cannot claim that Plaza Rizal is part of its patrimonial property. The basis for the claim of
ownership of Camarines Sur, i.e., the tax declaration39 covering Plaza Rizal in the name of the province, hardly
convinces this Court. Well-settled is the rule that a tax declaration is not conclusive evidence of ownership or of
the right to possess land, when not supported by any other evidence. The same is merely an indicia of a claim of
ownership.40 In the same manner, the Certification41 dated 14 June 1996 issued by the Department of
Environment and Natural Resources–Community Environment and Natural Resources Office (DENR-CENRO) in
favor of Camarines Sur, merely stating that the parcel of land described therein, purportedly Plaza Rizal, was
being claimed solely by Camarines Sur, hardly constitutes categorical proof of the alleged ownership of the said
property by the province.
Thus, being a property for public use within the territorial jurisdiction of the City of Naga, Plaza Rizal should be
under the administrative control and supervision of the said city.
WHEREFORE, premises considered, the Petition for Certiorari under Rule 65 of the Rules of Court is hereby
DISMISSED. The administrative control and supervision of Plaza Rizal is hereby vested in the City of Naga. Costs
against petitioner.
SO ORDERED.
Ynares-Santiago (Chairperson), Velasco, Jr., Nachura and Peralta, JJ., concur.
Petition dismissed.
Note.—Where it appears that the evidence of ownership and possession are so significant and convincing, the
government is not necessarily relieved of its duty from presenting proofs to show that the parcel of land sought
to be registered is part of the public domain to enable [the courts] to evaluate the evidence of both sides.
(Republic vs. Barandiaran, 538 SCRA 705 [2007])
17
3. G.R. No. 150806. January 28, 2008.*

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners, vs. BATHALA MARKETING INDUSTRIES, INC.,
respondent.
Actions; Declaratory Relief; Words and Phrases; “Declaratory Relief,” Defined; The only issue that may be raised
in a petition for declaratory relief is the question of construction or validity of provisions in an instrument or
statute—corollary is the general rule that such an action must be justified, as no other adequate relief or remedy
is available under the circumstances.—Declaratory relief is defined as an action by any person interested in a
deed, will, contract or other written instrument, executive order or resolution, to determine any question of
construction or validity arising from the instrument, executive order or regulation, or statute, and for a
declaration of his rights and duties thereunder. The only issue that may be raised in such a petition is the
question of construction or validity of provisions in an instrument or statute. Corollary is the general rule that
such an action must be justified, as no other adequate relief or remedy is available under the circumstances.
Same; Same; Requisites.—Decisional law enumerates the requisites of an action for declaratory relief, as

follows: 1) the subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; 2) the terms of said documents and the validity thereof are
doubtful and require judicial construction; 3) there must have been no breach of the documents in question; 4)
there must be an actual justiciable controversy or the “ripening seeds” of one between persons whose interests
are adverse; 5) the issue must be ripe for judicial determination; and 6) adequate relief is not available through
other means or other forms of action or proceeding.
Same; Same; When Dismissible; A petition for declaratory relief may not be dismissed despite the filing of an
action for rescission, ejectment and damages where the trial court had not yet resolved the rescission/ejectment
case during the pendency of the declaratory relief petition.—It is true that in Panganiban v. Pilipinas Shell
Petroleum Corporation, 395 SCRA 624 (2003), we held that the petition for declaratory relief should be
dismissed in view of the pendency of a separate action for unlawful detainer. However, we cannot apply the
same ruling to the instant case. In Panganiban, the unlawful detainer case had already been resolved by the
trial court before the dismissal of the declaratory relief case; and it was petitioner in that case who insisted that
the action for declaratory relief be preferred over the action for unlawful detainer. Conversely, in the case at
bench, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory
relief petition. In fact, the trial court, where the rescission case was on appeal, itself initiated the suspension of
the proceedings pending the resolution of the action for declaratory relief. We are not unmindful of the
doctrine enunciated in Teodoro, Jr. v. Mirasol, 99 Phil. 150 (1956), where the declaratory relief action was
dismissed because the issue therein could be threshed out in the unlawful detainer suit. Yet, again, in that case,
there was already a breach of contract at the time of the filing of the declaratory relief petition. This dissimilar
factual milieu proscribes the Court from applying Teodoro to the instant case. Given all these attendant
circumstances, the Court is disposed to entertain the instant declaratory relief action instead of dismissing it,
notwithstanding the pendency of the ejectment/rescission case before the trial court. The resolution of the
present petition would write finis to the parties’ dispute, as it would settle once and for all the question of the
proper interpretation of the two contractual stipulations subject of this controversy.
Contracts; Interpretation of Contracts; Essential to contract construction is the ascertainment of the intention of

the contracting parties, and such determination must take into account the contemporaneous and subsequent acts
of the parties.—Essential to contract construction is the ascertainment of the intention of the contracting
parties, and such determination must take into account the contemporaneous and subsequent acts of the
parties. This intention, once ascertained, is deemed an integral part of the contract.
Obligations and Contracts; Extraordinary Inflation or Deflation; Words and Phrases; Inflation,

Defined; Extraordinary Inflation, Defined.—Inflation has been defined as the sharp increase of money or credit,
or both, without a corresponding increase in business transaction. There is inflation when there is an increase
in the volume of money and credit relative to available goods, resulting in a substantial and continuing rise in
the general price level. In a number of cases, this Court had provided a discourse on what constitutes
extraordinary inflation, thus: [E]xtraordinary inflation exists when there is a decrease or increase in the
purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value
of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the establishment of the obligation.
18
Same; Same; Judicial Notice; The erosion of the value of the Philippine peso in the past three or four decades,
starting in the midsixties, is characteristic of most currencies—while the Supreme Court may take judicial notice
of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the
peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code;
Absent an official pronouncement or declaration by competent authorities of the existence of extraordinary
inflation during a given period, the effects of extraordinary inflation are not to be applied. —The factual
circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as
would justify the application of Article 1250 of the Civil Code. We would like to stress that the erosion of the
value of the Philippine peso in the past three or four decades, starting in the mid-sixties, is characteristic of
most currencies. And while the Court may take judicial notice of the decline in the purchasing power of the
Philippine currency in that span of time, such downward trend of the peso cannot be considered as the
extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official
pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a
given period, the effects of extraordinary inflation are not to be applied.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Singson, Valdez and Associates for petitioners.
Redentor S. Roque for respondent.
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Decision 1 of the Court of
Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its Resolution2 dated November 19, 2001.
The assailed Decision affirmed with modification the Decision 3 of the Regional Trial Court (RTC), Makati City,
Branch 136, dated May 9, 2000 in Civil Case No. 98-411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented by its president
Ramon H. Garcia, renewed its Contract of Lease 4 with Ponciano L. Almeda (Ponciano), as lessor, husband of
petitioner Eufemia and father of petitioner Romel Almeda. Under the said contract, Ponciano agreed to lease a
portion of the Almeda Compound, located at 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25
square meters, for a monthly rental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless
sooner terminated as provided in the contract. 5 The contract of lease contained the following pertinent
provisions which gave rise to the instant case:
“SIXTH—It is expressly understood by the parties hereto that the rental rate stipulated is based on the present
rate of assessment on the property, and that in case the assessment should hereafter be increased or any new
tax, charge or burden be imposed by authorities on the lot and building where the leased premises are located,
LESSEE shall pay, when the rental herein provided becomes due, the additional rental or charge corresponding
to the portion hereby leased; provided, however, that in the event that the present assessment or tax on said
property should be reduced, LESSEE shall be entitled to reduction in the stipulated rental, likewise in
proportion to the portion leased by him;
SEVENTH—In case an extraordinary inflation or devaluation of Philippine Currency should supervene, the
value of Philippine peso at the time of the establishment of the obligation shall be the basis of payment”; 6
During the effectivity of the contract, Ponciano died.
Thereafter, respondent dealt with petitioners. In a letter 7 dated December 29, 1997, petitioners advised
respondent that the former shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response,
respondent contended that VAT may not be imposed as the rentals fixed in the contract of lease were supposed
to include the VAT therein, considering that their contract was executed on May 1, 1997 when the VAT law had
long been in effect.8
On January 26, 1998, respondent received another letter from petitioners informing the former that its
monthly rental should be increased by 73% pursuant to condition No. 7 of the contract and Article 1250 of the
Civil Code. Respondent opposed petitioners’ demand and insisted that there was no extraordinary inflation to
warrant the application of Article 1250 in light of the pronouncement of this Court in various cases. 9
19
Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but continued to pay the
stipulated amount set forth in their contract.
On February 18, 1998, respondent instituted an action for declaratory relief for purposes of determining the
correct interpretation of condition Nos. 6 and 7 of the lease contract to prevent damage and prejudice. 10 The
case was docketed as Civil Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damages against respondent
for failure of the latter to vacate the premises after the demand made by the former. 11 Before respondent could
file an answer, petitioners filed a Notice of Dismissal. 12 They subsequently refiled the complaint before the
Metropolitan Trial Court of Makati; the case was raffled to Branch 139 and was docketed as Civil Case No.
53596.
Petitioners later moved for the dismissal of the declaratory relief case for being an improper remedy
considering that respondent was already in breach of the obligation and that the case would not end the
litigation and settle the rights of the parties. The trial court, however, was not persuaded, and consequently,
denied the motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and against petitioners. The
pertinent portion of the decision reads:
“WHEREFORE, premises considered, this Court renders judgment on the case as follows:
1)declaring that plaintiff is not liable for the payment of Value-Added Tax (VAT) of 10% of the rent for
[the] use of the leased premises;
2)declaring that plaintiff is not liable for the payment of any rental adjustment, there being no
[extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease contract, to
justify the same;
3)holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount
representing payments erroneously made by plaintiff as VAT charges and rental adjustment for the
months of January, February and March, 1999; and
4)holding defendants liable to plaintiff for the amount of P1,107,348.69, said amount representing the
balance of plaintiff’s rental deposit still with defendants.
SO ORDERED.”13
The trial court denied petitioners their right to pass on to respondent the burden of paying the VAT since it was
not a new tax that would call for the application of the sixth clause of the contract. The court, likewise, denied
their right to collect the demanded increase in rental, there being no extraordinary inflation or devaluation as
provided for in the seventh clause of the contract. Because of the payment made by respondent of the rental
adjustment demanded by petitioners, the court ordered the restitution by the latter to the former of the
amounts paid, notwithstanding the well-established rule that in an action for declaratory relief, other than a
declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification the RTC
decision. The fallo reads:
“WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed decision in Civil Case
No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order for the return of the balance of the
rental deposits and of the amounts representing the 10% VAT and rental adjustment, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.”14
The appellate court agreed with the conclusions of law and the application of the decisional rules on the matter
made by the RTC. However, it found that the trial court exceeded its jurisdiction in granting affirmative relief to
the respondent, particularly the restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
20
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE,
161 SCRA 32 AND COMPANION CASES ARE (sic) APPLICABLE IN THE CASE AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO VS. THE SHELL
COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ON
A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT RESPONDENT IS NOT
LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH THE MANDATE OF RA 7716.
V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE WAS IN BREACH WHEN
THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL COURT.
In fine, the issues for our resolution are as follows: 1) whether the action for declaratory relief is proper; 2)
whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) 7716; and 3) whether the amount
of rentals due the petitioners should be adjusted by reason of extraordinary inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written
instrument, executive order or resolution, to determine any question of construction or validity arising from
the instrument, executive order or regulation, or statute, and for a declaration of his rights and duties
thereunder. The only issue that may be raised in such a petition is the question of construction or validity of
provisions in an instrument or statute. Corollary is the general rule that such an action must be justified, as no
other adequate relief or remedy is available under the circumstances. 15
Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1) the subject matter of
the controversy must be a deed, will, contract or other written instrument, statute, executive order or
regulation, or ordinance; 2) the terms of said documents and the validity thereof are doubtful and require
judicial construction; 3) there must have been no breach of the documents in question; 4) there must be an
actual justiciable controversy or the “ripening seeds” of one between persons whose interests are adverse; 5)
the issue must be ripe for judicial determination; and 6) adequate relief is not available through other means or
other forms of action or proceeding.16
It is beyond cavil that the foregoing requisites are present in the instant case, except that petitioners insist that
respondent was already in breach of the contract when the petition was filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the months that followed, respondent complied
with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein.
Respondent religiously fulfilled its obligations to petitioners even during the pendency of the present suit.
There is no showing that respondent committed an act constituting a breach of the subject contract of lease.
Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action for rescission, ejectment and
damages had been commenced before another court; thus, the construction of the subject contractual
provisions should be ventilated in the same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation 17 we held that the petition for declaratory
relief should be dismissed in view of the pendency of a separate action for unlawful detainer. However, we
21
cannot apply the same ruling to the instant case. In Panganiban, the unlawful detainer case had already been
resolved by the trial court before the dismissal of the declaratory relief case; and it was petitioner in that case
who insisted that the action for declaratory relief be preferred over the action for unlawful detainer.
Conversely, in the case at bench, the trial court had not yet resolved the rescission/ejectment case during the
pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, itself
initiated the suspension of the proceedings pending the resolution of the action for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol 18 where the declaratory relief action
was dismissed because the issue therein could be threshed out in the unlawful detainer suit. Yet, again, in that
case, there was already a breach of contract at the time of the filing of the declaratory relief petition. This
dissimilar factual milieu proscribes the Court from applying Teodoro to the instant case.
Given all these attendant circumstances, the Court is disposed to entertain the instant declaratory relief action
instead of dismissing it, notwithstanding the pendency of the ejectment/rescission case before the trial court.
The resolution of the present petition would write finis to the parties’ dispute, as it would settle once and for all
the question of the proper interpretation of the two contractual stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental adjustment
allegedly brought about by extraordinary inflation or devaluation. Both the trial court and the appellate court
found no merit in petitioners’ claim. We see no reason to depart from such findings.
As to the liability of respondent for the payment of VAT, we cite with approval the ratiocination of the appellate
court, viz.:
“Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to pass it on to the
lessee or absorb the same. Beginning January 1, 1996, the lease of real property in the ordinary course of
business, whether for commercial or residential use, when the gross annual receipts exceed P500,000.00, is
subject to 10% VAT. Notwithstanding the mandatory payment of the 10% VAT by the lessor, the actual shifting
of the said tax burden upon the lessee is clearly optional on the part of the lessor, under the terms of the
statute. The word “may” in the statute, generally speaking, denotes that it is directory in nature. It is generally
permissive only and operates to confer discretion. In this case, despite the applicability of the rule under Sec. 99
of the NIRC, as amended by R.A. 7716, granting the lessor the option to pass on to the lessee the 10% VAT, to
existing contracts of lease as of January 1, 1996, the original lessor, Ponciano L. Almeda did not charge the
lessee-appellee the 10% VAT nor provided for its additional imposition when they renewed the contract of
lease in May 1997. More significantly, said lessor did not actually collect a 10% VAT on the monthly rental due
from the lessee-appellee after the execution of the May 1997 contract of lease. The inevitable implication is that
the lessor intended not to avail of the option granted him by law to shift the 10% VAT upon the lessee-appellee.
x x x.”19
In short, petitioners are estopped from shifting to respondent the burden of paying the VAT.
Petitioners’ reliance on the sixth condition of the contract is, likewise, unavailing. This provision clearly states
that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that
is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located.
Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a “new tax” in May 1997, as to
fall within the coverage of the sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or
devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the contract
stipulation speaks of extraordinary inflation or devaluation while the Code speaks of extraordinary inflation or
deflation. They insist that the doctrine pronounced in Del Rosario v. The Shell Company, Phils. Limited 20 should
apply.
Essential to contract construction is the ascertainment of the intention of the contracting parties, and such
determination must take into account the contemporaneous and subsequent acts of the parties. This intention,
once ascertained, is deemed an integral part of the contract. 21
22
While, indeed, condition No. 7 of the contract speaks of “extraordinary inflation or devaluation” as compared to
Article 1250’s “extraordinary inflation or deflation,” we find that when the parties used the term “devaluation,”
they really did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should,
thus, be read in harmony with the Civil Code provision.
That this is the intention of the parties is evident from petitioners’ letter 22 dated January 26, 1998, where, in
demanding rental adjustment ostensibly based on condition No. 7, petitioners made explicit reference to Article
1250 of the Civil Code, even quoting the law verbatim. Thus, the application of Del Rosario is not warranted.
Rather, jurisprudential rules on the application of Article 1250 should be considered.
Article 1250 of the Civil Code states:

“In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the
currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an
agreement to the contrary.”
Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding increase
in business transaction. There is inflation when there is an increase in the volume of money and credit relative
to available goods, resulting in a substantial and continuing rise in the general price level. 23 In a number of
cases, this Court had provided a discourse on what constitutes extraordinary inflation, thus:
“[E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine
currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase
or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation.” 24
The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or
devaluation as would justify the application of Article 1250 of the Civil Code. We would like to stress that the
erosion of the value of the Philippine peso in the past three or four decades, starting in the mid-sixties, is
characteristic of most currencies. And while the Court may take judicial notice of the decline in the purchasing
power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered
as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an
official pronouncement or declaration by competent authorities of the existence of extraordinary inflation
during a given period, the effects of extraordinary inflation are not to be applied. 25
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 67784, dated September 3, 2001, and its Resolution dated November 19, 2001, are AFFIRMED.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez, Corona** and Reyes, JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.—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, contract, etc. 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, contract, etc., to which it refers. (Manila Electric
Company vs. Philippine Consumers Foundation, Inc., 374 SCRA 262 [2002])
A petition for declaratory relief may be treated as one for prohibition if it has far-reaching implications and
raises questions that need to be resolved. (Ortega vs. Quezon City Government, 469 SCRA 388 [2005])
4. G.R. No. 144101. September 16, 2005.*

ANTONIO P. TAMBUNTING, JR. and COMMERCIAL HOUSE OF FINANCE, INC., petitioners, vs. SPOUSES
EMILIO SUMABAT and ESPERANZA BAELLO, respondents.
Remedial Law; Declaratory Relief; Where the law or contract has already been contravened prior to the filing of
an action for declaratory relief, the court can no longer assume jurisdiction over the action.—An action for
23
declaratory relief should be filed by a person interested under a deed, will, contract or other written
instrument, and whose rights are affected by a statute, executive order, regulation or ordinance before breach
or violation thereof. The purpose of the action is to secure an authoritative statement of the rights and
obligations of the parties under a statute, deed, contract, etc. for their guidance in its enforcement or
compliance and not to settle issues arising from its alleged breach. It may be entertained only before the breach
or violation of the statute, deed, contract, etc. to which it refers. Where the law or contract has already been
contravened prior to the filing of an action for declaratory relief, the court can no longer assume jurisdiction
over the action. In other words, a court has no more jurisdiction over an action for declaratory relief if its
subject, i.e., the statute, deed, contract, etc., has already been infringed or transgressed before the institution of
the action. Under such circumstances, inasmuch as a cause of action has already accrued in favor of one or the
other party, there is nothing more for the court to explain or clarify short of a judgment or final order.
Same; Civil Law; Mortgages; Prescription; An action to enforce a right arising from a mortgage should be

enforced within ten years from the time the right of action accrues.—Article 1142 of the Civil Code is clear. A
mortgage action prescribes after ten years. An action to enforce a right arising from a mortgage should be
enforced within ten years from the time the right of action accrues. Otherwise, it will be barred by prescription
and the mortgage creditor will lose his rights under the mortgage.
PETITION for review on certiorari of a decision of the Court of Appeals.

Soo, Gutierrez, Leogardo & Lee for respondents.
CORONA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails the February 11, 2000 decision
of the Regional Trial Court (RTC) of Caloocan City, Branch 120, in Civil Case No. C-16822.
This case involves a dispute over a parcel of land situated in Caloocan City covered by TCT No. (87655) 18837.
It was previously registered in the names of respondents, spouses Emilio Sumabat and Esperanza Baello. On
May 3, 1973, respondents mortgaged it to petitioner Antonio Tambunting, Jr. to secure the payment of a
P7,727.95 loan. In August 1976, respondents were informed that their indebtedness had ballooned to P15,000
for their failure to pay the monthly amortizations. In May 1977, because respondents defaulted in their
obligation, petitioner Commercial House of Finance, Inc. (CHFI), as assignee of the mortgage, initiated
foreclosure proceedings on the mortgaged property but the same did not push through. It was restrained by
the then Court of First Instance (CFI) of Caloocan City, Branch 33 (now RTC Branch 123) in Civil Case No. C-
6329, a complaint for injunction filed by respondents against petitioners. However, the case was subsequently
dismissed for failure of the parties to appear at the hearing on November 9, 1977.
On March 16, 1979, respondents filed an action for declaratory relief with the CFI of Caloocan City, Branch 33,
seeking a declaration of the extent of their actual indebtedness. It was docketed as Civil Case No. C-7496.
Petitioners were declared in default for failure to file an answer within the reglementary period. They moved
for the dismissal of the action on the ground that its subject, the mortgage deed, had already been breached
prior to the filing of the action. The motion was denied for having been filed out of time and petitioners had
already been declared in default.
On January 8, 1981, the CFI rendered its decision. It fixed respondents’ liability at P15,743.83 and authorized
them to consign the amount to the court for proper disposition. In compliance with the decision, respondents
consigned the required amount on January 9, 1981.
In March 1995, respondents received a notice of sheriff’s sale indicating that the mortgage had been foreclosed
by CHFI on February 8, 1995 and that an extrajudicial sale of the property would be held on March 27, 1995.
On March 27, 1995, respondents instituted Civil Case No. C-16822, a petition for preliminary injunction,
damages and cancellation of annotation of encumbrance with prayer for the issuance of a temporary
restraining order, with the RTC of Caloocan City, Branch 120. However, the public auction scheduled on that
same day proceeded and the property was sold to CHFI as the highest bidder. Respondents failed to redeem the
property during the redemption period. Hence, title to the property was consolidated in favor of CHFI and a
new certificate of title (TCT No. 310191) was issued in its name. In view of these developments, respondents
24
amended their complaint to an action for nullification of foreclosure, sheriff’s sale and consolidation of title,
reconveyance and damages.
On February 11, 2000, the RTC issued the assailed decision. It ruled that the 1981 CFI decision in Civil Case No.
C-7496 (fixing respondents’ liability at P15,743.83 and authorizing consignation) had long attained finality. The
mortgage was extinguished when respondents paid their indebtedness by consigning the amount in court.
Moreover, the ten-year period within which petitioners should have foreclosed the property was already
barred by prescription. They abused their right to foreclose the property and exercised it in bad faith. As a
consequence, the trial court nullified the foreclosure and extrajudicial sale of the property, as well as the
consolidation of title in CHFI’s name in 1995. It then ordered the register of deeds of Caloocan City to cancel
TCT No. 310191 and to reconvey the property to respondents. It also held petitioners liable for moral damages,
exemplary damages and attorney’s fees.
Petitioners moved for a reconsideration of the trial court’s decision but it was denied. Hence, this petition.
Petitioners claim that the trial court erred when it affirmed the validity of the consignation. They insist that the
CFI was barred from taking cognizance of the action for declaratory relief since, petitioners being already in
default in their loan amortizations, there existed a violation of the mortgage deed even before the institution of
the action. Hence, the CFI could not have rendered a valid judgment in Civil Case No. C-7496 and the
consignation made pursuant to a void judgment was likewise void. Respondents also fault the trial court for
holding that their right to foreclose the property had already prescribed.
True, the trial court erred when it ruled that the 1981 CFI decision in Civil Case No. C-7496 was already final
and executory.
An action for declaratory relief should be filed by a person interested under a deed, will, contract or other
written instrument, and whose rights are affected by a statute, executive order, regulation or
ordinance before breach or violation thereof. 1 The purpose of the action is to secure an authoritative statement
of the rights and obligations of the parties under a statute, deed, contract, etc. for their guidance in its
enforcement or compliance and not to settle issues arising from its alleged breach. 2 It may be entertained only
before the breach or violation of the statute, deed, contract, etc. to which it refers. 3 Where the law or contract
has already been contravened prior to the filing of an action for declaratory relief, the court can no longer
assume jurisdiction over the action. 4 In other words, a court has no more jurisdiction over an action for
declaratory relief if its subject, i.e., the statute, deed, contract, etc., has already been infringed or transgressed
before the institution of the action. Under such circumstances, inasmuch as a cause of action has already
accrued in favor of one or the other party, there is nothing more for the court to explain or clarify short of a
judgment or final order. Here, an infraction of the mortgage terms had already taken place before the filing
of Civil Case No. C-7496. Thus, the CFI lacked jurisdiction when it took cognizance of the case in 1979. And in
the absence of jurisdiction, its decision was void and without legal effect. As this Court held in Arevalo v.
Benedicto:5
Furthermore, the want of jurisdiction by a court over the subject-matter renders its judgment void and a mere
nullity, and considering that a void judgment is in legal effect no judgment, by which no rights are divested,
from which no rights can be obtained, which neither binds nor bars any one, and under which all acts
performed and all claims flowing out of are void, and considering further, that the decision, for want of
jurisdiction of the court, is not a decision in contemplation of law, and, hence, can never become executory, it
follows that such a void judgment cannot constitute a bar to another case by reason of res judicata.
Nonetheless, the petition must fail.
Article 1142 of the Civil Code is clear. A mortgage action prescribes after ten years.
An action to enforce a right arising from a mortgage should be enforced within ten years from the time the right
of action accrues.6 Otherwise, it will be barred by prescription and the mortgage creditor will lose his rights
under the mortgage.
Here, petitioners’ right of action accrued in May 1977 when respondents defaulted in their obligation to pay
their loan amortizations. It was from that time that the ten-year period to enforce the right under the mortgage
started to run. The period was interrupted when respondents filed Civil Case No. C-6329 sometime after May
25
1977 and the CFI restrained the intended foreclosure of the property. However, the period commenced to run
again on November 9, 1977 when the case was dismissed.
The respondents’ institution of Civil Case No. C-7496 in the CFI on March 16, 1979 did not interrupt the
running of the ten-year prescriptive period because, as discussed above, the court lacked jurisdiction over the
action for declaratory relief. All proceedings therein were without legal effect. Thus, petitioners could have
enforced their right under the mortgage, including its foreclosure, only until November 7, 1987, the tenth year
from the dismissal of Civil Case No. C-6329. Thereafter, their right to do so was already barred by prescription.
The foreclosure held on February 8, 1995 was therefore some seven years too late. The same thing can be said
about the public auction held on March 27, 1995, the consolidation of title in CHFI’s favor and the issuance of
TCT No. 310191 in its name. They were all void and did not exist in the eyes of the law.
WHEREFORE, the petition is hereby DENIED. Costs against petitioners.
SO ORDERED.
Panganiban (Chairman), Sandoval-Gutierrez, Carpio-Morales and Garcia, JJ., concur.
Petition denied.
Note.—Although the commencement of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same position
as though no action had been commenced at all. ( Laureano vs. Court of Appeals, 324 SCRA 414 [2000]
5. G.R. No. 154599. January 21, 2004.*

THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs. THE CITY MAYOR OF MANILA, HON. JOSE
ATIENZA, JR., and THE CITY COUNCIL OF MANILA, respondents.
Actions; Pleadings and Practice; Certiorari; Requisites; Petition for certiorari under Rule 65 may be invoked only
against a tribunal, board or officer exercising judicial or quasi-judicial functions. —A petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure is a special civil action that may be invoked only against a tribunal,
board, or officer exercising judicial or quasi-judicial functions. Section 1, Rule 65 of the 1997 Rules of Civil
Procedure provides: SECTION 1. Petition for certiorari.—When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may
require. Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (l) it must be
directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal,
board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion
amounting lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy
in the ordinary course of law.
Same; Same; Same; Judicial and Quasi-Judicial Function, distinguished.—A respondent is said to be

exercising judicial junction where he has the power to determine what the law is and what the legal rights of
the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the
parties. Quasi-judicial function, on the other hand, is “a term which applies to the actions, discretion, etc., of
public administrative officers or bodies ... required to investigate facts or ascertain the existence of facts, hold
hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a
judicial nature.”
Same; Same; Same; Concurrent Jurisdiction; A becoming regard of that judicial hierarchy most certainly indicates
that petitions for the issuance of extraordinary writs against first level (“inferior”) courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals.—This concurrence of jurisdiction is
not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of
choice of the court to which application therefore will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate
forum for petitions for the extraordinary writs. A becoming regard of that judicial hierarchy most certainly
indicates that petitions for the issuance of extraordinary writs against first level (“inferior”) courts should be
filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of
26
the Supreme Court’s original jurisdiction to issue these writs should be allowed only when there are special
and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It
is a policy necessary to prevent inordinate demands upon the Court’s time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further overcrowding of the Court’s
docket.
Same; Same; Forum shopping; Forum shopping exists where the elements of litis pendentia are present or when a
final judgment in one case will amount to res judicata in the other.—Forum shopping exists where the elements
of litis pendentia are present or when a final judgment in one case will amount to res judicata in the other.
For litis pendentia to exist, the following requisites must be present: (1) identity of parties, or at least such
parties as are representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed
for, the reliefs being founded on the same facts; and (3) identity with respect to the two preceding particulars
in the two cases, such that any judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

Cruz, Cruz, & Neria Law Offices for petitioner.
The Solicitor General for respondents.
DAVIDE, JR., C.J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila City Ordinance
No. 8039, Series of 2002,1 and respondent City Mayor’s Executive Order No. 011, Series of 2002, 2 dated 15
August 2002, for being patently contrary to law.
The antecedents are as follows:
Petitioner Liga ng mga Barangay National (Liga for brevity) is the national organization of all the barangays in
the Philippines, which pursuant to Section 492 of Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, constitutes the duly elected presidents of highly-urbanized cities, provincial chapters,
the metropolitan Manila Chapter, and metropolitan political subdivision chapters.
Section 493 of that law provides that “[t]he liga at the municipal, city, provincial, metropolitan political
subdivision, and national levels directly elect a president, a vice-president, and five (5) members of the board of
directors.” All other matters not provided for in the law affecting the internal organization of the leagues of
local government units shall be governed by their respective constitution and by-laws, which must always
conform to the provisions of the Constitution and existing laws. 3
On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern its internal
organization.4 Section 1, third paragraph, Article XI of said Constitution and By-Laws states:
All other election matters not covered in this Article shall be governed by the “Liga Election Code” or such other
rules as may be promulgated by the National Liga Executive Board in conformity with the provisions of existing
laws.
By virtue of the above-cited provision, the Liga adopted and ratified its own Election Code.5 Section 1.2, Article I
of the Liga Election Code states:
1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall be nationwide synchronized
elections for the provincial, metropolitan, and HUC/ICC chapters to be held on the third Monday of the month
immediately after the month when the synchronized elections in paragraph 1.1 above was held. The incumbent
Liga chapter president concerned duly assisted by the proper government agency, office or
department, e.g. Provincial/City/NCR/Regional Director, shall convene all the duly elected Component
City/Municipal Chapter Presidents and all the current elected Punong Barangays (for HUC/ICC) of the
respective chapters in any public place within its area of jurisdiction for the purpose of reorganizing and
electing the officers and directors of the provincial, metropolitan or HUC/ICC Liga chapters. Said president duly
assisted by the government officer aforementioned, shall notify, in writing, all the above concerned at least
27
fifteen (15) days before the scheduled election meeting on the exact date, time, place and requirements of the
said meeting.
The Liga thereafter came out with its Calendar of Activities and Guidelines in the Implementation of the Liga
Election Code of 2002,6 setting on 21 October 2002 the synchronized elections for highly urbanized city
chapters, such as the Liga Chapter of Manila, together with independent component city, provincial, and
metropolitan chapters.
On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of 2002, providing,
among other things, for the election of representatives of the District Chapters in the City Chapter of Manila and
setting the elections for both chapters thirty days after the barangay elections. Section 3 (A) and (B) of the
assailed ordinance read:
SEC. 3. Representation Chapters.—Every Barangay shall be represented in the said Liga Chapters . . . by the
Punong Barangay . . . or, in his absence or incapacity, by the kagawad duly elected for the purpose among its
members . . . .
A.District ChapterAll elected Barangay Chairman in each District shall elect from among themselves the
President, Vice-President and five (5) members of the Board . . . .
B.City Chapter
The District Chapter representatives shall automatically become members of the Board and they shall
elect from among themselves a President, Vice-President, Secretary, Treasurer, Auditor and create
other positions as it may deem necessary for the management of the chapter.
The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza, Jr., for his signature and
approval.
On 16 July 2002, upon being informed that the ordinance had been forwarded to the Office of the City Mayor,
still unnumbered and yet to be officially released, the Liga sent respondent Mayor of Manila a letter requesting
him that said ordinance be vetoed considering that it encroached upon, or even assumed, the functions of the
Liga through legislation, a function which was clearly beyond the ambit of the powers of the City Council. 7
Respondent Mayor, however, signed and approved the assailed city ordinance and issued on 15 August 2002
Executive Order No. 011, Series of 2002, to implement the ordinance.
Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:
I
WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION, WHEN IT ENACTED CITY
ORDINANCE NO. 8039 S. 2002 PURPOSELY TO GOVERN THE ELECTIONS OF THE MANILA CHAPTER OF THE
LIGA NG MGA BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF ELECTING ITS OFFICERS,
DESPITE THE FACT THAT SAID CHAPTER’S ELECTIONS, AND THE ELECTIONS OF ALL OTHER CHAPTERS OF
THE LIGA NG MGA BARANGAYS FOR THAT MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE
LIGA CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION CODE.
II
WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION WHEN HE ISSUED EXECUTIVE ORDER NO. 011 TO
IMPLEMENT THE QUESTIONED CITY ORDINANCE NO. 8039 S. 2002.
In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and Executive Order No.
011, Series of 2002, contradict the Liga Election Code and are therefore invalid. There exists neither rhyme nor
reason, not to mention the absence of legal basis, for the Manila City Council to encroach upon, or even assume,
the functions of the Liga by prescribing, through legislation, the manner of conducting the Liga elections other
than what has been provided for by the Liga Constitution and By-laws and the Liga Election Code. Accordingly,
the subject ordinance is an ultra vires act of the respondents and, as such, should be declared null and void.
As for its prayer for the issuance of a temporary restraining order, the petitioner cites as reason therefor the
fact that under Section 5 of the assailed city ordinance, the Manila District Chapter elections would be held
thirty days after the regular barangay elections. Hence, it argued that the issuance of a temporary restraining
28
order and/or preliminary injunction would be imperative to prevent the implementation of the ordinance and
executive order.
On 12 September 2002, Barangay Chairman Arnel Peñ a, in his capacity as a member of the Liga ng mga
Barangay in the City Chapter of Manila, filed a Complaint in Intervention with Urgent Motion for the Issuance of
Temporary Restraining Order and/or Preliminary Injunction. 8 He supports the position of the Liga and prays
for the declaration of the questioned ordinance and executive order, as well as the elections of the Liga ng mga
Barangay pursuant thereto, to be null and void. The assailed ordinance prescribing for an “indirect manner of
election” amended, in effect, the provisions of the Local Government Code of 1991, which provides for the
election of the Liga officers at large. It also violated and curtailed the rights of the petitioner and intervenor, as
well as the other 896 Barangay Chairmen in the City of Manila, to vote and be voted upon in a direct election.
On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of Comment. 9 It
supports the petition of the Liga, arguing that the assailed city ordinance and executive order are clearly
inconsistent with the express public policy enunciated in R.A. No. 7160. Local political subdivisions are able to
legislate only by virtue of a valid delegation of legislative power from the national legislature. They are mere
agents vested with what is called the power of subordinate legislation. Thus, the enactments in question, which
are local in origin, cannot prevail against the decree, which has the force and effect of law.
On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG posits that technical
rules of procedure should be relaxed in the instant petition. While Batas Pambansa Blg. 129, as amended,
grants original jurisdiction over cases of this nature to the Regional Trial Court (RTC), the exigency of the
present petition, however, calls for the relaxation of this rule. Section 496 (should be Section 491) of the Local
Government Code of 1991 primarily intended that the Liga ng mga Barangay determine the representation of
the Liga in the sanggunians for the immediate ventilation, articulation, and crystallization of issues affecting
barangay government administration. Thus, the immediate resolution of this petition is a must.
On the other hand, the respondents defend the validity of the assailed ordinance and executive order and pray
for the dismissal of the present petition on the following grounds: (1) certiorari under Rule 65 of the Rules of
Court is unavailing; (2) the petition should not be entertained by this Court in view of the pendency before the
Regional Trial Court of Manila of two actions or petitions questioning the subject ordinance and executive
order; (3) the petitioner is guilty of forum shopping; and (4) the act sought to be enjoined is fait accompli.
The respondents maintain that certiorari is an extraordinary remedy available to one aggrieved by the decision
of a tribunal, officer, or board exercising judicial or quasi-judicial functions. The City Council and City Mayor of
Manila are not the “board” and “officer” contemplated in Rule 65 of the Rules of Court because both do not
exercise judicial functions. The enactment of the subject ordinance and issuance of the questioned executive
order are legislative and executive functions, respectively, and thus, do not fall within the ambit of “judicial
functions.” They are both within the prerogatives, powers, and authority of the City Council and City Mayor of
Manila, respectively. Furthermore, the petition failed to show with certainty that the respondents acted without
or in excess of jurisdiction or with grave abuse of discretion.
The respondents also asseverate that the petitioner cannot claim that it has no other recourse in addressing its
grievance other than this petition for certiorari. As a matter of fact, there are two cases pending before
Branches 33 and 51 of the RTC of Manila (one is for mandamus; the other, for declaratory relief) and three in
the Court of Appeals (one is for prohibition; the two other cases, for quo warranto), which are all akin to the
present petition in the sense that the relief being sought therein is the declaration of the invalidity of the
subject ordinance. Clearly, the petitioner may ask the RTC or the Court of Appeals the relief being prayed for
before this Court. Moreover, the petitioner failed to prove discernible compelling reasons attending the present
petition that would warrant cognizance of the present petition by this Court.
Besides, according to the respondents, the petitioner has transgressed the proscription against forum-shopping
in filing the instant suit. Although the parties in the other pending cases and in this petition are different
individuals or entities, they represent the same interest.
With regard to petitioner’s prayer for temporary restraining order and/or preliminary injunction in its petition,
the respondents maintain that the same had become moot and academic in view of the elections of officers of
the City Liga ng mga Barangay on 15 September 2002 and their subsequent assumption to their respective
29
offices.10 Since the acts to be enjoined are now fait accompli, this petition for certiorari with an application for
provisional remedies must necessarily fail. Thus, where the records show that during the pendency of the case
certain events or circumstances had taken place that render the case moot and academic, the petition
for certiorari must be dismissed.
After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any
judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is a special civil action that may be invoked only against a tribunal, board, or officer exercising
judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:

SECTION 1. Petition for certiorari.—When any tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it must be directed
against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or
officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or
excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law.
A respondent is said to be exercising judicial junction where he has the power to determine what the law is and
what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon
the rights of the parties.11
Quasi-judicial function, on the other hand, is “a term which applies to the actions, discretion, etc., of public
administrative officers or bodies . . . required to investigate facts or ascertain the existence of facts, hold
judicial nature.”12
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law
that gives rise to some specific rights of persons or properly under which adverse claims to such rights are
made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power
and authority to determine the law and adjudicate the respective rights of the contending parties. 13
The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasi-judicial
functions. As correctly pointed out by the respondents, the enactment by the City Council of Manila of the
assailed ordinance and the issuance by respondent Mayor of the questioned executive order were done in the
exercise of legislative and executive functions, respectively, and not of judicial or quasi-judicial functions. On
this score alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the declaration by
this Court of the unconstitutionality or illegality of the questioned ordinance and executive order. It, thus,
partakes of the nature of a petition for declaratory relief over which this Court has only appellate, not original,
jurisdiction.14 Section 5, Article VIII of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1)Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls,
and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
(2)Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court
may provide, final judgments and orders of lower courts in:
(a)All cases in which the constitutionality or validity of any treaty, international or executive agreement,
law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.
(Italics supplied).
As such, this petition must necessary fail, as this Court does not have original jurisdiction over a petition for
declaratory relief even if only questions of law are involved. 15
30
Third, even granting arguendo that the present petition is ripe for the extraordinary writ of certiorari, there is
here a clear disregard of the hierarchy of courts. No special and important reason or exceptional and
compelling circumstance has been adduced by the petitioner or the intervenor why direct recourse to this
Court should be allowed.
We have held that this Court’s original jurisdiction to issue a writ of certiorari (as well as of
prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive, but is concurrent with the
Regional Trial Courts and the Court of Appeals in certain cases. As aptly stated in People v. Cuaresma:16
This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an
absolute, unrestrained freedom of choice of the court to which application therefore will be directed. There is
after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a
general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard of
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against
first level (“inferior”) courts should be filed with the Regional Trial Court, and those against the latter, with the
Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and specifically set out in the
petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court’s
time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent
further overcrowding of the Court’s docket.
As we have said in Santiago v. Vasquez,17 the propensity of litigants and lawyers to disregard the hierarchy of
courts in our judicial system by seeking relief directly from this Court must be put to a halt for two reasons: (1)
it would be an imposition upon the precious time of this Court; and (2) it would cause an inevitable and
resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to be
remanded or referred to the lower court as the proper forum under the rules of procedure, or as better
equipped to resolve the issues because this Court is not a trier of facts.
Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it unless the redress
desired cannot be obtained in the appropriate courts, and exceptional and compelling circumstances justify the
availment of the extraordinary remedy of writ of certiorari, calling for the exercise of its primary jurisdiction. 18
Petitioner’s reliance on Pimentel v. Aguirre19 is misplaced because the non-observance of the hierarchy-of-
courts rule was not an issue therein. Besides, what was sought to be nullified in the petition for certiorari and
prohibition therein was an act of the President of the Philippines, which would have greatly affected all local
government units. We reiterated therein that when an act of the legislative department is seriously alleged to
have infringed the Constitution, settling the controversy becomes the duty of this Court. The same is true when
what is seriously alleged to be unconstitutional is an act of the President, who in our constitutional scheme is
coequal with Congress.
We hesitate to rule that the petitioner and the intervenor are guilty of forum shopping. Forum shopping exists
where the elements of litis pendentia are present or when a final judgment in one case will amount to res
judicata in the other. For litis pendentia to exist, the following requisites must be present: (1) identity of parties,
or at least such parties as are representing the same interests in both actions; (2) identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; and (3) identity with respect to the two
preceding particulars in the two cases, such that any judgment that may be rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other case.20
In the instant petition, and as admitted by the respondents, the parties in this case and in the alleged other
pending cases are different individuals or entities; thus, forum-shopping cannot be said to exist. Moreover, even
assuming that those five petitions are indeed pending before the RTC of Manila and the Court of Appeals, we
can only guess the causes of action and issues raised before those courts, considering that the respondents
failed to furnish this Court with copies of the said petitions.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
31
Davide, Jr. (C.J.), Puno, Vitug, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria
Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna and Tinga, JJ., concur.
Panganiban, J., In the result.
Petition dismissed.
Note.—There are three (3) essential dates that must be stated in a petition for certiorari under Rule 65 of the
Rules of Court. (Santos vs. Court of Appeals, 360 SCRA 521 [2001])
6. No. L-21036. June 30, 1977.*

COMMISSIONER OF CUSTOMS and COLLECTOR OF CUSTOMS FOR MANILA and CONRADO SOLEDAD,
EDMUNDO POSTRERO, MAXIMINO ABRUGENA, GERONIMO DERILO, SANTOS GUINTO, and EUSTAQUIO
MARANAN, as employees and duly authorized representatives of the House of Representatives, Congress
of the Philippines, petitioners, vs. HON. JUDGE GAUDENCIO CLORIBEL, as Presiding Judge of Branch VI,
Court of First Instance of Manila, and JOSE and SUSANA COCHINGYAN, respondents.
Declaratory relief; Injunction; Execution; The purpose of the special civil action for declaratory relief is to ask the
court to make a proper interpretation of a contract and because of this relief is to be confined to the actual
controversy within the court’s jurisdiction, without need of injunction, execution or other relief beyond the
adjudication of the legal rights of the parties.—As already stated, Civil Case No. 52318 was a special civil action
for declaratory relief under Rule 66 of the Rules of 1940 which were in force when it was filed. The only
purpose thereof was to secure from the court the proper interpretation or construction of the reparations
contract between the Reparations Commission and Warvets in regard to the rate of conversion of the dollar to
the peso of the purchase price Warvets had to pay. No positive or affirmative, much less any material relief, was
being sought therein. Indeed, it is in the very nature of a declaratory relief special civil action that “the Relief is
confined to a case of actual controversy within the Court’s jurisdiction, without the need of injunction,
execution, or other relief beyond the adjudication of the legal rights which are the subject of controversy
between the parties.” (3 Moran, Comments on the Rules of Court, p. 146, 1970 ed.) In other words, the plaintiff
Ofilada in said case did not, as he could not pray for anything to be awarded or granted to him.
Same; Action; Third-party complaint; A 3rd party complaint is inconceivable when the main case is an special
civil action for declaratory relief since in a 3rd party complaint, the 3rd party plaintiff is supposed to seek
contribution, indemnity, subrogation or other relief in respect of the plaintiff’s complaint, and declaratory relief
proceeding is confined, merely to interpretation of the terms of a contract.—It is obvious from this definition that
a third-party complaint is inconceivable when the main case is one for nothing more than a declaratory relief.
In a third-party complaint, the defendant or third-party plaintiff is supposed to seek contribution, indemnity,
subrogation or any other relief from the third-party defendant in respect to the claim of the plaintiff against
him. In the case at bar, what possible relief could the Cochingyans, as defendants in Civil Case No. 52318, for
declaratory relief, have asked for by way of contribution, indemnity, subrogation or any other relief from those
they have named third-party defendants, the Collector of Customs, Commissioner of Customs, Reparations
Commission, their co-defendant, and Macario Ofilada, that very plaintiff, in respect to the construction or
interpretation that Ofilada was asking the court to make?
Action; Third-party complaint; Admission ex parte of third-party complaint after the trial had ended is not proper.
—Moreover, respondent court also paid no heed to the requirement of Section 2 of Rule 12 of the 1940 Rules to
the effect that: “Before the service of his answer a defendant may move ex parte or, after the service of his
answer, on notice to the plaintiff, for leave as third-party plaintiff to file a complaint against a third-party
defendant.” In the present case, it is a fact that the motions of the Cochingyans for leave to file their third-party
complaint and for the admission thereof were granted ex-parte nowithstanding that the trial of the case had
already been terminated.
ORIGINAL ACTION in the Supreme Court Certiorari and prohibition with preliminary injunction.

Solicitor General Arturo A. Alafriz; Assistant Solicitor General Pacifico P. de Castro, Solicitor; Alejandro B.
Afurong, Special Attorney Jose T. Viduya and Attorney Ceferino de los Santos for petitioners.
Lino M. Patajo and Ramon Encarnacion, Jr. for private respondents.
BARREDO, J.:
32
Petition for certiorari and prohibition to annul and set aside several orders of respondent court all of which
together in effect: (1) permitted ex-parte private respondents Jose and Susana Conchingyan to file a third-party
complaint for mandamus against petitioners in a special civil action for declaratory relief in which said
Cochingyans were defendants and which was already tried and almost ready for decision; on the same day, (2)
admitted said third-party complaint and (3) further issued immediately a writ of preliminary mandatory
injunction likewise ex-parte; and which (4) were intended to enforce said writ of injunction.
There was pending before respondent court as Civil Case No. 52318, entitled Macario M. Ofilada vs. Reparations
Commission, Jose Cochingyan and Susana Cochingyan, a special civil action for declaratory relief, wherein
Ofilada, as the Second Receiver of the World War II Veterans Enterprises, Inc. (Warvets) in Civil Case No.
34998, likewise pending in another Branch of the Court of First Instance of Manila, sought a judicial declaration
as to whether, under the allocation granted to said Warvets to purchase reparations goods, the conversion into
pesos of the dollar prices of said goods should be at the rate of two pesos to one dollar or at the prevailing
market rate at the time for payment, which would be much higher. Civil Case No. 34998 was a minority suit
filed by certain stockholders of Warvets alleging irregularities in the management and disposition of the goods
being purchased by the corporation by virtue of the aforementioned allocation, hence the need for receivers, of
which there were two, the first being one Ramon E. Saura and the second, Ofilada, In the same Civil Case No.
34998, an order had been issued on October 9, 1962 ordering Ofilada to deliver to the Cochingyans the second
shipment of goods under Warvets’ allocation. (The Cochingyans had a contract with Warvets regarding said
goods.) It appears, however, that a motion for the reconsideration of the just mentioned order of October 9,
1962 had been filed and was still unresolved when on February 9, 1963, the Honorable Judge Francisco Arca
(now deceased) issued the following order:
“Considering all the foregoing, the Court is of the opinion that the petition of Atty. Magno to defer action on the
motion for contempt against the intervenors should be granted until after it can be definitely known whether
or not the parties can settle this case amicably. Resolutions on all pending incidents, such as the motion for
reconsideration of the order authorizing the release of the second shipment, and the motions for the release of the
third, fourth and fifth shipments, are also held in abeyance until such time that the Court knows the result of the
pending settlement being negotiated among the parties.”
“In view of all the above, the Court hereby orders that all incidents pending resolution be held in abeyance until
after the parties have definitely decided whether they are going to settle this case or not.” (Italics supplied.)
It was shortly after the issuance of this order which in effect freezed the order of release of October 9, 1962,
that the incidents subject of the instant petition took place. On February 13, 1963, the Cochingyans filed in Civil
Case No. 52318 then already tried although not yet decided by Judge Gaudencio Cloribel (now also deceased)—
who on February 9, 1963 had written the Secretary of Justice asking for permission to go on leave for a week
starting February 12, 1973 but who later changed the starting date to February 13, 1973—an ex-parte motion
asking permission to file a third-party complaint, which was forthwith granted. On the same day, another
motion was filed asking for immediate admission of the third party complaint, which likewise, was forthwith
granted. The third-party complaint included in the prayer, among other reliefs, the following:
“1. Immediately upon the filing of the herein third-party complaint this Honorable Court issue a writ of
preliminary mandatory injunction ex-parte, without notice to the other parties, ordering the third-party
defendants Commissioner of Customs and Collector of Customs and Reparations Commission to release
immediately to the third-party plaintiffs the balance of the 202 packages of rayon clothing forming part of the
shipment of consumer goods originally consigned to the Reparations Commission which arrived in Manila
aboard the SS GUILLERMO on September 10, 1962, and which to the present are still under the custody and
possession of the Collector of Customs and Commissioner of Customs, upon the filing of a bond by the third-
party plaintiffs in such amount as may be fixed by this Honorable Court to pay for any damages that the third-
party defendants may suffer should this Honorable Court find that issuance of the preliminary mandatory
injunction is not proper.” (Page 87, Record.)
Without loss of time and without hearing the third-party defendants, the following order, was issued on the
same day, February 12, 1963:
“In a verified third-party complaint for mandamus against the Commissioner of Customs, the Collector of
Customs and others, .third-party plaintiffs Jose and Susana Cochingyan, doing business under the name and
style “The Catholic Church Mart”, alleged that a shipment of 402 packages of rayon cloth which was procured
33
by the Reparations Commission to cover an allocation granted by the Commission to the World War II Veterans
Enterprises (WARVETS for reparation consumer goods from Japan arrived in Manila on September 10, 1962,
consigned to the Reparations Commission; that this Court in Civil Case No. 34998 entitled ‘Pilar Normandy et
al., vs. Calixto Duque, et al.” authorized in its order of October 9, 1962, the Second Receiver of WARVETS, Mr.
Macario M. Ofilada, to release said goods to Jose and Susana Cochingyan; that pursuant to said order of October
9, 1962, Mr. Ofilada, in his capacity as second receiver of WARVETS, signed a contract of absolute sale with the
Reparations Commission covering the described reparation consumer goods and paid in full the purchase price
of said goods; that after receiving full payment of the purchase price of said goods the Commission instead of
releasing the goods from customs and delivering them requested the Collector of Customs to verify and make
am appraisal of the value of the goods and complying with said request, the Collector of Customs opened and
inspected each and all of the bales and packages comprising said shipment; that after completing said
inspection and verification the Collector of Customs advised the third-party plaintiffs herein that the shipment
cannot be released unless the advance sales tax due on the goods be first paid; that said Collector of Customs
also advised the Reparations Commission that the goods, being reparations goods and as such owned by the
Philippine Government, cannot be subject to seizure or forfeiture proceedings; that of the 402 packages the
Commissioner and Collector of Customs have released to the said third-party plaintiffs only 200 packages but
have retained 202 packages supposedly to secure the payment of advance sales tax assessed on the shipment
as recomputed on the basis of an opinion of the Collector of Internal Revenue; that notwithstanding the fact
that there are no unpaid liens, fines, surchages, taxes (except the advance sales tax the payment of which was
tendered by third-party plaintiffs and refused and the amount deposited with the Clerk of this Court) customs
duties, and consular fees (of which the goods are exempt under Section 14 of the Reparations Law) and
notwithstanding the fact that there are no pending proceedings for the seizure and forfeiture of the goods for
the same have been imported by the Reparations Commission which made the proper declaration of entry
therefor, third-party denfendants Commissioner of Customs and Collector of Customs have refused without any
legal reason or justification whatsoever to release and deliver the balance of the shipment to the third-party
plaintiffs; that the duty of the Collector of Customs and Commissioner of Customs to deliver or release said
goods to third-party plaintiffs is clear as under the circumstances above recited said officials have no discretion
to decide whether or not to release said goods.
“Third-party plaintiffs further alleged that the delay in the release of the goods to them has caused and will
cause them grave and irreparable damage and injury; and unless a writ of preliminary injunction were to be
issued ex-parte they will suffer greater and grave damages.
“WHEREFORE, finding the petition for the issuance of a writ of preliminary injunction to be meritorious, the
same is hereby granted, and upon the filing by the third-party plaintiffs of a bond in the sum of P5,000.00 to
answer for all damages that the third-party defendants may sustain by reason of this injunction if it be finally
decided that the third-party plaintiffs are not entitled thereto, let a writ of preliminary mandatory injunction be
issued ordering the third-party defendants Commissioner of Customs, Collector of Customs, and the
Reparations Commission, their representatives, agents, subordinates and other persons acting in their behalf to
release and deliver immediately the third-party plaintiffs Jose and Susana Cochingyan, doing business under
the name and style ‘The Catholic, Church Mart’, the 202 packages of rayon cloth presently in their possession,
custody and/or control, which goods are part of the shipment of reparation consumer goods which arrived in
Manila aboard the SS Guillermo from Japan consigned to the Reparations Commission.
“SO ORDERED.”
The writ issued pursuant to this order was served on the Law Division of the Bureau of Customs at 4:55 o’clock
in the afternoon of the same day, February 12, 1963. But compliance therewith did not materialize. A motion to
lift the writ was filed, and in the meanwhile, the Chairman of the Committee on Reparations of the House of
Representatives, which was then investigating the implementation of the Warvets allocation, asserted
jurisdiction over the goods by ordering the Collector of Customs to deliver the same to the Sergeant-at-Arms of
the House. Respondent court denied the motion to lift and threatened the agents of the Committee on
Reparations, herein co-petitioners, with contempt. Still, there was no release. The goods were, therefore, still
unreleased to the Cochingyans when the petition now at bar was filed.
We deem it unnecessary to dwell on the many interesting issues extensively and brilliantly discussed by
distinguished counsel of both petitioners and respondents. In Our view of this case, the only question We have
to resolve in order to dispose of it is whether or not respondent court gravely abused its discretion in allowing
34
the filing of and in admitting the third-party complaint of the Cochingyans. In the affirmative, it should follow
that the writ of preliminary mandatory injunction in question would have no legal basis, as also all subsequent
orders of respondent court tending to enforce the same. And it is Our considered opinion and so We hold that it
was highly Irregular and totally unwarranted for respondent court to have allowed said third-party complaint.
The circumstances surrounding the allowance and admission thereof indicate that respondent court’s action
was hasty, baseless and arbitrary.
As already stated, Civil Case No. 52318 was a special civil action for declaratory relief under Rule 66 of the
Rules of 1940 which were in force when it was filed. The only purpose thereof was to secure from the court the
proper interpretation or construction of the reparations contract between the Reparations Commission and
Warvets in regard to the rate of conversion of the dollar to the peso of the purchase price Warvets had to pay.
No positive or affirmative, much less any material relief, was being sought therein. Indeed, it is in the very
nature of a declaratory relief special civil action that “the Relief is confined to a case of actual controversy
within the Court’s jurisdiction, without the need of injunction, execution, or other relief beyond the
adjudication of the legal rights which are the subject of controversy between the parties.” (3 Moran, Comments
on the Rules of Court, p. 146, 1970 ed.) In other words, the plaintiff Ofilada in said case did not, as he could not
pray for anything to be award or granted to him. Now, as regards the nature and purpose of a third-party
complaint, Section 1 of Rule 12 of the Rules of 1940 provided:
“SECTION 1. Claim against one not a party to an action.—When a defendant claims to be entitled against a
person not a party to the action, hereinafter called the third-party defendant, to contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff claim, he may file, with leave of court, against such
person a pleading which shall state the nature of his claim and shall be called the third-party complaint.”
It is obvious from this definition that a third-party complaint is inconceivable when the main case is one for
nothing more than a declaratory relief. In a third-party complaint, the defendant or third-party plaintiff is
supposed to seek contribution, indemnity, subrogation or any other relief from the third-party defendant is
respect to the claim of the plaintiff against him. In the case at bar, what possible relief could the Cochingyans, as
defendants in Civil Case No. 52318, for declaratory relief, have asked for by way of contribution, indemnity,
subrogation or any other relief from those they have named third-party defendants, the Collector of Customs,
Commissioner of Customs, Reparations Commission, their co-defendant, and Macario Ofilada, the very plaintiff,
in respect to the construction or interpretation that Ofilada was asking the court to make? At the risk of quoting
again part thereof, the complete prayer in the third-party complaint in question reads thus:
“1.Immediately upon the filing of the herein third-party complaint this Honorable Court issue a writ of
preliminary mandatory injunction ex-parte, without notice to the other parties, ordering the third-party
defendants Commissioner of Customs and Collector of Customs and Reparations Commission to release
immediately the third-party plaintiffs the balance of the 202 packages of rayon clothing forming part of the
shipment of consumer goods originally consigned to the Reparations Commission which arrived in Manila
aboard the SS GUILLERMO on September 10, 1962, and which to the present are still under the custody and
possession of the Collector of Customs and Commissioner of Customs, upon the filing of a bond by the third-
party plaintiffs in such amount as may be fixed by this Honorable Court to pay for any damages that the third-
party defendants may suffer should this Honorable Court find that issuance of the preliminary mandatory
injunction is not proper.
“2.That after hearing on the merits this Honorable Court confirm and make final its order of mandatory
preliminary injunction.
“The third-party plaintiffs further pray for such other relief as may be just and equitable under the premises.”
(Pp. 87-88, Record.) According to Moran:
“Tests of propriety.—The test to determine whether the claim for indemnity in a third-party complaint in
respect to plaintiff’s claim is proper, are (a) whether it arises out of the same transaction on which plaintiff’s
claim is based; or whether the third-party’s claim, although arising out of another or different contract or
transaction, is connected with plaintiff’s claim; (U.S. Commercial Co. v. Guevara, et al., 48 O.G. 612.) (b) whether
the third-party defendant would be liable to the plaintiff or to the defendant for all or part of the plaintiff’s
claim against the original defendant, although the third-party defendant’s liability arises out of another
transaction; or (c) whether the third-party defendant may assert any defense which the third-party plaintiff
has, or may have, against plaintiff’s claim. (Capayas v. Court of First Instance, 77 Phil. 181.) Failing these tests,
the complaint is improper. x x x” (1 Moran, Comments on the Rules of Court, p. 281, 1970 ed.)
35
It is thus too evident to call for more elaborate discussion that respondent court s action in allowing the filing of
Cochingyans’ third-party complaint completely disregarded, due presumably to ignorance thereof, the basic
concepts of the remedies of declaratory relief and third-party complaint.
Moreover, respondent court also paid no heed to the requirement of Section 2 of Rule 12 of the 1940 Rules to
the effect that; “Before the service of his answer a defendant may move ex parte or, after the service of his
answer, on notice to the plaintiff, for leave as third-party plaintiff to file a complaint against a third-party
defendant.” In the present case, it is a fact that the motions of the Cochingyans for leave to file their third-party
complaint and for the admission thereof were granted ex-parte notwithstanding that the trial of the case had
already been terminated.
IN CONSEQUENCE OF THE FOREGOING, We have no other alternative than to declare as We do declare null and
void all the orders herein complained of. 1 They are all hereby set aside and respondent court is enjoined to
desist from carrying any of them into effect. Costs against respondents Jose and Susana Cochingyan.
Antonio, Muñoz Palma, Concepcion Jr., and Martin, JJ., concur.
Fernando and Aquino, JJ., did not take part.
Muñoz Palma and Martin, JJ., were designated to sit in the Second Division.
Orders null and void.
Notes.—Declaratory relief may lie only when any person interested under a deed, will, contract or other
written instrument, or whose rights are affected by statute or ordinance, demands construction thereof for a
declaration of his rights thereunder. (Tan vs. Republic, 3 SCRA 407). Declaratory relief is not proper after a
contract, statute or right has been violated. (Gomez vs. Palomar, 25 SCRA 827; Ollado vs. Central Bank, 5 SCRA
297; Magtibay vs. Alikpala, 6 SCRA 681).
A declaratory relief proceeding for obtaining judicial declaration of citizenship is not allowed. ( Santiago vs.
Commissioner of Immigration, 7 SCRA 21; Chug Siu vs. Local Civil Registrar of Manila, 20 SCRA 877).
A person is not entitled to file an action for declaratory judgment when he is not one of the contracting parties
to the deed of sale. (Tadeo vs. Provincial Fiscal of Pangasinan, 4 SCRA 235).
The conditions sine qua non before relief can be availed of include the presence of a justiciable controversy
between persons whose interests are adverse, the existence of a legal interest by the party seeking declaratory
relief, and the ripeness of the issue for judicial determination. (Caltex (Phil), Inc. vs. Palomar, 18 SCRA 247).
A claim for compensation for services rendered is not proper in a petition for declaratory relief. An ordinary
action must be filed. (Jimenez vs. Roa, 39 SCRA 329).
An action for declaratory judgment cannot be invoked solely to determine or to try resolve a moot, abstract or
theoretical question, or to decide claims which are uncertain or hypothetical. (Lim vs. Republic, 37 SCRA 783).
7. No. L-29673. November 12, 1987.*

THE VISAYAN PACKING CORPORATION, petitioner, vs. THE REPARATIONS COMMISSION and THE COURT
OF APPEALS, respondents.
Civil Procedure; Counterclaim; Failure to assert a compulsory counterclaim in the same suit involving the same
transaction or occurrence not irremediable or irreversibly fatal; Remedy for failure to set up a counterclaim .—It is
indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall be
barred if it arises out of or is necessarily connected with the transaction or occurrence that is thesubject matter
of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction. In other words, a compulsory counterclaim cannot be made the subject of a
separate action but should be asserted in the same suit involving the same transaction or occurrence giving rise
to it. The omission is not however irremediable or irreversibly fatal. The Rules provide that when a pleader
fails to set up a counterclaim through oversight, inadvertence, or excusable negligence, or when justice
requires, he may, by leave of court, set up the counterclaim or cross-claim by amendment before judgment.
Where the counterclaim is made the subject of a separate suit, it may be abated upon a plea of auter action
36
pendant or lids pendentia, and/or dismissed on the ground of res adjudicata. Res adjudicata may be pleaded as a
ground for dismissal if the opposing party’s claim, involving the same transaction or occurence as the
counterclaim, has already been adjudicated on the merits by a court of competent jurisdiction, and the
judgment has become final; this, on the theory that what is barred by prior judgment are not only the matters
squarely raised and litigated, but all such other matters as could have been raised but were not.
Same; Same; Declaratory Relief; Nothing in the nature of a special civil action for declaratory relief that
proscribes the filing of a counterclaim based on the same transaction, deed or contract subject of the complaint.—
Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is
after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of
the Rules of Court, except that the former deals with a special subject matter which makes necessary some
special regulation. But the identity between their fundamental nature is such that the same rules governing
ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special civil actions.
Same; Same; Same; Rules of procedure are laid down to attain justice; Form cannot prevail over substance.—
Rules of procedure are after all laid down in order to attain justice. They cannot be applied to prevent the
achievement of that goal. Form cannot prevail over substance.
PETITION to review the decision of the Court of Appeals.
NARVASA, J.:
The proceedings at bar had their origin in an agreement denominated “Contract of Conditional Purchase and
Sale of Reparation Goods” entered into between petitioner Visayan Packing Corporation (hereafter, simply
VISPAC) and the Reparations Commission (hereafter, simply REPACOM). Subject of the contract were a cannery
plant, a tin manufacturing plant, and three (3) fishing boats sold to VISPAC, for which it bound itself to pay the
total price of P1,135,712.47 in ten ( 1 0 ) equal yearly installments with interest. 2
Prior to the due date of the first installment, REPACOM sent VISPAC a written reminder thereof. VISPAC’s
response was to file in the Court of First Instance of Manila two (2) special civil actions for declaratory
relief,3 alleging ambiguity in the contract between it and REPACOM consisting in the agreement’s failure to
clearly state the precise time when the obligation to pay the first installment of the price would arise. 4
On the other hand, when V ISP AC subsequently failed, despite several demands, to pay the first installment of
the price (P135,712.47) on what REPACOM deemed to be the due date, the latter instituted an ordinary civil
action for collection thereof. 5 VISPAC moved to dismiss this collection suit on the ground of the pendency of
the declaratory relief actions, arguing that until and unless the latter were resolved, no cause of action could be
deemed to exist in favor of REPACOM for collection of said first installment. The motion to dismiss was denied;
and after trial, the Court of First Instance rendered judgment dated March 27, 1963 ordering VISPAC to pay
REPACOM the sum claimed, P135,712.47, with interest at the legal rate from date of filing of the complaint until
fully paid.
VISPAC appealed to the Court of Appeals claiming error on the part of the Trial Court in not holding that
the collection suit was barred by the pendency of the declaratory relief cases earlier instituted.
But the declaratory relief actions had been earlier dismissed by Order of the Court of First Instance dated
October 9, 1962, the Court holding that the issues raised would be necessarily threshed out in the collection
suit. VISPAC appealed to this Court 6 but was rebuffed. By decision rendered on May 31, 1965, this Court
affirmed the dismissal of the declaratory relief suits, holding that the clarity of the terms of the contract
eliminated all occasion for interpretation thereof.
VISPAC also received an unfavorable verdict in its appeal to the Court of Appeals from the decision of the Trial
Court in the collection action against it. That Appellate Court, on October 2, 1968, promulgated judgment
affirming that of the Court of First Instance. It is this affirmance of the Court of Appeals that is subject of the
37
instant appeal taken to this Court by VISPAC. VISPAC’s contention is that it was error on the Appellate Court’s
part to have affirmed the Trial Court’s decision for the collection of the first installment of the price due from it
under its contract with REPACOM, because that money claim should have been set up as a compulsory
counterclaim in the declaratory relief action, and since REPACOM had not done this, but had instead set it up in
a separate suit, the claim had thereby become barred.
It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall be
barred if it arises out of or is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. In other words, a compulsory counterclaim cannot be made the
subject of a separate action but should be asserted in the same suit involving the same transaction or
occurrence giving rise to it. The omission is not however irremediable or irreversibly fatal. The Rules provide
that when a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable negligence, or
when justice requires, he may, by leave of court, set up the counterclaim or cross-claim by amendment before
judgment.7 Where the counter-claim is made the subject of a separate suit, it may be abated upon a plea
of auter action pendant or litis pendentia,8 and/or dismissed on the ground of res adjudicata.9 Res
adjudicata may be pleaded as a ground for dismissal if the opposing party’s claim, involving the same
transaction or occurrence as the counterclaim, has already been adjudicated on the merits by a court of
competent jurisdiction, and the judgment has become final; this, on the theory that what is barred by prior
judgment are not only the matters squarely raised and litigated, but all such other matters as could have been
raised but were not.10
Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of a
counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil action is
after all not essentially different from an ordinary civil action, which is generally governed by Rules 1 to 56 of
the Rules of Court, except that the former deals with a special subject matter which makes necessary some
special regulation.11 But the identity between their fundamental nature is such that the same rules governing
ordinary civil suits may and do apply to special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules govermng special civil actions. 12
Ideally, in the case at bar, the separate action for collection should have been dismissed and set up as
a compulsory counterclaim in the declaratory relief suits, by way of an amended answer. This was not done. The
actions proceeded separately and were decided on the merits. The final verdict was that the declaratory relief
suits instituted by VISPAC were unmeritorious, quite without foundation and, in the light of all the relevant
facts, appear to have been initiated by VISPAC merely to obstruct and delay the payment of the installments
clearly due from it, payment of which was decreed in the collection suit. Under the circumstances, and taking
account of the not inconsiderable length of time that the case at bar has been pending, it would be to do
violence to substantial justice to pronounce the proceedings fatally defective for breach of the rule on
compulsory counterclaims. Rules of procedure are after all laid down in order to attain justice . They cannot be
applied to prevent the achievement of that goal. Form cannot prevail over substance.1
WHEREFORE, the petition is dismissed for lack of merit, with costs against the petitioner.
Teehankee (C.J.), Cruz, ** Paras and Gancayco, JJ., concur.
Petition dismissed.
Notes.—Counterclaim is not ancilliary to the new action but can be maintained separately. (Zabat, Jr. vs.
CA, 142 SCRA 587).
A defendant in an action for ejectment may set up a counterclaim for moral damage and some may be awarded
to defendant. (Agustin vs. Bacalan, 135 SCRA 340.)
8. Erlinda Reyes vs. Ortiz, G.R. No. 137794, August 11, 2010 (same case with no. 1)
9. G.R. No. 193978. February 28, 2012.*
JELBERT B. GALICTO, petitioner, vs. H.E. PRESIDENT BENIGNO SIMEON C. AQUINO III, in his capacity as
President of the Republic of the Philippines; ATTY. PAQUITO N. OCHOA, JR., in his capacity as Executive
Secretary; and FLORENCIO B. ABAD, in his capacity as Secretary of the Department of Budget and
Management, respondents.
38
Remedial Law; Special Civil Actions; Certiorari; Prohibition; Executive Orders; Since the issuance of an Executive
Order (EO) is not judicial, quasi-judicial or a mandatory act, a petition for certiorari and prohibition is an
incorrect remedy; instead a petition for declaratory relief under Rule 63 of the Rules of Court, filed with the
Regional Trial Court (RTC), is the proper recourse.—Under the Rules of Court, petitions for Certiorari and
Prohibition are availed of to question judicial, quasi-judicial and mandatory acts. Since the issuance of an EO is
not judicial, quasi-judicial or a mandatory act, a petition for certiorari and prohibition is an incorrect remedy;
instead a petition for declaratory relief under Rule 63 of the Rules of Court, filed with the Regional Trial Court
(RTC), is the proper recourse to assail the validity of EO 7: Section 1. Who may file petition. Any person
interested under a deed, will, contract or other written instrument, whose rights are affected by a
statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties, thereunder.
Same; Civil Procedure; Parties; “Locus Standi,” Defined; Words and Phrases; Locus standi or legal standing has
been defined as a personal and substantial interest in a case such that the party has sustained or will sustain
direct injury as a result of the governmental act that is being challenged.—“Locus standi or legal standing has
been defined as a personal and substantial interest in a case such that the party has sustained or will sustain
direct injury as a result of the governmental act that is being challenged. The gist of the question on 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.” This requirement of standing relates to the constitutional mandate that this
Court settle only actual cases or controversies.
Same; Same; Same; A party is allowed to raise a constitutional question when (1) he can show that he will
personally suffer some actual or threatened injury because of the allegedly illegal conduct of the government; (2)
the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a favorable
action.—As a general rule, a party is allowed to “raise a constitutional question” when (1) he can show that he
will personally suffer some actual or threatened injury because of the allegedly illegal conduct of the
government; (2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be
redressed by a favorable action. Jurisprudence defines interest as “material interest, an interest in issue and to
be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental
interest. By real interest is meant a present substantial interest, as distinguished from a mere expectancy or
a future, contingent, subordinate, or consequential interest.”
Same; Same; Pleadings and Practice; The defective jurat in the Verification/Certification of Non-Forum Shopping
is not a fatal defect; the verification is only a formal, not a jurisdictional, requirement that the Court may waive.—
Te point raised by the respondents regarding the petitioner’s defective jurat is correct. Indeed, A.M. No. 02-8-
13-SC, dated February 19, 2008, calls for a current identification document issued by an official agency bearing
the photograph and signature of the individual as competent evidence of identity. Nevertheless, we hasten to
clarify that the defective jurat in the Verification/Certification of Non-Forum Shopping is not a fatal defect, as
we held in In-N-Out Burger, Inc. v. Sehwani, Incorporated, 575 SCRA 535 (2008). The verification is only a
formal, not a jurisdictional, requirement that the Court may waive.
Constitutional Law; Executive Department; Government-Owned and Controlled Corporations; Government-Owned

and Controlled Corporations (GOCC) Governance Act of 2011 (R.A. No. 10149); With the enactment of the GOCC
Governance Act of 2011, the President is now authorized to fix the compensation framework of Government-
Owned and Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs).—With the enactment
of the GOCC Governance Act of 2011, the President is now authorized to fix the compensation framework of
GOCCs and GFIs. The pertinent provisions read: Section 5. Creation of the Governance Commission for
Government-Owned or Controlled Corporations.—There is hereby created an advisory, monitoring, and
oversight body with authority to formulate, implement and coordinate policies to be known as the Governance
Commission for Government-Owned or-Controlled Corporations, hereinafter referred to as the GCG, which
shall be attached to the Office of the President. The GCG shall have the following powers and functions: x x x x
h) Conduct compensation studies, develop and recommend to the President a competitive compensation and
remuneration system which shall attract and retain talent, at the same time allowing the GOCC to be financially
sound and sustainable; x x x x Section 8. Coverage of the Compensation and Position Classification System.—The
39
GCG, after conducting a compensation study, shall develop a Compensation and Position Classification System
which shall apply to all officers and employees of the GOCCs whether under the Salary Standardization Law or
exempt therefrom and shall consist of classes of positions grouped into such categories as the GCG may
determine, subject to approval of the President. Section 9. Position Titles and Salary Grades.—All positions in
the Positions Classification System, as determined by the GCG and as approved by the President, shall be
allocated to their proper position titles and salary grades in accordance with an Index of Occupational Services,
Position Titles and Salary Grades of the Compensation and Position Classification System, which shall be
prepared by the GCG and approved by the President. x x x x [N]o GOCC shall be exempt from the coverage of the
Compensation and Position Classification System developed by the GCG under this Act. As may be gleaned from
these provisions, the new law amended R.A. No. 7875 and other laws that enabled certain GOCCs and GFIs to fix
their own compensation frameworks; the law now authorizes the President to fix the compensation and
position classification system for all GOCCs and GFIs, as well as other entities covered by the law. This means
that, the President can now reissue an EO containing these same provisions without any legal constraints.
Remedial Law; Civil Procedure; Moot and Academic; A moot case is “one that ceases to present a justiciable
controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value. —
A moot case is “one that ceases to present a justiciable controversy by virtue of supervening events, so that a
declaration thereon would be of no practical use or value.” “[A]n action is considered ‘moot’ when it no longer
presents a justiciable controversy because the issues involved have become academic or dead[,] or when the
matter in dispute has already been resolved and hence, one is not entitled to judicial intervention unless the
issue is likely to be raised again between the parties x x x. Simply stated, there is nothing for the x x x court to
resolve as [its] determination x x x has been overtaken by subsequent events.”
CORONA, C.J., Separate Opinion:
Administrative Law; Public Officers; Government-Owned and Controlled Corporations (GOCC); View that
accountability in public office requires rationality and efficiency in both administrative and financial
operations of all government offices, government-owned and controlled corporations (GOCCs) included.—
Accountability in public office requires rationality and efficiency in both administrative and financial
operations of all government offices, government-owned and controlled corporations (GOCCs) included. As a
corollary, public funds must be utilized in a way that will promote transparency, accountability and prudence.
The nation was recently informed that GOCCs, most of which enjoyed privileges not afforded to other offices
and agencies of the National Government, suffer from serious fiscal deficit. Yet, officers and employees of these
GOCCs continue to receive hefty perks and excessive allowances presenting a stark disconnect and causing the
further depletion of limited resources. In the face of such situation, where the President as Chief Executive
makes a decisive move to stave off the financial hemorrhage and administrative inefficiency of government
corporations, the Court should not invalidate the Chief Executive’s action without a clear showing of grave
abuse of discretion on his part.
Constitutional Law; Judicial Review; View that the power of judicial review is a sword that must be unsheathed
with restraint.—The power of judicial review is a sword that must be unsheathed with restraint. To ensure this,
certain justiciability doctrines must be complied with as a prerequisite for the Court’s exercise of its awesome
power to declare the act of a co-equal branch invalid for being unconstitutional. These doctrines are important
as they are intertwined with the principle of separation of powers. They help define the judicial role; they
determine when it is appropriate for courts to review (a legal issue) and when it is necessary to defer to the
other branches of government.
Same; Same; Courts; View that courts do not decide all kinds of cases dumped on their laps and do not open their
doors to all parties or entities claiming a grievance.—Courts do not decide all kinds of cases dumped on their
laps and do not open their doors to all parties or entities claiming a grievance. Locus standi is intended to
assure a vigorous adversary presentation of the case. More importantly, it warrants the judiciary’s overruling
the determination of a coordinate, democratically elected organ of government. It thus goes to the very essence
of representative democracies.
Remedial Law; Civil Procedure; Parties; View that a party who assails the constitutionality of a statute or an
official act must have a direct and personal interest. He must show not only that the law or any governmental act
is invalid, but also that he sustained or is in immediate danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite way.—The irreducible minimum condition
40
for the exercise of judicial power is a requirement that a party “show he personally has suffered some actual or
threatened injury” to his rights. A party who assails the constitutionality of a statute or an official act must have
a direct and personal interest. He must show not only that the law or any governmental act is invalid, but also
that he sustained or is in immediate danger of sustaining some direct injury as a result of its enforcement,
and not merely that he suffers thereby in some indefinite way. He must show that he has been or is about to
be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to
some burdens or penalties by reason of the statute or act complained of. For this reason, petitioner’s reliance
on his status as PhilHealth employee, without more, is a frail thread that fails to sustain the burden
of locus standi required of anyone who may properly invoke the Court’s power of judicial review.
“Moratorium,” Defined; Words and Phrases; View that a moratorium is an authorized postponement in the
performance of an obligation or a suspension of a specific activity.—EO 7 simply imposes a moratorium on
increases in salaries, allowances and other benefits of officials and employees of GOCCs and GFIs and directs
the suspension of all allowances bonuses and incentives of GOCC and GFI officials. Moratorium is defined as an
authorized postponement in the performance of an obligation or a suspension of a specific activity. Section 9 of
EO 7 is not a permanent prohibition on petitioner’s perceived right to receive future increases. Nor is it an
absolute ban on salary increases as it ensures that, like all other officials and employees of the government,
officials and employees of GOCCs and GFIs will continue to enjoy the salary increases mandated under EO 8011
dated June 17, 2009 and EO 900 dated June 23, 2010.
Administrative Law; Public Officers; View that a public officer has a vested right only to salaries already earned
or accrued, he does not have a “right” to an increase in salary.—A public officer has a vested right only to salaries
already earned or accrued. Salary increases are a mere expectancy. They are by nature volatile and dependent
on numerous variables, including the company’s fiscal situation, the employee’s future performance on the job,
or the employee’s continued stay in a position. Thus, petitioner does not have a “right” to an increase in salary.
There is no vested right to salary increases. There must be a lawful decree or order supporting an employee’s
claim. In this case, petitioner failed to point to any lawful decree or order supporting his entitlement to future
increases in salary, as no such decree or order yet exists.
Remedial Law; Civil Procedure; Locus Standi; View that mere interest as a member of the Bar and an empty
invocation of a duty in “making sure that laws and orders by officials of the Philippine government are legally
issued and implemented” does not suffice to clothe one with standing.—Neither can petitioner rely on his
membership in the Philippine Bar to support his legal standing. Mere interest as a member of the Bar and an
empty invocation of a duty in “making sure that laws and orders by officials of the Philippine government are
legally issued and implemented” does not suffice to clothe one with standing. It is clear from the foregoing that
petitioner failed to satisfy the irreducible minimum condition that will trigger the exercise of judicial power.
Lacking a leg on which he may base his personality to bring this action, petitioner’s claim of sufficient standing
should fail.
Statutory Construction; View that provisions of law should be read and understood in their entirety and all parts
thereof should be seen as constituting a coherent whole.—Provisions of law should be read and understood in
their entirety and all parts thereof should be seen as constituting a coherent whole. In this context, the
recognition under Section 9 of Joint Resolution No. 4 of the authority granted to exempt entities like Philhealth
to determine their own compensation and position classification system seeks to exclude them from the salary
adjustments provided in Joint Resolution No. 4. Constitutional Law; Congress; Bills; Joint Resolutions; View that
under the Rules of both the Senate and the House of Representatives, a joint resolution, like a bill, is required to be
enrolled, examined, undergo three readings and signed by the presiding officer of each House and then presented
to the President for approval.—Under the Rules of both the Senate and the House of Representatives, a joint
resolution, like a bill, is required to be enrolled, examined, undergo three readings and signed by the presiding
officer of each House. A joint resolution, like a bill, is also presented to the President for approval. There is no
real difference between a bill and a joint resolution. A joint resolution also satisfies the two requisites before a
bill becomes law—approval by both Houses of Congress after three readings and approval by the President.
Thus, a joint resolution, upon approval by the President, is law. Even the Rules of the House of Representatives
acknowledge this: SEC 58. Third Reading. x x x No bill or joint resolution shall become law unless it passes
three (3) readings on separate days and printed copies thereof in its final form are distributed to the Members
three (3) days before its passage except when the President certifies to the necessity of its immediate
enactment to meet a public calamity or emergency.
41
Same; Public Officers; Wages; View that a public officer does not have a vested right to salary and his
compensation may be altered, decreased or discontinued, in the absence of a constitutional prohibition. —The
right of a public officer to receive compensation can only arise out of the rendition of the public services related
to his or her office. The right to compensation arises out of the performance by the public officer of his duties.
Thus, a public officer’s right to salary is limited only to salaries which he has already earned or accrued for
services rendered. Other than that, a public officer does not have a vested right to salary and his compensation
may be altered, decreased or discontinued, in the absence of a constitutional prohibition. If no vested right to
salary generally pertains to a public officer, there is no cogent reason to support the claim to a right to future
salary increase. The grant of any salary increase in the future is something that is merely anticipatory of a
prospective benefit, something that is contingent on various factors. That is why it is a mere expectancy, which
does not give rise to a vested right.
Same; Same; Bonus; View that a bonus is not a demandable and enforceable obligation. —There could have been
no violation of substantive due process as petitioner, or anybody for that matter, cannot properly claim a right
to receive bonuses. A bonus is not a demandable and enforceable obligation. By definition, a “bonus” is a
gratuity or act of liberality of the giver which cannot be demanded as a matter of right by the recipient. It is
something given in addition to what is ordinarily received by or strictly due to the recipient. The grant thereof
is basically a management prerogative which cannot be forced upon the employer who may not be obliged to
assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or
wages, especially so if it is incapable of doing so. Thus, there can be no oppression to speak of even if these
privileges (bonuses, allowances and incentives) cease to be given. All the more reason should the President’s
judgment as Chief Executive be accorded respect if he directs the temporary stoppage of the grant of bonuses
when he deems it to be prejudicial to public interest or too onerous because of the government’s fiscal
condition. It is therefore clear that the suspension of the grant of bonuses and the imposition of a moratorium
on salary increases under EO 7 do not deprive petitioner of any property right. As such, any declaration that
such suspension or moratorium violates substantive due process cannot be justified.
Constitutional Law; Public Officers; Executive Department; Government-Owned and Controlled Corporations
(GOCCs); Government Financial Institutions (GFIs); View that absent any showing of grave abuse of discretion on
his part, the Court should recognize in the President as Chief Executive the power and duty to protect and promote
public interest thru the rationalization of the compensation and position classification system in executive
departments, bureaus, offices and agencies, including Government-Owned and Controlled Corporations (GOCCs)
and Government Financial Institutions (GFIs).—Accountability of public office is a safeguard of representative
democracy. All who serve in government must always be aware that they are exercising a public trust. They
must bear in mind that public funds are scarce resources and should therefore be used prudently and
judiciously. Hence, where there are findings that government funds are being wasted due to operational
inefficiency and lack of fiscal responsibility in the executive departments, bureaus, offices or agencies, the
President as Chief Executive should not be deprived of the authority to control, stop, check or at least manage
the situation. Absent any showing of grave abuse of discretion on his part, the Court should recognize in the
President as Chief Executive the power and duty to protect and promote public interest thru the rationalization
of the compensation and position classification system in executive departments, bureaus, offices and agencies,
including GOCCs and GFIs.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition.

The facts are stated in the resolution of the Court.
The Solicitor General for respondents.
RESOLUTION
BRION, J.:
Before us is a Petition for Certiorari and Prohibition with Application for Writ of Preliminary Injunction and/or
Temporary Restraining Order,1 seeking to nullify and enjoin the implementation of Executive Order No. (EO) 7
issued by the Office of the President on September 8, 2010. Petitioner Jelbert B. Galicto asserts that EO 7 is
unconstitutional for having been issued beyond the powers of the President and for being in breach of existing
laws.
42
The petitioner is a Filipino citizen and an employee of the Philippine Health Insurance Corporation
(PhilHealth).2 He is currently holding the position of Court Attorney IV and is assigned at the PhilHealth
Regional Office CARAGA.3
Respondent Benigno Simeon C. Aquino III is the President of the Republic of the Philippines (Pres. Aquino); he
issued EO 7 and has the duty of implementing it. Respondent Paquito N. Ochoa, Jr. is the incumbent Executive
Secretary and, as the alter ego of Pres. Aquino, is tasked with the implementation of EO 7. Respondent Florencio
B. Abad is the incumbent Secretary of the Department of Budget and Management (DBM) charged with the
implementation of EO 7.4
The Antecedent Facts
On July 26, 2010, Pres. Aquino made public in his first State of the Nation Address the alleged excessive
allowances, bonuses and other benefits of Officers and Members of the Board of Directors of the Manila
Waterworks and Sewerage System—a government owned and controlled corporation (GOCC) which has been
unable to meet its standing obligations. 5 Subsequently, the Senate of the Philippines (Senate), through the
Senate Committee on Government Corporations and Public Enterprises, conducted an inquiry in aid of
legislation on the reported excessive salaries, allowances, and other benefits of GOCCs and government
financial institutions (GFIs).6
Based on its findings that “officials and governing boards of various [GOCCs] and [GFIs] x x x have been
granting themselves unwarranted allowances, bonuses, incentives, stock options, and other benefits [as well as
other] irregular and abusive practices,” 7 the Senate issued Senate Resolution No. 17 “urging the President to
order the immediate suspension of the unusually large and apparently excessive allowances, bonuses,
incentives and other perks of members of the governing boards of [GOCCs] and [GFIs].” 8
Heeding the call of Congress, Pres. Aquino, on September 8, 2010, issued EO 7, entitled “Directing the
Rationalization of the Compensation and Position Classification System in the [GOCCs] and [GFIs], and for Other
Purposes.” EO 7 provided for the guiding principles and framework to establish a fixed compensation and
position classification system for GOCCs and GFIs. A Task Force was also created to review all remunerations of
GOCC and GFI employees and officers, while GOCCs and GFIs were ordered to submit to the Task Force
information regarding their compensation. Finally, EO 7 ordered (1) a moratorium on the increases in the
salaries and other forms of compensation, except salary adjustments under EO 8011 and EO 900, of all
GOCC and GFI employees for an indefinite period to be set by the President, 9 and (2) a suspension of all
allowances, bonuses and incentives of members of the Board of Directors/Trustees until December 31,
2010.10
EO 7 was published on September 10, 2010. 11 It took effect on September 25, 2010 and precluded the Board of
Directors, Trustees and/or Officers of GOCCs from granting and releasing bonuses and allowances to members
of the board of directors, and from increasing salary rates of and granting new or additional benefits and
allowances to their employees.
The Petition
The petitioner claims that as a PhilHealth employee, he is affected by the implementation of EO 7, which was
issued with grave abuse of discretion amounting to lack or excess of jurisdiction, based on the following
arguments:
I.
EXECUTIVE ORDER NO. 7 IS NULL AND VOID FOR LACK OF LEGAL BASIS DUE TO THE FOLLOWING GROUNDS:
A. P.D. 985 IS NOT APPLICABLE AS BASIS FOR EXECUTIVE ORDER NO. 7 BECAUSE THE
GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS WERE SUBSEQUENTLY GRANTED
THE POWER TO FIX COMPENSATION LONG AFTER SUCH POWER HAS BEEN REVOKED BY P.D.
1597 AND R.A. 6758.
B. THE GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS DO NOT NEED TO HAVE ITS
COMPENSATION PLANS, RATES AND POLICIES REVIEWED BY THE DBM AND APPROVED BY THE
PRESIDENT BECAUSE P.D. 1597 REQUIRES ONLY THE GOCCs TO REPORT TO THE OFFICE TO THE
43
PRESIDENT THEIR COMPENSATION PLANS AND RATES BUT THE SAME DOES NOT GIVE THE
PRESIDENT THE POWER OF CONTROL OVER THE FISCAL POWER OF THE GOCCs.
C. J.R. NO. 4, [SERIES] 2009 IS NOT APPLICABLE AS LEGAL BASIS BECAUSE IT HAD NOT RIPENED INTO X X X
LAW, THE SAME NOT HAVING BEEN PUBLISHED.
D. ASSUMING ARGUENDO THAT J.R. NO. 1, S. 2004 (sic) AND J.R. 4, S. 2009 ARE VALID, STILL THEY
ARE NOT APPLICABLE AS LEGAL BASIS BECAUSE THEY ARE NOT LAWS WHICH MAY VALIDLY
DELEGATE POWER TO THE PRESIDENT TO SUSPEND THE POWER OF THE BOARD TO FIX
COMPENSATION.
II.
EXECUTIVE ORDER NO. 7 IS INVALID FOR DIVESTING THE BOARD OF DIRECTORS OF [THE] GOCCS OF THEIR
POWER TO FIX THE COMPENSATION, A POWER WHICH IS A LEGISLATIVE GRANT AND WHICH COULD NOT
BE REVOKED OR MODIFIED BY AN EXECUTIVE FIAT.
III.
EXECUTIVE ORDER NO. 7 IS BY SUBSTANCE A LAW, WHICH IS A DEROGATION OF CONGRESSIONAL
PREROGATIVE AND IS THEREFORE UNCONSTITUTIONAL.
IV.
THE ACTS OF SUSPENDING AND IMPOSING MORATORIUM ARE ULTRA VIRES ACTS BECAUSE J.R. NO. 4 DOES
NOT EXPRESSLY AUTHORIZE THE PRESIDENT TO EXERCISE SUCH POWERS.
V.
EXECUTIVE ORDER NO. 7 IS AN INVALID ISSUANCE BECAUSE IT HAS NO SUFFICIENT STANDARDS AND IS
THEREFORE ARBITRARY, UNREASONABLE AND A VIOLATION OF SUBSTANTIVE DUE PROCESS.
VI.
EXECUTIVE ORDER NO. 7 INVOLVES THE DETERMINATION AND DISCRETION AS TO WHAT THE LAW SHALL
BE AND IS THEREFORE INVALID FOR ITS USURPATION OF LEGISLATIVE POWER.
VII.
CONSISTENT WITH THE DECISION OF THE SUPREME COURT IN PIMENTEL V. AGUIRRE CASE, EXECUTIVE
ORDER NO. 7 IS ONLY DIRECTORY AND NOT MANDATORY.12
The Case for the Respondents

On December 13, 2010, the respondents filed their Comment. They pointed out the following procedural
defects as grounds for the petition’s dismissal: (1) the petitioner lacks locus standi; (2) the petitioner failed to
attach a board resolution or secretary’s certificate authorizing him to question EO 7 in behalf of PhilHealth; (3)
the petitioner’s signature does not indicate his PTR Number, Mandatory Continuing Legal Education (MCLE)
Compliance Number and Integrated Bar of the Philippines (IBP) Number; (4) the jurat of the Verification and
Certification of Non-Forum Shopping failed to indicate a valid identification card as provided under A.M. No.
02-8-13-SC; (5) the President should be dropped as a party respondent as he is immune from suit; and
(6) certiorari is not applicable to this case.13
The respondents also raised substantive defenses to support the validity of EO 7. They claim that the President
exercises control over the governing boards of the GOCCs and GFIs; thus, he can fix their compensation
packages. In addition, EO 7 was issued in accordance with law for the purpose of controlling the grant of
excessive salaries, allowances, incentives and other benefits to GOCC and GFI employees. They also advocate
the validity of Joint Resolution (J.R.) No. 4, which they point to as the authority for issuing EO 7. 14
Meanwhile, on June 6, 2011, Congress enacted Republic Act (R.A.) No. 10149, 15 otherwise known as the “GOCC
Governance Act of 2011.” Section 11 of RA 10149 expressly authorizes the President to fix the compensation
framework of GOCCs and GFIs.
The Court’s Ruling
44
We resolve to DISMISS the petition for its patent formal and procedural infirmities, and for having been
mooted by subsequent events.
A. Certiorari is not the proper remedy.

Under the Rules of Court, petitions for Certiorari and Prohibition are availed of to question judicial, quasi-
judicial and mandatory acts. Since the issuance of an EO is not judicial, quasi-judicial or a mandatory act, a
petition for certiorari and prohibition is an incorrect remedy; instead a petition for declaratory relief under
Rule 63 of the Rules of Court, filed with the Regional Trial Court (RTC), is the proper recourse to assail the
validity of EO 7:
“Section 1. Who may file petition. Any person interested under a deed, will, contract or other written
instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other
Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.” (Emphases ours.)
Liga ng mga Barangay National v. City Mayor of Manila 16 is a case in point. 17 In Liga, we dismissed the petition
for certiorari to set aside an EO issued by a City Mayor and insisted that a petition for declaratory relief should
have been filed with the RTC. We painstakingly ruled:
“After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any
judicial or quasi-judicial prerogatives. A petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is a special civil action that may be invoked only against a tribunal, board, or officer exercising
judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari.—When any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in
the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must concur: (1) it must be directed
against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or
officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting [to]
lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law.
A respondent is said to be exercising judicial function where he has the power to determine what the law is and
what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon
the rights of the parties.
Quasi-judicial function, on the other hand, is “a term which applies to the actions, discretion, etc., of public
administrative officers or bodies … required to investigate facts or ascertain the existence of facts, hold
judicial nature.”
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law
that gives rise to some specific rights of persons or property under which adverse claims to such rights are
made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power
and authority to determine the law and adjudicate the respective rights of the contending parties.
The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or quasi-judicial
functions. As correctly pointed out by the respondents, the enactment by the City Council of Manila of the
45
assailed ordinance and the issuance by respondent Mayor of the questioned executive order were done in the
exercise of legislative and executive functions, respectively, and not of judicial or quasi-judicial functions. On
this score alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks the declaration by
this Court of the unconstitutionality or illegality of the questioned ordinance and executive order. It, thus,
partakes of the nature of a petition for declaratory relief over which this Court has only appellate, not original,
jurisdiction. Section 5, Article VIII of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and
over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in
question. (Italics supplied).
As such, this petition must necessar[ily] fail, as this Court does not have original jurisdiction over a petition for
declaratory relief even if only questions of law are involved.” 18
Likewise, in Southern Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council,19 we similarly dismissed
the petitions for certiorari and prohibition challenging the constitutionality of R.A. No. 9372, otherwise known
as the “Human Security Act of 2007,” since the respondents therein (members of the Anti-Terrorism Council)
did not exercise judicial or quasi-judicial functions.
While we have recognized in the past that we can exercise the discretion and rulemaking authority we are
granted under the Constitution,20 and set aside procedural considerations to permit parties to bring a suit
before us at the first instance through certiorari and/or prohibition,21 this liberal policy remains to be an
exception to the general rule, and thus, has its limits. In Concepcion v. Commission on Elections (COMELEC),22 we
emphasized the importance of availing of the proper remedies and cautioned against the wrongful use
of certiorari in order to assail the quasi-legislative acts of the COMELEC, especially by the wrong party. In ruling
that liberality and the transcendental doctrine cannot trump blatant disregard of procedural rules, and
considering that the petitioner had other available remedies (such as a petition for declaratory relief with the
appropriate RTC under the terms of Rule 63 of the Rules of Court), as in this case, we categorically ruled:
“The petitioner’s unusual approaches and use of Rule 65 of the Rules of Court do not appear to us to be the
result of any error in reading Rule 65, given the way the petition was crafted. Rather, it was a backdoor
approach to achieve what the petitioner could not directly do in his individual capacity under Rule 65. It was, at
the very least, an attempted bypass of other available, albeit lengthier, modes of review that the Rules of Court
provide. While we stop short of concluding that the petitioner’s approaches constitute an abuse of process
through a manipulative reading and application of the Rules of Court, we nevertheless resolve that the
petition should be dismissed for its blatant violation of the Rules. The transgressions alleged in a
petition, however weighty they may sound, cannot be justifications for blatantly disregarding the rules
of procedure, particularly when remedial measures were available under these same rules to achieve
the petitioner’s objectives. For our part, we cannot and should not—in the name of liberality and the
“transcendental importance” doctrine—entertain these types of petitions. As we held in the very recent
case of Lozano, et al. vs. Nograles, albeit from a different perspective, our liberal approach has its limits and
should not be abused.”23 [emphasis supplied]
B. Petitioner lacks locus standi.

“Locus standi or legal standing has been defined as a personal and substantial interest in a case such that the
party has sustained or will sustain direct injury as a result of the governmental act that is being challenged. The
gist of the question on 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.” 24 This requirement of standing relates to
the constitutional mandate that this Court settle only actual cases or controversies. 25
46
Thus, as a general rule, a party is allowed to “raise a constitutional question” when (1) he can show that he will
personally suffer some actual or threatened injury because of the allegedly illegal conduct of the government;
(2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a
favorable action.26
Jurisprudence defines interest as “material interest, an interest in issue and to be affected by the decree, as
distinguished from mere interest in the question involved, or a mere incidental interest. By real interest is
meant a present substantial interest, as distinguished from a mere expectancy or a future, contingent,
subordinate, or consequential interest.”27
To support his claim that he has locus standi to file the present petition, the petitioner contends that as an
employee of PhilHealth, he “stands to be prejudiced by [EO] 7, which suspends or imposes a moratorium on the
grants of salary increases or new or increased benefits to officers and employees of GOCC[s] and x x x curtail[s]
the prerogative of those officers who are to fix and determine his compensation.” 28 The petitioner also claims
that he has standing as a member of the bar in good standing who has an interest in ensuring that laws and
orders of the Philippine government are legally and validly issued and implemented.
The respondents meanwhile argue that the petitioner is not a real party-in-interest since future increases in
salaries and other benefits are merely contingent events or expectancies. 29 The petitioner, too, is not asserting a
public right for which he is entitled to seek judicial protection. Section 9 of EO 7 reads:
“Section 9. Moratorium on Increases in Salaries, Allowances, Incentives and Other Benefits.—

Moratorium on increases in the rates of salaries, and the grant of new increases in the rates of allowances,
incentives and other benefits, except salary adjustments pursuant to Executive Order No. 8011 dated June 17,
2009 and Executive Order No. 900 dated June 23, 2010, are hereby imposed until specifically authorized by the
President.” [emphasis ours]
In the present case, we are not convinced that the petitioner has demonstrated that he has a personal stake or
material interest in the outcome of the case because his interest, if any, is speculative and based on a mere
expectancy. In this case, the curtailment of future increases in his salaries and other benefits cannot but be
characterized as contingent events or expectancies. To be sure, he has no vested rights to salary increases and,
therefore, the absence of such right deprives the petitioner of legal standing to assail EO 7.
It has been held that as to the element of injury, such aspect is not something that just anybody with some
grievance or pain may assert. It has to be direct and substantial to make it worth the court’s time, as well as
the effort of inquiry into the constitutionality of the acts of another department of government. If the asserted
injury is more imagined than real, or is merely superficial and insubstantial, then the courts may end up
being importuned to decide a matter that does not really justify such an excursion into constitutional
adjudication.30 The rationale for this constitutional requirement of locus standi is by no means trifle. Not only
does it assure the vigorous adversary presentation of the case; more importantly, it must suffice to warrant the
Judiciary’s overruling the determination of a coordinate, democratically elected organ of government, such as
the President, and the clear approval by Congress, in this case. Indeed, the rationale goes to the very essence of
representative democracies.31
Neither can the lack of locus standi be cured by the petitioner’s claim that he is instituting the present petition
as a member of the bar in good standing who has an interest in ensuring that laws and orders of the Philippine
government are legally and validly issued. This supposed interest has been branded by the Court in Integrated
Bar of the Phils. (IBP) v. Hon. Zamora,32 “as too general an interest which is shared by other groups and [by] the
whole citizenry.”33 Thus, the Court ruled in IBP that the mere invocation by the IBP of its duty to preserve the
rule of law and nothing more, while undoubtedly true, is not sufficient to clothe it with standing in that case.
The Court made a similar ruling in Prof. David v. Pres. Macapagal-Arroyo34 and held that the petitioners therein,
who are national officers of the IBP, have no legal standing, having failed to allege any direct or potential injury
which the IBP, as an institution, or its members may suffer as a consequence of the issuance of Presidential
Proclamation No. 1017 and General Order No. 5.35
47
We note that while the petition raises vital constitutional and statutory questions concerning the power of the
President to fix the compensation packages of GOCCs and GFIs with possible implications on their officials and
employees, the same cannot “infuse” or give the petitioner locus standi under the transcendental importance or
paramount public interest doctrine. In Velarde v. Social Justice Society,36 we held that even if the Court could
have exempted the case from the stringent locus standi requirement, such heroic effort would be futile because
the transcendental issue could not be resolved any way, due to procedural infirmities and shortcomings, as
in the present case.37 In other words, giving due course to the present petition which is saddled with formal and
procedural infirmities explained above in this Resolution, cannot but be an exercise in futility that does not
merit the Court’s liberality. As we emphasized in Lozano v. Nograles,38 “while the Court has taken an
increasingly liberal approach to the rule of locus standi, evolving from the stringent requirements of
‘personal injury’ to the broader ‘transcendental importance’ doctrine, such liberality is not to be
abused.”39
Finally, since the petitioner has failed to demonstrate a material and personal interest in the issue in dispute,
he cannot also be considered to have filed the present case as a representative of PhilHealth. In this regard, we
cannot ignore or excuse the blatant failure of the petitioner to provide a Board Resolution or a Secretary’s
Certificate from PhilHealth to act as its representative.
C. The petition has a defective jurat.

The respondents claim that the petition should be dismissed for failing to comply with Section 3, Rule 7 of the
Rules of Civil Procedure, which requires the party or the counsel representing him to sign the pleading and
indicate an address that should not be a post office box. The petition also allegedly violated the Supreme
Court En Banc Resolution dated November 12, 2001, requiring counsels to indicate in their pleadings their Roll
of Attorneys Number, their PTR Number and their IBP Official Receipt or Lifetime Member Number; otherwise,
the pleadings would be considered unsigned and dismissible. Bar Matter No. 1922 likewise states that a counsel
should note down his MCLE Certificate of Compliance or Certificate of Exemption in the pleading, but the
petitioner had failed to do so.40
We do not see any violation of Section 3, Rule 7 of the Rules of Civil Procedure as the petition bears the
petitioner’s signature and office address. The present suit was brought before this Court by the petitioner
himself as a party litigant and not through counsel. Therefore, the requirements under the Supreme Court En
Banc Resolution dated November 12, 2001 and Bar Matter No. 1922 do not apply. In Bar Matter No. 1132, April
1, 2003, we clarified that a party who is not a lawyer is not precluded from signing his own pleadings as this is
allowed by the Rules of Court; the purpose of requiring a counsel to indicate his IBP Number and PTR Number
is merely to protect the public from bogus lawyers. A similar construction should be given to Bar Matter No.
1922, which requires lawyers to indicate their MCLE Certificate of Compliance or Certificate of Exemption;
otherwise, the provision that allows parties to sign their own pleadings will be negated.
However, the point raised by the respondents regarding the petitioner’s defective jurat is correct. Indeed, A.M.
No. 02-8-13-SC, dated February 19, 2008, calls for a current identification document issued by an official
agency bearing the photograph and signature of the individual as competent evidence of identity. Nevertheless,
we hasten to clarify that the defective jurat in the Verification/Certification of Non-Forum Shopping is not a
fatal defect, as we held in In-N-Out Burger, Inc. v. Sehwani, Incorporated. 41 The verification is only a formal, not a
jurisdictional, requirement that the Court may waive.
D. The petition has been mooted by supervening events.

Because of the transitory nature of EO 7, it has been pointed out that the present case has already been
rendered moot by these supervening events: (1) the lapse on December 31, 2010 of Section 10 of EO 7 that
suspended the allowances and bonuses of the directors and trustees of GOCCs and GFIs; and (2) the
enactment of R.A. No. 10149 amending the provisions in the charters of GOCCs and GFIs empowering their
board of directors/trustees to determine their own compensation system, in favor of the grant of authority to
the President to perform this act.
48
With the enactment of the GOCC Governance Act of 2011, the President is now authorized to fix the
compensation framework of GOCCs and GFIs. The pertinent provisions read:
“Section 5. Creation of the Governance Commission for Government-Owned or -Controlled Corporations.—
There is hereby created an advisory, monitoring, and oversight body with authority to formulate, implement
and coordinate policies to be known as the Governance Commission for Government-Owned or-Controlled
Corporations, hereinafter referred to as the GCG, which shall be attached to the Office of the President. The GCG
shall have the following powers and functions:
x x x x
h) Conduct compensation studies, develop and recommend to the President a competitive compensation
and remuneration system which shall attract and retain talent, at the same time allowing the GOCC to be
financially sound and sustainable;
x x x x
Section 8. Coverage of the Compensation and Position Classification System.—The GCG, after conducting a
compensation study, shall develop a Compensation and Position Classification System which shall apply to all
officers and employees of the GOCCs whether under the Salary Standardization Law or exempt therefrom and
shall consist of classes of positions grouped into such categories as the GCG may determine, subject to approval
of the President.
Section 9. Position Titles and Salary Grades.—All positions in the Positions Classification System, as
determined by the GCG and as approved by the President, shall be allocated to their proper position titles and
salary grades in accordance with an Index of Occupational Services, Position Titles and Salary Grades of the
Compensation and Position Classification System, which shall be prepared by the GCG and approved by the
President.
x x x x
[N]o GOCC shall be exempt from the coverage of the Compensation and Position Classification System
developed by the GCG under this Act.”
As may be gleaned from these provisions, the new law amended R.A. No. 7875 and other laws that enabled
certain GOCCs and GFIs to fix their own compensation frameworks; the law now authorizes the President to fix
the compensation and position classification system for all GOCCs and GFIs, as well as other entities covered by
the law. This means that, the President can now reissue an EO containing these same provisions without any
legal constraints.
A moot case is “one that ceases to present a justiciable controversy by virtue of supervening events, so that a
declaration thereon would be of no practical use or value.” 42 “[A]n action is considered ‘moot’ when it no longer
presents a justiciable controversy because the issues involved have become academic or dead[,] or when the
matter in dispute has already been resolved and hence, one is not entitled to judicial intervention unless the
issue is likely to be raised again between the parties x x x. Simply stated, there is nothing for the x x x court to
resolve as [its] determination x x x has been overtaken by subsequent events.”43
This is the present situation here. Congress, thru R.A. No. 10149, has expressly empowered the President to
establish the compensation systems of GOCCs and GFIs. For the Court to still rule upon the supposed
unconstitutionality of EO 7 will merely be an academic exercise. Any further discussion of the constitutionality
of EO 7 serves no useful purpose since such issue is moot in its face in light of the enactment of R.A. No. 10149.
In the words of the eminent constitutional law expert, Fr. Joaquin Bernas, S.J., “the Court normally [will not]
entertain a petition touching on an issue that has become moot because x x x there would [be] no longer x x x a
‘flesh and blood’ case for the Court to resolve.” 44
All told, in view of the supervening events rendering the petition moot, as well as its patent formal and
procedural infirmities, we no longer see any reason for the Court to resolve the other issues raised in
the certiorari petition.
WHEREFORE, premises considered, the petition is DISMISSED. No costs.

SO ORDERED.
Carpio, Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Abad, Villarama, Jr., Perez, Mendoza,
Reyes and Perlas-Bernabe, JJ., concur.
49
Corona (C.J.), See separate opinion.

Del Castillo, J., On Official Leave.
Sereno, J., On Leave.
S E P A R A T E O P I N I O N
CORONA, C.J.:
Most GOCCs are incurring significant financial losses. Budgetary support to the total government corporate sector
(including government financial institutions, social security institutions, and GOCCs providing goods and services
to the public) amounted to P80.4 billion during 2000–2004. In addition, indirect support, in the form of
guarantees on GOCC obligations, is also in the billions of pesos. In the past 5 years, there has been a noticeable
increase in the aggregate deficit of the 14 monitored GOCCs,1 bringing their financial viability into question. While
the 14 monitored GOCCs’ current and capital expenditures fluctuated around 6% of GDP, revenues have fallen
from 5% to 4.1% of GDP over 2000–2004, increasing the deficit of the monitored GOCCs from 0.6% to 1.8% of GDP
over the same period. In 2004, the monitored GOCCs’ consolidated deficit was P85.4 billion, a more than
fourfold increase from the 2000 level of P19.2 billion. The 2004 deficit is already about the same size as the
potential new revenues collected through the expanded value-added tax law. There are various reasons for the
ballooning GOCC deficits, including (i) failure to adjust tariff rates, (ii) large capital requirements, and
(iii) operational and management inefficiencies.2
Accountability in public office requires rationality and efficiency in both administrative and financial
operations of all government offices, government-owned and controlled corporations (GOCCs) included. As a
corollary, public funds must be utilized in a way that will promote transparency, accountability and prudence.
The nation was recently informed that GOCCs, most of which enjoyed privileges not afforded to other offices
and agencies of the National Government, suffer from serious fiscal deficit. Yet, officers and employees of these
GOCCs continue to receive hefty perks and excessive allowances presenting a stark disconnect and causing the
further depletion of limited resources. In the face of such situation, where the President as Chief Executive
makes a decisive move to stave off the financial hemorrhage and administrative inefficiency of government
corporations, the Court should not invalidate the Chief Executive’s action without a clear showing of grave
abuse of discretion on his part.
Factual Antecedents
In his first State of the Nation Address, President Benigno Simeon C. Aquino III exposed anomalies in the
financial management of the Metropolitan Waterworks and Sewerage System, the National Power Corporation
and the National Food Authority. These revelations prompted the Senate to conduct legislative inquiries on the
matter of the activities of GOCCs. Appalled by its findings, the Senate issued Resolution No. 17, s. 2010, urging
the President to order the immediate suspension of the unusually large and excessive allowances, bonuses,
incentives and other perks of members of the governing boards of GOCCs and government financial institutions
(GFIs). Thus, on September 8, 2010, President Benigno Simeon C. Aquino III issued Executive Order No. 7 3 (EO
7) strengthening the supervision of the compensation levels of GOCCs and GFIs by controlling the grant of
excessive salaries, allowances, incentives and other benefits. 4
EO 7 imposes a moratorium on increases in salaries, allowances, incentives and other benefits of GOCCs and
GFIs, except salary adjustments pursuant to EO 8011 dated June 17, 2009 and EO 900 dated June 23, 2010. 5 It
suspended the allowances, bonuses and other perks enjoyed by the boards of directors/trustees of GOCCs and
GFIs until December 31, 2010, pending the issuance of new policies and guidelines on the compensation
packages of GOCCs and GFIs.6 In addition, it provides for the creation of a Task Force on Corporate
Compensation (TFCC) to undertake a review of all remunerations granted to members of the board of directors,
officers and rank-and-file employees, as well as discretionary funds of GOCCs and GFIs. 7 It mandates the
submission of information on all personnel remuneration from all GOCCs and GFIs to the TFCC. 8 Lastly, it
establishes guiding principles as well as a total compensation framework for the rationalization of the
compensation and position classification system in GOCCs and GFIs. 9
The constitutionality of EO 7 is now being challenged by petitioner Jelbert B. Galicto who brings this petition
for certiorari and prohibition in his capacity as a lawyer and as an employee of the Philippine Health Insurance
50
Corporation (PhilHealth) Regional Office–Butuan City. Essentially, he questions the authority of the President
to issue EO 7. He likewise assails the constitutionality of EO 7 for allegedly violating his right to property
without due process of law.
The ponencia of Justice Arturo D. Brion dismisses the petition for being replete with formal and procedural
defects and for having been rendered moot by supervening events.
I agree with the ponencia’s thorough discussion and correct disposition. Nevertheless, I am submitting this
opinion to express my thoughts on matters which I believe to be equally important considerations in the
resolution of this case.
Fundamental considerations governing the exercise of the power of judicial review require the Court to
exercise restraint in nullifying the act of a co-equal and coordinate branch. Here, the justiciability doctrines of
standing and mootness work against petitioner.
Moreover, a careful consideration of the respective arguments of the parties compels sustaining the validity of
EO 7. The President as Chief Executive has the legal authority to issue EO 7. Furthermore, petitioner failed to
show that the President committed grave abuse of discretion in directing the rationalization of the
compensation and position classification system in GOCCs and GFIs.
Lack of Standing and Mootness

The power of judicial review is a sword that must be unsheathed with restraint. To ensure this, certain
justiciability doctrines must be complied with as a prerequisite for the Court’s exercise of its awesome power to
declare the act of a co-equal branch invalid for being unconstitutional. These doctrines are important as they
are intertwined with the principle of separation of powers. 10 They help define the judicial role; they determine
when it is appropriate for courts to review (a legal issue) and when it is necessary to defer to the other
branches of government.11
Among the justiciability doctrines are standing and mootness. Petitioner failed to observe both.
Courts do not decide all kinds of cases dumped on their laps and do not open their doors to all parties or
entities claiming a grievance.12 Locus standi is intended to assure a vigorous adversary presentation of the case.
More importantly, it warrants the judiciary’s overruling the determination of a coordinate, democratically
elected organ of government. It thus goes to the very essence of representative democracies. 13
Petitioner, for himself, asserts his right to question the constitutionality of EO 7 on two grounds. First, as an
employee of PhilHealth, he allegedly stands to be prejudiced by EO 7 insofar as it suspends or imposes a
moratorium on the grant of salary increases and other benefits to employees and officials of GOCCs and GFIs
and curtails the prerogatives of the officers responsible for the fixing and determination of his
compensation. Second, as a lawyer, he claims to have an interest in making sure that laws and orders by
government officials are legally and validly issued and implemented.
Petitioner cannot sufficiently anchor his standing to bring this action on account of his employment in
PhilHealth, a GOCC covered by EO 7. He cannot reasonably expect this Court to sympathize with his lament that
the law impedes or threatens to impede his right to receive future increases as well as the right of members of
the board of directors of Philhealth to allowances and bonuses.
The irreducible minimum condition for the exercise of judicial power is a requirement that a party “show he
personally has suffered some actual or threatened injury” to his rights. 14 A party who assails the
constitutionality of a statute or an official act must have a direct and personal interest. He must show not only
that the law or any governmental act is invalid, but also that he sustained or is in immediate danger of
sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some
indefinite way. He must show that he has been or is about to be denied some right or privilege to which
51
he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute
or act complained of.15
For this reason, petitioner’s reliance on his status as PhilHealth employee, without more, is a frail thread that
fails to sustain the burden of locus standi required of anyone who may properly invoke the Court’s power of
judicial review.
EO 7 simply imposes a moratorium on increases in salaries, allowances and other benefits of officials and
employees of GOCCs and GFIs and directs the suspension of all allowances bonuses and incentives of GOCC and
GFI officials. Moratorium is defined as an authorized postponement in the performance of an obligation or a
suspension of a specific activity.16 Section 9 of EO 7 is not a permanent prohibition on petitioner’s perceived
right to receive future increases. Nor is it an absolute ban on salary increases as it ensures that, like all other
officials and employees of the government, officials and employees of GOCCs and GFIs will continue to enjoy the
salary increases mandated under EO 8011 dated June 17, 2009 and EO 900 dated June 23, 2010.
While one’s employment is a constitutionally-protected property right, petitioner does not claim that his
employment is at risk under EO 7. Petitioner is simply concerned about his entitlement to future salary
increases. However, a public officer has a vested right only to salaries already earned or accrued. 17 Salary
increases are a mere expectancy.18 They are by nature volatile and dependent on numerous variables, including
the company’s fiscal situation, the employee’s future performance on the job, or the employee’s continued stay
in a position.19 Thus, petitioner does not have a “right” to an increase in salary. There is no vested right to salary
increases.20 There must be a lawful decree or order supporting an employee’s claim. 21 In this case, petitioner
failed to point to any lawful decree or order supporting his entitlement to future increases in salary, as no such
decree or order yet exists.
It is, however, contended that petitioner does not claim any right to any future increase. He merely seeks to
remove any legal impediment to his receiving future increases. It is asserted that, without the legal impediment
provided under Section 9 of EO 7, any future increase in petitioner’s compensation will simply depend on the
usual factors considered by the proper authorities. I fear this view is misleading and incorrect.
It is misleading because, by re-working the concept of injury, it diverts the focus from the required right-centric
approach to the concept of injury as an element of locus standi.
Injury or threat of injury, as an element of legal standing, refers to a denial of a right or privilege. It does not
include the denial of a reasonable expectation.
The argument is likewise incorrect because petitioner’s reasonable expectation of any future salary increase is
subject to presidential approval. Even without Section 9 of EO 7, the President may disallow any salary increase
in RA 675822—exempt entities. Section 9 of Joint Resolution No. 4, Section 59 of the General Provisions of RA
997023 and Section 56 of the General Provisions of RA 10147 24 expressly confer on the President the authority
to approve or disapprove “any grant of or increase in salaries, allowances, and other fringe benefits” in entities
exempt from the coverage of RA 6758. The approval of the President, upon the favorable recommendation of
the Department of Budget and Management (DBM), is among the “usual factors” that will determine any future
salary increase that may be reasonable expected to be received by petitioner.
Petitioner cannot also lay claim to any direct personal injury to his right or interest arising from the suspension
under Section 10 of EO 7 of allowances and bonuses enjoyed by the board of directors/trustees of GOCCs and
GFIs. He is not a member of the board of directors of Philhealth.
Neither can petitioner rely on his membership in the Philippine Bar to support his legal standing. Mere interest
as a member of the Bar25 and an empty invocation of a duty in “making sure that laws and orders by officials of
the Philippine government are legally issued and implemented” does not suffice to clothe one with standing. 26
52
It is clear from the foregoing that petitioner failed to satisfy the irreducible minimum condition that will trigger
the exercise of judicial power. Lacking a leg on which he may base his personality to bring this action,
petitioner’s claim of sufficient standing should fail.
Even assuming that petitioner had standing at the time he commenced this petition, subsequent events have
rendered his petition moot.
For one, the effectivity of the suspension of allowances and bonuses enjoyed by the board of directors/trustees
of GOCCs and GFIs under Section 10 of EO 7 already lapsed on December 31, 2010. 27 Thus, a review of the
constitutionality of that provision is no longer necessary and its invalidation improper. The unnecessary
invalidation of Section 10 of EO 7 might not only betray injudiciousness on the part of the Court but also
needlessly put the Chief Executive, the head of a co-equal branch, in a bad light for issuing an invalid provision.
Thus, the undue disregard of the mootness doctrine in connection with Section 10 of EO 7 would inflict severe
collateral damage to judicial modesty and inter-branch courtesy.
Moreover, as the ponencia correctly ruled, the enactment of RA 28 1014929 has rendered the issue as to the
validity of EO 7 effectively moot. With RA 10149, Congress affirmed the power of the President as enunciated in
EO 7 to set guidelines and components of a rationalized compensation and position classification for all
GOCC and GFI employees.
If a case is moot, there is no longer an actual controversy between adverse litigants. 30 Also, if events subsequent
to the initiation of the lawsuit have resolved the matter, then the decision of the court on that issue is not likely
to have any meaningful effect.31
With the recognition that RA 10149 mooted the challenge to EO 7, the Court must act with circumspection and
prudence, bearing in mind that due respect for a co-equal branch necessitates that the presumption of legality
and constitutionality afforded to the said provisions should no longer be disturbed.
Consistency with Existing Laws
Sections 2 to 6 of EO 7 is an enumeration of the guidelines and components of a rationalized compensation and

position classification for GOCCs and GFIs that the President intends to establish. In particular, Section 2
provides the guiding principles; Section 3 discusses the total compensation framework; Section 4 pertains to
the standard components of the compensation and position classification system; Section 5 involves the
rationalization of indirect compensation and Section 6 lists the considerations in setting compensation levels.
Petitioner claims that these provisions are invalid because they violate existing laws, namely Section 16(n) of
RA 787532 (the charter of Philhealth) and Section 9 of Joint Resolution No. 4 33 of the Senate and the House of
Representatives.
Petitioner finds fault in the failure of EO 7 to correctly distinguish between GOCCs and GFIs that have been
exempted by law from RA 6758, as amended, and those that are within its coverage.
RA 6758, as amended, vests the Department of Budget and Management (DBM), which is under the control of
the President, the authority to establish and administer a compensation and position classification system. On
the other hand, Section 16(n) of RA 7875 gives the board of directors of Philhealth the authority to appoint its
own personnel and to fix their compensation, with the exception of the Philhealth president whose
appointment and compensation require approval of the President. For petitioner, EO 7 violates Section 16(n) of
RA 7875 by vesting on the DBM and the President the power to determine the compensation of Philhealth
employees.
Joint Resolution No. 4 authorizes the President to modify the compensation and position classification system
under RA 6758 of civilian personnel, among others. Section 9 of Joint Resolution No. 4 recognizes the distinct
53
character of exempt entities and provides that such entities shall be governed by their respective compensation
and position classification system. For petitioner, by using the guidelines, standards and components of
standardized compensation framework provided under Joint Resolution No. 4 and applying them to all GOCCs
and GFIs, EO 7 contravenes Joint Resolution No. 4 itself. In particular, EO 7 disregards the substantial
distinction made under Section 9 of Joint Resolution No. 4 insofar as the right of exempt GOCCs to set their own
compensation and position classification systems is concerned.
Petitioner is wrong. EO 7 is consistent with laws, including RA 7875 and Joint Resolution No. 4.
True, Congress carved exceptions to RA 6758, as amended, when it created GOCCs and GFIs which have been
granted the authority to determine their own compensation and position classification system. Philhealth,
governed by RA 7875, is one of these RA 6758-exempt entities.
It is likewise true that Section 9 of Joint Resolution No. 4 recognizes the authority granted to exempt entities
like Philhealth to determine their own compensation and position classification system. Nonetheless, the said
provision also provides that exempt entities “shall observe the policies, parameters and guidelines
governing position classification, salary rates, categories and rates of allowances, benefits and
incentives prescribed by the President.”
For purposes of clarity, Section 9 of Joint Resolution No. 4 provides:

(9) Exempt Entities―Government agencies which by specific provision/s of laws are authorized to have their
own compensation and position classification system shall not be entitled to the salary adjustments provided
herein. Exempt entities shall be governed by their respective Compensation and Position Classification
System: Provided, That such entities shall observe the policies, parameters and guidelines governing
position classification, salary rates, categories and rates of allowances, benefits and incentives
prescribed by the President: Provided, further, That any increase in the existing salary rates thereof
shall be subject to the approval by the President, upon the recommendation of the DBM: Provided,
finally, That exempt entities which still follow the salary rates for positions covered by [RA 6758], as amended,
are entitled to the salary adjustments due to the implementation of this Joint Resolution, until such time that
they have implemented their own compensation and position classification system.” (Emphasis supplied)
Provisions of law should be read and understood in their entirety and all parts thereof should be seen as
constituting a coherent whole. In this context, the recognition under Section 9 of Joint Resolution No. 4 of the
authority granted to exempt entities like Philhealth to determine their own compensation and position
classification system seeks to exclude them from the salary adjustments provided in Joint Resolution No. 4. This
would have the effect of retaining the existing compensation levels in the said exempt entities at that time. It
would prevent both diminution, in case their existing compensation levels are higher than the salary
adjustments, and also increase, which would have enlarged the pay disparity between those covered by RA
6758 and exempt entities. To ensure observance of the distinction between RA 6758-covered and RA 6758-
exempt entities and, at the same time, forestall any unnecessary or excessive dissimilarity in compensation and
position classification systems may occur as a result of the distinctions, exempt entities are required to observe
the policies, parameters and guidelines governing position classification, salary rates, categories and rates of
allowances, benefits and incentives prescribed by the President. This is a recognition by Congress of the
authority of the President to issue policies, parameters and guidelines that will govern the determination by
exempt entities of their respective compensation and position classification systems. As a further safeguard
against any abuse or misuse of their exclusion from RA 6758, any increase in existing salary rates of exempt
entities are mandated to have the imprimatur of the President, upon the recommendation of the DBM. This
second proviso complements and enhances the first proviso. It gives the President the opportunity to ascertain
whether salary increases in exempt entities are in accordance with the prescribed policies, parameters and
guidelines on compensation and position classification system. As a final proviso, exempt entities which still
follow the salary rates for positions covered by RA 6758 are entitled to the salary adjustments under Joint
Resolution No. 4, until such time as they have implemented their own compensation and position classification
system. Again, this acknowledges the status of exempt entities and prevents the effective diminution of their
salary rates.
54
Taken as a cohesive whole, Section 9 of Joint Resolution No. 4 pertains to the effect on and applicability to RA
6758-exempt entities of the salary adjustments provided under the said Joint Resolution. It prohibits RA
6758-exempt entities from availing of the beneficial effects of the salary adjustments provided therein, unless
such entities still follow the salary rates for positions covered by RA 6758 and only “until such time that they
have implemented their own compensation and position classification system.” However, there is nothing
there which limits or constricts the power of the President as Chief Executive to prescribe such policies,
parameters and guidelines which in his discretion would best serve public interest by regulating the
compensation and position classification system of RA 6758-exempt entities. There is nothing there that
prevents or prohibits him from adopting the same or similar policies, parameters and guidelines provided for
in the said Joint Resolution. Viewed in this light, Sections 2 to 6 of EO 7 cohere with the objectives of Joint
Resolution No. 4 and other laws relevant to it.
Petitioner further asserts as invalid insofar as Philhealth is concerned the second proviso in Section 9 of Joint
Resolution No. 4. The said proviso requires that any increase in the existing salary rates in RA 6758-exempt
entities shall be subject to the approval by the President, upon the recommendation of the DBM. For petitioner,
this proviso amends or repeals the grant of authority under RA 7875 to fix the compensation of Philhealth’s
personnel to Philhealth’s board of directors. Petitioner, however, maintains that a joint resolution cannot be
used to repeal another law simply because it is not a law.
Under the Rules of both the Senate and the House of Representatives, 34 a joint resolution, like a bill, is required
to be enrolled, examined, undergo three readings and signed by the presiding officer of each House. A joint
resolution, like a bill, is also presented to the President for approval. There is no real difference between a bill
and a joint resolution.35 A joint resolution also satisfies the two requisites before a bill becomes law—approval
by both Houses of Congress after three readings and approval by the President. Thus, a joint resolution, upon
approval by the President, is law. Even the Rules of the House of Representatives acknowledge this:
“SEC. 58. Third Reading. x x x
No bill or joint resolution shall become law unless it passes three (3) readings on separate days and
printed copies thereof in its final form are distributed to the Members three (3) days before its passage except
when the President certifies to the necessity of its immediate enactment to meet a public calamity or
emergency.” (Emphasis supplied)
Joint Resolution No. 4 was approved by both Houses of Congress after three readings. President Gloria
Macapagal-Arroyo approved it on June 17, 2009. It was published in the Manila Times on June 20, 2009 and in
Volume 105, No. 34 of the Official Gazette on August 24, 2009. It is therefore a law.
As law, Joint Resolution No. 4 may therefore amend or repeal RA 7875, if the second proviso of Section 9 indeed
it modifies RA 7875. However, the said proviso may be read in a way that does not require it to be seen as an
implied amendment of RA 7875. It can be simply read as a necessary adjunct of the authority to prescribe
policies, parameters and guidelines on compensation and position classification system for exempt entities.
Without it, the President would have no way to check if the prescribed policies, parameters and guidelines are
actually observed.
Nevertheless, Section 59 of the General Provisions of RA 9970 and Section 56 of the General Provisions of RA
10147 identically provide:
“SEC. 59. Special Compensation and Other Benefits.—GOCCs, including GFIs, who are exempt from, or
are legally enjoying special compensation and other benefits which are subject to those authorized
under R.A. No. 6758, as amended, shall be governed by such special laws: PROVIDED, That they shall
observe the policies, parameters and guidelines governing position classification, salary rates,
categories and rates of allowances, benefits, and incentives prescribed by the President; PROVIDED,
FURTHER, That they shall submit their existing compensation and position classification systems and
their implementation status to the DBM; PROVIDED, FURTHERMORE, That any grant of or increase in
salaries, allowances, and other fringe benefits shall be subject to the approval of the President, upon
favorable recommendation of the DBM: PROVIDED, FINALLY, That they shall not be entitled to benefits
accruing to government employees covered by R.A. No. 6758, as amended, if they are already receiving similar
or equivalent benefits under their own compensation scheme.” (Emphasis supplied)
55
Section 59 of the General Provisions of RA 9970 and Section 56 of the General Provisions of RA 10147
completely debunk the conclusion that Sections 2 to 6 violate existing laws. Specifically with respect to all
RA 6758-exempt GOCCs and GFIs, they recognize the authority of the President as exercised in Sections 2 to 6
of EO 7 to prescribe policies, parameters and guidelines governing position classification, salary rates,
categories and rates of allowances, benefits, and incentives. Specifically with respect to all RA 6758-exempt
GOCCs and GFIs, they acknowledge the President’s power to approve or disapprove “any grant of or increase in
salaries, allowances, and other fringe benefits.”
Joint Resolution No. 4, Section 59 of the General Provisions of RA 9970 and Section 56 of the General Provisions
of RA 10147 reinforce the rule that “sound management and effective utilization of financial resources of
government are basically executive functions.” 36 As a necessary incident thereof, the President as Chief
Executive has the legal competence to exercise his power of control of all the executive departments, bureaus
and offices,37 including GOCCs and GFIs.38 EO 7 is simply an exercise by the President of that power of control.
In sum, the guidelines in Sections 2 to 6 of EO 7 are within the bounds of authority conferred on the President
by the Constitution and various laws. Such regulatory powers cover all GOCCs and GFIs, regardless of coverage
in or exemption from the salary standardization laws. In issuing EO 7, the President does not encroach on the
authority of the legislature to make laws as he is merely enforcing the law:
“While Congress is vested with the power to enact laws, the President executes the laws. The executive
power is vested in the President. It is generally defined as the power to enforce and administer the laws. It is
the power of carrying (out) the laws into practical operation and enforcing their due observance.” 38
It is fundamental that no person shall be deprived of life, liberty or property without due process of
law.40 Hence, the premise of a valid due process claim, whether substantive or procedural, is the dispossession
of life or liberty or property. Where there is no deprivation of life, liberty or property, no meaningful claim of
denial of due process may be made.
As discussed earlier, the imposition of a moratorium on increases in salaries, allowances and other benefits of
officers and employees of GOCCs and GFIs, except salary adjustments under EO 8011 dated June 17, 2009 and
EO 900 dated June 23, 2010, does not constitute a deprivation of property. In fact, it ensures that, like all other
officials and employees of the government, officials and employees of GOCCs and GFIs will continue to enjoy the
salary increases granted under EO 8011 dated June 17, 2009 and EO 900 dated June 23, 2010.
More importantly, the right of a public officer to receive compensation can only arise out of the rendition of the
public services related to his or her office.41 The right to compensation arises out of the performance by the
public officer of his duties.42Thus, a public officer’s right to salary is limited only to salaries which he has
already earned or accrued for services rendered. 43 Other than that, a public officer does not have a vested right
to salary and his compensation may be altered, decreased or discontinued, in the absence of a constitutional
prohibition.44
If no vested right to salary generally pertains to a public officer, there is no cogent reason to support the claim
to a right to future salary increase. The grant of any salary increase in the future is something that is merely
anticipatory of a prospective benefit, something that is contingent on various factors. That is why it is a mere
expectancy,45 which does not give rise to a vested right.46
Furthermore, the measure undertaken by the President seeks to impose a moratorium only on increases which
are not authorized by existing legislation sanctioning salary adjustments.
On the matter of the suspension of allowances and bonuses (which is already moot as it was expressly made
effective until December 31, 2010 only), 47 its context shows that it was meant to arrest the questionable
practice by members of the board of directors/trustees of GOCCs and GFIs granting numerous and excessive
allowances, bonuses, incentives and other benefits to themselves. The President’s action as Chief executive was
simply a decisive response to Senate issued Resolution No. 17, s. 2010 urging him to act on the matter and an
exercise of his control and oversight powers.
56
More importantly, there could have been no violation of substantive due process as petitioner, or anybody for
that matter, cannot properly claim a right to receive bonuses. A bonus is not a demandable and enforceable
obligation.48 By definition, a “bonus” is a gratuity or act of liberality of the giver which cannot be demanded as
a matter of right by the recipient.49 It is something given in addition to what is ordinarily received by or
strictly due to the recipient. The grant thereof is basically a management prerogative which cannot be forced
upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other
benefits aside from the employee’s basic salaries or wages, especially so if it is incapable of doing so. 50 Thus,
there can be no oppression to speak of even if these privileges (bonuses, allowances and incentives) cease to be
given. All the more reason should the President’s judgment as Chief Executive be accorded respect if he directs
the temporary stoppage of the grant of bonuses when he deems it to be prejudicial to public interest or too
onerous because of the government’s fiscal condition.
It is therefore clear that the suspension of the grant of bonuses and the imposition of a moratorium on salary
increases under EO 7 do not deprive petitioner of any property right. As such, any declaration that such
suspension or moratorium violates substantive due process cannot be justified.
Moreover, as already discussed, Section 59 of the General Provisions of RA 9970 and Section 56 of the General
Provisions of RA 10147 expressly recognize the President’s power to approve or disapprove “any grant of or
increase in salaries, allowances, and other fringe benefits” in all RA 6758-exempt GOCCs and GFIs, including
Philhealth. The power to approve or disapprove covers the lesser power to suspend the grant of allowances
and bonuses or impose a moratorium on salary increases.
All told, the act of the President as Chief Executive in issuing EO 7 was not oppressive, arbitrary, capricious or
whimsical. No grave abuse of discretion may be imputed to the President. Thus, as the President’s official act
which enjoys the presumption of constitutionality and regularity, EO 7 should be accorded due respect and its
validity sustained.
A Final Word
Accountability of public office is a safeguard of representative democracy. All who serve in government must
always be aware that they are exercising a public trust. They must bear in mind that public funds are scarce
resources and should therefore be used prudently and judiciously. Hence, where there are findings that
government funds are being wasted due to operational inefficiency and lack of fiscal responsibility in the
executive departments, bureaus, offices or agencies, the President as Chief Executive should not be deprived of
the authority to control, stop, check or at least manage the situation. Absent any showing of grave abuse of
discretion on his part, the Court should recognize in the President as Chief Executive the power and duty to
protect and promote public interest thru the rationalization of the compensation and position classification
system in executive departments, bureaus, offices and agencies, including GOCCs and GFIs.
Accordingly, I vote that the petition be DISMISSED.

Petition dismissed.
Notes.—The civil service encompasses all branches and agencies of the Government, including government-
owned or controlled corporations (GOCCs) with original charters, like the Government Service Insurance
System (GSIS), or those created by special law. (Garcia vs. Molina, 627 SCRA 540 [2010])
As a general rule, the government and all the attached agencies with no legal personality distinct from the
former are exempt from posting appeal bonds, whereas government-owned and controlled corporations
(GOCCs) are not similarly exempted. (Banahaw Broadcasting Corporation vs. Pacana III, 649 SCRA 196 [2011])
10. G.R. No. 176579. June 28, 2011.*

WILSON P. GAMBOA, petitioner, vs. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE
UNDERSECRETARY JOHN P. SEVILLA, AND COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS,
RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO.,
57
LTD. IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V.
PANGILINAN OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS
MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE COMMISSION,
and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, petitioners-in-intervention.
Special Civil Actions; Declaratory Relief; Mandamus; Court treats the petition for declaratory relief as one for
mandamus if the issue involved has far-reaching implications.—In short, it is well-settled that this Court may
treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching implications.
As this Court held in Salvacion: The Court has no original and exclusive jurisdiction over a petition for
declaratory relief. However, exceptions to this rule have been recognized. Thus, where the petition has
far-reaching implications and raises questions that should be resolved, it may be treated as one for
mandamus. (Emphasis supplied)
Actions; Locus Standi; Petitioner being a stockholder of Philippine Long Distance Telephone (PLDT) has the right
to question the subject sale which he claims to violate the nationality requirement prescribed in Section 11, Article
XII of the Constitution; Court upheld the right of a citizen to bring a suit on matters of transcendental importance
to the public.—There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question
the subject sale, which he claims to violate the nationality requirement prescribed in Section 11, Article XII of
the Constitution. If the sale indeed violates the Constitution, then there is a possibility that PLDT’s franchise
could be revoked, a dire consequence directly affecting petitioner’s interest as a stockholder. More importantly,
there is no question that the instant petition raises matters of transcendental importance to the public. The
fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of
the Filipino people, far outweighs any perceived impediment in the legal personality of the petitioner to bring
this action. In Chavez v. PCGG, 299 SCRA 744 (1998), the Court upheld the right of a citizen to bring a suit on
matters of transcendental importance to the public.
Corporation Law; Words and Phrases; “Capital”; The term “capital” in Section 11, Article XII of the Constitution
refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to
common shares, and not to the total outstanding capital stock comprising both common and non-voting preferred
shares.—We agree with petitioner and petitioners-in-intervention. The term “capital” in Section 11, Article XII
of the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the
present case only to common shares, and not to the total outstanding capital stock comprising both common
and non-voting preferred shares.
Same; Capital; Common shares cannot be deprived of the right to vote in any corporate meeting, and any provision
in the articles of incorporation restricting the right of common shareholders to vote is invalid.—Indisputably, one
of the rights of a stockholder is the right to participate in the control or management of the corporation. This is
exercised through his vote in the election of directors because it is the board of directors that controls or
manages the corporation. In the absence of provisions in the articles of incorporation denying voting rights to
preferred shares, preferred shares have the same voting rights as common shares. However, preferred
shareholders are often excluded from any control, that is, deprived of the right to vote in the election of
directors and on other matters, on the theory that the preferred shareholders are merely investors in the
corporation for income in the same manner as bondholders. In fact, under the Corporation Code only preferred
or redeemable shares can be deprived of the right to vote. Common shares cannot be deprived of the right to
vote in any corporate meeting, and any provision in the articles of incorporation restricting the right of
common shareholders to vote is invalid.
Same; Same; The term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock that can
vote in the election of directors.—Considering that common shares have voting rights which translate to control,
as opposed to preferred shares which usually have no voting rights, the term “capital” in Section 11, Article XII
of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in
the election of directors, then the term “capital” shall include such preferred shares because the right to
participate in the control or management of the corporation is exercised through the right to vote in the
election of directors. In short, the term “capital” in Section 11, Article XII of the Constitution refers only to
shares of stock that can vote in the election of directors.
58
Same; Same; The term “capital” in Section 11, Article XII of the Constitution to include both voting and non-voting
shares will result in the abject surrender of our telecommunications industry to foreigners, amounting to a clear
abdication of the State’s constitutional duty to limit control of public utilities to Filipino citizens; The Court should
never open to foreign control what the Constitution has expressly reserved to Filipinos for that would be a betrayal
of the Constitution and of the national interest.—Indisputably, construing the term “capital” in Section 11,
Article XII of the Constitution to include both voting and non-voting shares will result in the abject surrender of
our telecommunications industry to foreigners, amounting to a clear abdication of the State’s constitutional
duty to limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the
constitutional provision reserving certain areas of investment to Filipino citizens, such as the exploitation of
natural resources as well as the ownership of land, educational institutions and advertising businesses. The
Court should never open to foreign control what the Constitution has expressly reserved to Filipinos for that
would be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty to
defend and uphold the intent and letter of the Constitution to ensure, in the words of the Constitution, “a self-
reliant and independent national economy effectively controlled by Filipinos.”
Same; Securities and Exchange Commission; The Securities and Exchange Commission (SEC) is vested with the
power and function to suspend or revoke, after proper notice and hearing, the franchise or certificate of
registration of corporations, partnerships or associations, upon any of the grounds provided by law. —Under
Section 5(m) of the Securities Regulation Code, the SEC is vested with the “power and function” to “ suspend or
revoke, after proper notice and hearing, the franchise or certificate of registration of
corporations, partnerships or associations, upon any of the grounds provided by law.” The SEC is
mandated under Section 5(d) of the same Code with the “power and function” to “investigate x x x the
activities of persons to ensure compliance” with the laws and regulations that SEC administers or enforces.
The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against
violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can
compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present
case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of the
ownership structure of PLDT’s voting shares, as admitted by respondents and as stated in PLDT’s 2010 GIS that
PLDT submitted to SEC.
VELASCO, JR., J., Separate Dissenting Opinion:
Actions; Locus Standi; Petitioner has not shown any real interest substantial enough to give him the requisite locus
standi to question the sale of the government’s PTIC shares to First Pacific.—The Rules of Court specifically
requires that “[e]very action must be prosecuted or defended in the name of the real party in interest.” A real
party in interest is defined as the “party who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit.” Petitioner has failed to allege any interest in the 111,415 PTIC shares
nor in any of the previous purchase contracts he now seeks to annul. He is neither a shareholder of PTIC nor of
First Pacific. Also, he has not alleged that he was an interested bidder in the government’s auction sale of the
PTIC shares. Finally, he has not shown how, as a nominal shareholder of PLDT, he stands to benefit from the
annulment of the sale of the 111,415 PTIC shares or of any of the sales of the PLDT common shares held by
foreigners. In fine, petitioner has not shown any real interest substantial enough to give him the requisite locus
standi to question the sale of the government’s PTIC shares to First Pacific.
Same; Same; A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that
public funds have been disbursed in alleged contravention of the law or the Constitution.—Likewise, petitioner’s
assertion that he has standing to bring the suit as a “taxpayer” must fail. In Gonzales v. Narvasa, We discussed
that “a taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public
funds have been disbursed in alleged contravention of the law or the Constitution.” In this case, no public
funds have been disbursed. In fact, the opposite has happened—there is an inflow of funds into the government
coffers.
Same; Jurisdiction; Declaratory Relief; Petitions for declaratory relief, annulment of sale and injunction do not fall
within the exclusive jurisdiction of this Court; The proper jurisdiction for declaratory relief is the Regional Trial
Court (RTC); Requisites for an Action for Declaratory Relief.—Based on the foregoing provisos, it is patently clear
that petitions for declaratory relief, annulment of sale and injunction do not fall within the exclusive original
59
jurisdiction of this Court. First, the court with the proper jurisdiction for declaratory relief is the Regional Trial
Court (RTC). Sec. 1, Rule 63 of the Rules of Court stresses that an action for declaratory relief is within
the exclusive original jurisdiction of the RTC, viz.: Any person interested under a deed, will, contract or other
written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his
rights or duties, thereunder. (Emphasis supplied.) An action for declaratory relief also requires the following:
(1) a justiciable controversy between persons whose interests are adverse; (2) the party seeking the relief has a
legal interest in the controversy; and (3) the issue is ripe for judicial determination. As previously discussed,
petitioner lacks any real interest in this action; thus, no justiciable controversy between adverse interests
exists.
Same; Same; Same; The exercise of such discretion, whether to treat a petition for declaratory relief as one
for mandamus, presupposes that the petition is otherwise viable or meritorious.—Despite this,
the ponencia decided to treat the petition for declaratory relief as one for mandamus, citing the rule that
“where the petition has far-reaching implications and raises questions that should be resolved, it may be
treated as one for mandamus.” However, such rule is not absolute. In Macasiano v. National Housing Authority,
224 SCRA 236 (1993), the Court explicitly stated that the exercise of such discretion, whether to treat a petition
for declaratory relief as one for mandamus, presupposes that the petition is otherwise viable or
meritorious. As I shall discuss subsequently in the substantive portion of this opinion, the petition in this case
is clearly not viable or meritorious.
Same; Mandamus; A petition for mandamus is premature if there are administrative remedies available to
petitioner.—A petition for mandamus is premature if there are administrative remedies available to petitioner.
Under the doctrine of primary administrative jurisdiction, “courts cannot or will not determine a controversy
where the issues for resolution demand the exercise of sound administrative discretion requiring the special
knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters
of fact. In other words, if a case is such that its determination requires the expertise, specialized training and
knowledge of an administrative body, relief must first be obtained in an administrative proceeding before
resort to the courts is had even if the matter may well be within their proper jurisdiction.” Along with this, the
doctrine of exhaustion of administrative remedies also requires that where an administrative remedy is
provided by statute relief must be sought by exhausting this remedy before the courts will act.
Same; Hierarchy of Courts; The doctrine dictates that when jurisdiction is shared concurrently with different
courts, the proper suit should first be filed with the lower-ranking court.—Although this Court,
the CA, and the RTC have “concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction, such concurrence does not give the petitioner unrestricted freedom of
choice of court forum.” The doctrine of hierarchy of courts dictates that when jurisdiction is shared
concurrently with different courts, the proper suit should first be filed with the lower-ranking court. Failure to
do so is sufficient cause for the dismissal of a petition.
Corporation Law; Capital; The intent of the framers of the Constitution was not to limit the application of the word
“capital” to voting or common shares alone.—Contrary to pronouncement of the ponencia, the intent of the
framers of the Constitution was not to limit the application of the word “capital” to voting or common shares
alone. In fact, the Records of the Constitutional Commission reveal that even though the UP Law Center
proposed the phrase “voting stock or controlling interest,” the framers of the Constitution did not adopt this
but instead used the word “capital.”
Same; Same; Stockholders, whether holding voting or non-voting stocks, have all the rights, powers and privileges
of ownership over their stocks; Control is another inherent right of ownership.—Stockholders, whether holding
voting or non-voting stocks, have all the rights, powers and privileges of ownership over their stocks. This
necessarily includes the right to vote because such is inherent in and incidental to the ownership of corporate
stocks, and as such is a property right. Additionally, control is another inherent right of ownership. The
circumstances enumerated in Sec. 6 of the Corporation Code clearly evince this. It gives voting rights to the
stocks deemed as non-voting as to fundamental and major corporate changes. Thus, the issue should not
only dwell on the daily management affairs of the corporation but also on the equally important fundamental
changes that may need to be voted on. On this, the “non-voting” shares also exercise control, together with the
voting shares.
60
Same; Same; Securities and Exchange Commission; Securities and Exchange Commission (SEC) defined “capital” as
to include both voting and non-voting in the determination of the nationality of a corporation.—More
importantly, the SEC defined “capital” as to include both voting and non-voting in the determination of the
nationality of a corporation, to wit: In view of the foregoing, it is opined that the term “capital” denotes the sum
total of the shares subscribed and paid by the shareholders, or secured to be paid, irrespective of their
nomenclature to be issued by the corporation in the conduct of its operation. Hence, non-voting preferred
shares are considered in the computation of the 60-40% Filipino-alien equity requirement of certain
economic activities under the Constitution. (Emphasis supplied.)
Same; Same; Outstanding Capital Stock; The Corporation Code defines “outstanding capital stock” as the “total
shares of stock issued”; It includes all types of shares.—Similarly, the Corporation Code defines “outstanding
capital stock” as the “total shares of stock issued.” It does not distinguish between common and preferred
shares. It includes all types of shares.
ABAD, J., Dissenting Opinion:
Remedial Law; Actions; Jurisdiction; Gamboa actions for injunction, declaratory relief, and declaration of nullity of
sale are not among the cases that can be initiated before the Supreme Court; Only exceptional and compelling
circumstances such as cases of national interest and of serious implications justify direct resort to the Supreme
Court for the extraordinary remedy of writ of certiorari, prohibition, or mandamus.—Strictly speaking, Gamboa
actions for injunction, declaratory relief, and declaration of nullity of sale are not among the cases that can be
initiated before the Supreme Court. Those actions belong to some other tribunal. And, although the Court has
original jurisdiction in prohibition cases, the Court shares this authority with the Court of Appeals and the
Regional Trial Courts. But this concurrence of jurisdiction does not give the parties absolute and unrestrained
freedom of choice on which court the remedy will be sought. They must observe the hierarchy of courts. As a
rule, the Supreme Court will not entertain direct resort to it unless the remedy desired cannot be obtained in
other tribunals. Only exceptional and compelling circumstances such as cases of national interest and of serious
implications justify direct resort to the Supreme Court for the extraordinary remedy of writ of certiorari,
prohibition, or mandamus.
Corporation Law; Capital; The Constitution fails to provide for the meaning of the term “capital” considering that
the shares of stock of a corporation vary in kinds.—The Constitution fails to provide for the meaning of the term
“capital,” considering that the shares of stock of a corporation vary in kinds. The usual classification depends on
how profits are to be distributed and which stockholders have the right to vote the members of the
corporation’s board of directors.
Same; Same; The Court should not leave the matter of compliance with the constitutional limit on foreign
ownership in public utilities, a matter of transcendental importance, to judicial legislation especially since any
ruling the Court makes on the matter could have deep economic repercussions; It is apt for Congress to build up on
this framework by defining the meaning of “capital.”—Under this confusing legislative signals, the Court should
not leave the matter of compliance with the constitutional limit on foreign ownership in public utilities, a
matter of transcendental importance, to judicial legislation especially since any ruling the Court makes on the
matter could have deep economic repercussions. This is not a concern over which the Court has competence.
The 1987 Constitution laid down the general framework for restricting foreign ownership of public utilities. It
is apt for Congress to build up on this framework by defining the meaning of “capital,” establishing rules for the
implementation of the State policy, providing sanctions for its violation, and vesting in the appropriate agency
the responsibility for carrying out the purposes of such policy.
ORIGINAL ACTION in the Supreme Court. Prohibition, Injunction, Declaratory Relief and Declaration of Nullity
of Sale of Shares of Stock.
Edgar D. Dumlao for China Banking Corporation.
Office of the General Counsel for respondent Francis Ed Lim.
Sycip, Salazar, Hernandez and Gatmaitan for respondent Manuel V. Pangilinan.
Angara, Abello, Concepcion, Regala and Cruz for Napoleon L. Nazareno.

CARPIO, J.:
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The Case
This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of
shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the
Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company
Limited (First Pacific).
The Antecedents
The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone
Company (PLDT), are as follows:1
On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and
the right to engage in telecommunications business. In 1969, General Telephone and Electronics Corporation
(GTE), an American company and a major PLDT stockholder, sold 26 percent of the outstanding common
shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including
Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by
virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In
1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on
Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding
capital stock of PTIC, were later declared by this Court to be owned by the Republic of the Philippines. 2
In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54
percent of the outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council
(IPC) of the Philippine Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent of
the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006.
Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund
XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or
US$510 million.
Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy
the 111,415 PTIC shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1
February 2007 deadline set by IPC and instead, yielded its right to PTIC itself which was then given by IPC until
2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered
into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the
outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or
US$510,580,189. The sale was completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is
actually an indirect sale of 12 million shares or about 6.3 percent of the outstanding common shares of
PLDT. With the sale, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47
percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership
of the capital of a public utility to not more than 40 percent. 3
On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla,
and PCGG Commissioner Ricardo Abcede allege the following relevant facts:
On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings.
PTIC held 26,034,263 PLDT common shares, or 13.847 percent of the total PLDT outstanding common shares.
PHI, on the other hand, was incorporated in 1977, and became the owner of 111,415 PTIC shares or 46.125
percent of the outstanding capital stock of PTIC by virtue of three Deeds of Assignment executed by Ramon
Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG,
and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos.
The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this
Court’s decision4 which became final and executory on 8 August 2006.
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The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the
outstanding common shares of stock of PLDT, and designated the Inter-Agency Privatization Council (IPC),
composed of the Department of Finance and the PCGG, as the disposing entity. An invitation to bid was
published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid
conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8
December 2006. The extension was published in nine different newspapers.
During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a
bid of P25,217,556,000. The government notified First Pacific, the majority owner of PTIC shares, of the bidding
results and gave First Pacific until 1 February 2007 to exercise its right of first refusal in accordance with PTIC’s
Articles of Incorporation. First Pacific announced its intention to match Parallax’s bid.
On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public
hearing on the particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and
Sevilla were among those who attended the public hearing. The HR Committee Report No. 2270 concluded that:
(a) the auction of the government’s 111,415 PTIC shares bore due diligence, transparency and conformity with
existing legal procedures; and (b) First Pacific’s intended acquisition of the government’s 111,415 PTIC
shares resulting in First Pacific’s 100% ownership of PTIC will not violate the 40 percent constitutional
limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total
outstanding common shares of PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the
111,415 shares of stock of PTIC.
Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale
of 111,415 PTIC shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC
shares was already owned by First Pacific and its affiliates); (b) Parallax offered the highest bid amounting to
P25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its shareholders granted in PTIC’s
Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the
highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was
consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the
111,415 PTIC shares. Respondent Pangilinan denies the other allegations of facts of petitioner.
On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and
declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the
111,415 PTIC shares would result in an increase in First Pacific’s common shareholdings in PLDT from 30.7
percent to 37 percent, and this, combined with Japanese NTT DoCoMo’s common shareholdings in PLDT, would
result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent
constitutional limit.6 Petitioner asserts:
“If and when the sale is completed, First Pacific’s equity in PLDT will go up from 30.7 percent to 37.0 percent of
its common—or voting-stockholdings, x x x. Hence, the consummation of the sale will put the two largest
foreign investors in PLDT—First Pacific and Japan’s NTT DoCoMo, which is the world’s largest wireless
telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale,
data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those
foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of
PLDT’s common equity. x x x
x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the
New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other foreign
entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x” 7
Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415
PTIC shares to First Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether
public respondents committed grave abuse of discretion in allowing the sale of the 111,415 PTIC shares to First
Pacific; and (3) whether the sale of common shares to foreigners in excess of 40 percent of the entire
subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility. 8
63
On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit
Attached Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted
the Petition-in-Intervention.
Petitioners-in-intervention “join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or
nullify the sale by respondents of the 111,415 PTIC shares to First Pacific or assignee.” Petitioners-in-
intervention claim that, as PLDT subscribers, they have a “stake in the outcome of the controversy x x x where
the Philippine Government is completing the sale of government owned assets in [PLDT], unquestionably a
public utility, in violation of the nationality restrictions of the Philippine Constitution.”
The Issue
This Court is not a trier of facts. Factual questions such as those raised by petitioner, 9 which indisputably
demand a thorough examination of the evidence of the parties, are generally beyond this Court’s jurisdiction.
Adhering to this well-settled principle, the Court shall confine the resolution of the instant controversy solely
on the threshold and purely legal issue of whether the term “capital” in Section 11, Article XII of the
Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of
common and non-voting preferred shares) of PLDT, a public utility.
The Ruling of the Court
The petition is partly meritorious.

Petition for declaratory relief treated as petition for mandamus
At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the
petition for prohibition is within the original jurisdiction of this court, which however is not exclusive but is
concurrent with the Regional Trial Court and the Court of Appeals. The actions for declaratory
relief,10 injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme
Court. On this ground alone, the petition could have been dismissed outright.
While direct resort to this Court may be justified in a petition for prohibition, 11 the Court shall nevertheless
refrain from discussing the grounds in support of the petition for prohibition since on 28 February 2007, the
questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the
certificates for the 111,415 PTIC shares.
However, since the threshold and purely legal issue on the definition of the term “capital” in Section 11, Article
XII of the Constitution has far-reaching implications to the national economy, the Court treats the petition for
declaratory relief as one for mandamus.12
In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for
mandamus considering the grave injustice that would result in the interpretation of a banking law. In that case,
which involved the crime of rape committed by a foreign tourist against a Filipino minor and the execution of
the final judgment in the civil case for damages on the tourist’s dollar deposit with a local bank, the Court
declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment,
garnishment or any other order or process of any court, inapplicable due to the peculiar circumstances of the
case. The Court held that “injustice would result especially to a citizen aggrieved by a foreign guest like accused
x x x” that would “negate Article 10 of the Civil Code which provides that ‘in case of doubt in the interpretation
or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.’ ” The Court
therefore required respondents Central Bank of the Philippines, the local bank, and the accused to comply with
the writ of execution issued in the civil case for damages and to release the dollar deposit of the accused to
satisfy the judgment.
In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural
infirmity of the petition for declaratory relief and treated the same as one for mandamus. In Alliance, the issue
was whether the government unlawfully excluded petitioners, who were government employees, from the
enjoyment of rights to which they were entitled under the law. Specifically, the question was: “Are the
branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or
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controlled corporations included among the four ‘employers’ under Presidential Decree No. 851 which are
required to pay their employees x x x a thirteenth (13th) month pay x x x ?” The Constitutional principle
involved therein affected all government employees, clearly justifying a relaxation of the technical rules of
procedure, and certainly requiring the interpretation of the assailed presidential decree.
In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the
issue involved has far-reaching implications. As this Court held in Salvacion:
“The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However,
exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications
and raises questions that should be resolved, it may be treated as one for mandamus.”15 (Emphasis
supplied)
In the present case, petitioner seeks primarily the interpretation of the term “capital” in Section 11, Article XII
of the Constitution. He prays that this Court declare that the term “capital” refers to common shares only, and
that such shares constitute “the sole basis in determining foreign equity in a public utility.” Petitioner further
asks this Court to declare any ruling inconsistent with such interpretation unconstitutional.
The interpretation of the term “capital” in Section 11, Article XII of the Constitution has far-reaching
implications to the national economy. In fact, a resolution of this issue will determine whether Filipinos are
masters, or second class citizens, in their own country. What is at stake here is whether Filipinos or foreigners
will have effective control of the national economy. Indeed, if ever there is a legal issue that has far-reaching
implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue
presented in this case.
The Court first encountered the issue on the definition of the term “capital” in Section 11, Article XII of the
Constitution in the case of Fernandez v. Cojuangco, docketed as G.R. No. 157360. 16 That case involved the same
public utility (PLDT) and substantially the same private respondents. Despite the importance and novelty of the
constitutional issue raised therein and despite the fact that the petition involved a purely legal question, the
Court declined to resolve the case on the merits, and instead denied the same for disregarding the hierarchy of
courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Court’s Decision of
21 February 2003 via a petition for review under Rule 45.
The Court’s Resolution, denying the petition, became final on 21 December 2004.
The instant petition therefore presents the Court with another opportunity to finally settle this purely legal
issue which is of transcendental importance to the national economy and a fundamental requirement to a
faithful adherence to our Constitution. The Court must forthwith seize such opportunity, not only for the
benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in the
words of the Constitution, “a self-reliant and independent national economy effectively controlled by
Filipinos.”18 Besides, in the light of vague and confusing positions taken by government agencies on this purely
legal issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a
categorical ruling from this Court on the extent of their participation in the capital of public utilities and other
nationalized businesses.
Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved
for over 75 years since the 1935 Constitution. There is no reason for this Court to evade this ever recurring
fundamental issue and delay again defining the term “capital,” which appears not only in Section 11, Article XII
of the Constitution, but also in Section 2, Article XII on co-production and joint venture agreements for the
development of our natural resources, 19 in Section 7, Article XII on ownership of private lands, 20 in Section 10,
Article XII on the reservation of certain investments to Filipino citizens, 21 in Section 4(2), Article XIV on the
ownership of educational institutions, 22 and in Section 11(2), Article XVI on the ownership of advertising
companies.23
Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject
sale, which he claims to violate the nationality requirement prescribed in Section 11, Article XII of the
65
Constitution. If the sale indeed violates the Constitution, then there is a possibility that PLDT’s franchise could
be revoked, a dire consequence directly affecting petitioner’s interest as a stockholder.
More importantly, there is no question that the instant petition raises matters of transcendental importance to
the public. The fundamental and threshold legal issue in this case, involving the national economy and the
economic welfare of the Filipino people, far outweighs any perceived impediment in the legal personality of the
petitioner to bring this action.
In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental
importance to the public, thus:
“In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in
interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution
of the laws, he need not show that he has any legal or special interest in the result of the action. In the
aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right
then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order
to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In
ruling for the petitioners’ legal standing, the Court declared that the right they sought to be enforced ‘is a public
right recognized by no less than the fundamental law of the land.’
Legaspi v. Civil Service Commission, while reiterating Tañ ada, further declared that ‘when a mandamus
proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by
the mere fact that petitioner is a citizen and, therefore, part of the general ‘public’ which possesses the
right.’
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under
the questioned contract for the development, management and operation of the Manila International Container
Terminal, ‘public interest [was] definitely involved considering the important role [of the subject
contract] . . . in the economic development of the country and the magnitude of the financial
consideration involved.’ We concluded that, as a consequence, the disclosure provision in the Constitution
would constitute sufficient authority for upholding the petitioner’s standing.” (Emphasis supplied)
Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance,
the petitioner has the requisite locus standi.
Definition of the Term “Capital” in Section 11, Article XII of the 1987 Constitution
Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization
of public utilities, to wit:
“Section 11. No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens ;
nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public. The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to their proportionate share in its capital,
and all the executive and managing officers of such corporation or association must be citizens of the
Philippines.” (Emphasis supplied)
The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:
under the laws of the Philippines at least sixty per centum of the capital of which is owned by such
citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period
than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The
66
State shall encourage equity participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to their proportionate share in
the capital thereof.” (Emphasis supplied)
The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935
Constitution, viz.:
utility shall be granted except to citizens of the Philippines or to corporations or other entities
organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens
of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation,
except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the
public interest so requires.” (Emphasis supplied)
Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the
Filipinization provision in the 1987 Constitution is one of the products of the spirit of nationalism which
gripped the 1935 Constitutional Convention. 25 The 1987 Constitution “provides for the Filipinization of public
utilities by requiring that any form of authorization for the operation of public utilities should be granted only
to ‘citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at
least sixty per centum of whose capital is owned by such citizens.’ The provision is [an express] recognition
of the sensitive and vital position of public utilities both in the national economy and for national
security.”26 The evident purpose of the citizenship requirement is to prevent aliens from assuming control of
public utilities, which may be inimical to the national interest. 27 This specific provision explicitly reserves to
Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to
“conserve and develop our patrimony” 28 and ensure “a self-reliant and independent national
economy effectively controlled by Filipinos.”29
Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality
requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted
authority to operate a public utility, at least 60 percent of its “capital” must be owned by Filipino citizens.
The crux of the controversy is the definition of the term “capital.” Does the term “capital” in Section 11, Article
XII of the Constitution refer to common shares or to the total outstanding capital stock (combined total of
common and non-voting preferred shares)?
Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to
common shares because such shares are entitled to vote and it is through voting that control over a corporation
is exercised. Petitioner posits that the term “capital” in Section 11, Article XII of the Constitution refers to “the
ownership of common capital stock subscribed and outstanding, which class of shares alone, under the
corporate set-up of PLDT, can vote and elect members of the board of directors.” It is undisputed that PLDT’s
non-voting preferred shares are held mostly by Filipino citizens. 30 This arose from Presidential Decree No.
217,31 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT
telephone line to subscribe to non-voting preferred shares to pay for the investment cost of installing the
telephone line.32
Petitioners-in-intervention basically reiterate petitioner’s arguments and adopt petitioner’s definition of the
term “capital.”33Petitioners-in-intervention allege that “the approximate foreign ownership of common capital
stock of PLDT x x x already amounts to at least 63.54% of the total outstanding common stock,” which means
that foreigners exercise significant control over PLDT, patently violating the 40 percent foreign equity
limitation in public utilities prescribed by the Constitution.
Respondents, on the other hand, do not offer any definition of the term “capital” in Section 11, Article XII of the
Constitution. More importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that
more than 40 percent of the common shares of PLDT are held by foreigners.
67
In particular, respondent Nazareno’s Memorandum, consisting of 73 pages, harps mainly on the procedural
infirmities of the petition and the supposed violation of the due process rights of the “affected foreign common
shareholders.” Respondent Nazareno does not deny petitioner’s allegation of foreigners’ dominating the
common shareholdings of PLDT. Nazareno stressed mainly that the petition “seeks to divest foreign common
shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their
ownership over their shares.” Thus, “the foreign natural and juridical PLDT shareholders must be impleaded
in this suit so that they can be heard.” 34 Essentially, Nazareno invokes denial of due process on behalf of the
foreign common shareholders.
While Nazareno does not introduce any definition of the term “capital,” he states that “among the factual
assertions that need to be established to counter petitioner’s allegations is the uniform interpretation
by government agencies (such as the SEC), institutions and corporations (such as the Philippine
National Oil Company-Energy Development Corporation or PNOC-EDC) of including both preferred
shares and common shares in “controlling interest” in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public utilities.”35
Similarly, respondent Manuel V. Pangilinan does not define the term “capital” in Section 11, Article XII of the
Constitution. Neither does he refute petitioner’s claim of foreigners holding more than 40 percent of PLDT’s
common shares. Instead, respondent Pangilinan focuses on the procedural flaws of the petition and the alleged
violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in his Memorandum (1)
the absence of this Court’s jurisdiction over the petition; (2) petitioner’s lack of standing; (3) mootness of the
petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights. Moreover,
respondent Pangilinan alleges that the issue should be whether “owners of shares in PLDT as well as owners of
shares in companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those
companies without any law requiring them to surrender their shares and also without notice and trial.”
Respondent Pangilinan further asserts that “Section 11, [Article XII of the Constitution] imposes no
nationality requirement on the shareholders of the utility company as a condition for keeping their
shares in the utility company.” According to him, “Section 11 does not authorize taking one person’s property
(the shareholder’s stock in the utility company) on the basis of another party’s alleged failure to satisfy a
requirement that is a condition only for that other party’s retention of another piece of property (the utility
company being at least 60% Filipino-owned to keep its franchise).” 36
The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla,
Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise silent on the definition of the term “capital.”
In its Memorandum37 dated 24 September 2007, the OSG also limits its discussion on the supposed procedural
defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of interested parties, and lack of
basis for injunction. The OSG does not present any definition or interpretation of the term “capital” in Section
11, Article XII of the Constitution. The OSG contends that “the petition actually partakes of a collateral attack on
PLDT’s franchise as a public utility,” which in effect requires a “full-blown trial where all the parties in interest
are given their day in court.”38
Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock
Exchange (PSE), does not also define the term “capital” and seeks the dismissal of the petition on the following
grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly implemented its rules and
required all listed companies, including PLDT, to make proper and timely disclosures; and (3) the reliefs prayed
for in the petition would adversely impact the stock market.
In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of
PLDT, contended that the term “capital” in the 1987 Constitution refers to shares entitled to vote or the
common shares. Fernandez explained thus: “The forty percent (40%) foreign equity limitation in public utilities
prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares,
considering that it is through voting that control is being exercised. x x x
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Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully
nationalized and partially nationalized activities is for Filipino nationals to be always in control of the
corporation undertaking said activities. Otherwise, if the Trial Court’s ruling upholding respondents’ arguments
were to be given credence, it would be possible for the ownership structure of a public utility corporation to be
divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the
Trial Court’s ruling adopting respondents’ arguments, the common shares can be owned entirely by foreigners
thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control
the public utility corporation.
xxxx
Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership
and the controlling interest.
xxxx
Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the
Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares. Furthermore,
ownership of record of shares will not suffice but it must be shown that the legal and beneficial ownership rests
in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that
the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of SMART
shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between
the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11,
Article XII of the Constitution.
Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support
the proposition that the meaning of the word “capital” as used in Section 11, Article XII of the Constitution
allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder and it allegedly is
immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear
legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as
clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an
opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are
merely advisory and cannot prevail over the clear intent of the framers of the Constitution.
In the same vein, the SEC’s construction of Section 11, Article XII of the Constitution is at best merely advisory
for it is the courts that finally determine what a law means.”39
On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen
Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L.
Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term “capital” in Section 11, Article XII of
the Constitution includes preferred shares since the Constitution does not distinguish among classes of stock,
thus:
16. The Constitution applies its foreign ownership limitation on the corporation’s “capital,” without
distinction as to classes of shares.
xxx
In this connection, the Corporation Code—which was already in force at the time the present (1987)
Constitution was drafted—defined outstanding capital stock as follows:
Section 137. Outstanding capital stock defined.—The term “outstanding capital stock”, as used in this
Code, means the total shares of stock issued under binding subscription agreements to subscribers or
stockholders, whether or not fully or partially paid, except treasury shares.
Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor
exclude either class of shares, in determining the outstanding capital stock (the “capital”) of a corporation.
Consequently, petitioner’s suggestion to reckon PLDT’s foreign equity only on the basis of PLDT’s outstanding
common shares is without legal basis. The language of the Constitution should be understood in the sense it has
in common use.
xxxx
17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is
nothing in the Record of the Constitutional Commission (Vol. III)—which petitioner misleadingly cited in the
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Petition x x x—which supports petitioner’s view that only common shares should form the basis for computing
a public utility’s foreign equity.
xxxx
18. In addition, the SEC—the government agency primarily responsible for implementing the Corporation
Code, and which also has the responsibility of ensuring compliance with the Constitution’s foreign equity
restrictions as regards nationalized activities x x x—has categorically ruled that both common and preferred
shares are properly considered in determining outstanding capital stock and the nationality composition
thereof.40
We agree with petitioner and petitioners-in-intervention. The term “capital” in Section 11, Article XII of the
Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present
case only to common shares,41 and not to the total outstanding capital stock comprising both common and non-
voting preferred shares.
The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

Sec. 6. Classification of shares.—The shares of stock of stock corporations may be divided into classes or
series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions
as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights
except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in
this Code: Provided, further, That there shall always be a class or series of shares which have complete voting
rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided
for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies,
public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of
the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be
stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That
preferred shares of stock may be issued only with a stated par value. The Board of Directors, where authorized
in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series
thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with
the Securities and Exchange Commission.
Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder
of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided, That shares
without par value may not be issued for a consideration less than the value of five (P5.00) pesos per
share: Provided, further, That the entire consideration received by the corporation for its no-par value shares
shall be treated as capital and shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional
or legal requirements.
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share
shall be equal in all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders
of such shares shall nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate
property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular
corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights.”
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Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the
corporation.43 This is exercised through his vote in the election of directors because it is the board of directors
that controls or manages the corporation. 44 In the absence of provisions in the articles of incorporation denying
voting rights to preferred shares, preferred shares have the same voting rights as common shares. However,
preferred shareholders are often excluded from any control, that is, deprived of the right to vote in the election
of directors and on other matters, on the theory that the preferred shareholders are merely investors in the
corporation for income in the same manner as bondholders. 45
In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to
vote.46 Common shares cannot be deprived of the right to vote in any corporate meeting, and any provision in
the articles of incorporation restricting the right of common shareholders to vote is invalid. 47
Considering that common shares have voting rights which translate to control, as opposed to preferred shares
which usually have no voting rights, the term “capital” in Section 11, Article XII of the Constitution refers only
to common shares. However, if the preferred shares also have the right to vote in the election of directors, then
the term “capital” shall include such preferred shares because the right to participate in the control or
management of the corporation is exercised through the right to vote in the election of directors. In short, the
term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in
the election of directors.
This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of
Filipino citizens the control and management of public utilities. As revealed in the deliberations of the
Constitutional Commission, “capital” refers to the voting stock or controlling interest of a corporation, to wit:
MR. NOLLEDO.In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity;
namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.
MR. VILLEGAS.That is right.
MR. NOLLEDO.In teaching law, we are always faced with this question: “Where do we base the equity
requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up
capital stock of a corporation”? Will the Committee please enlighten me on this?
MR. VILLEGAS.We have just had a long discussion with the members of the team from the UP Law Center
who provided us a draft. The phrase that is contained here which we adopted from the UP draft is
“60 percent of voting stock.”
MR. NOLLEDO.That must be based on the subscribed capital stock, because unless declared delinquent,
unpaid capital stock shall be entitled to vote.
MR. NOLLEDO.Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with 60-
40 percent equity invests in another corporation which is permitted by the Corporation Code, does the
Committee adopt the grandfather rule?
MR. VILLEGAS.Yes, that is the understanding of the Committee.
MR. NOLLEDO.Therefore, we need additional Filipino capital?
MR. VILLEGAS.Yes.48
xxxx
MR. AZCUNA.May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS.The portion accepted by the Committee is the deletion of the phrase “voting stock or
controlling interest.”
MR. AZCUNA.Hence, without the Davide amendment, the committee report would read: “corporations or
associations at least sixty percent of whose CAPITAL is owned by such citizens.”
MR. VILLEGAS.Yes.
MR. AZCUNA.So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned
by citizens.
MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us
say 40 percent of the capital is owned by them, but it is the voting capital, whereas, the Filipinos
own the nonvoting shares. So we can have a situation where the corporation is controlled by
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foreigners despite being the minority because they have the voting capital. That is the anomaly
that would result here.
MR. BENGZON. No, the reason we eliminated the word “stock” as stated in the 1973 and 1935
Constitutions is that according to Commissioner Rodrigo, there are associations that do not have
stocks. That is why we say “CAPITAL.”
MR. AZCUNA. We should not eliminate the phrase “controlling interest.”
MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied)
Thus, 60 percent of the “capital” assumes, or should result in, “controlling interest” in the corporation.
Reinforcing this interpretation of the term “capital,” as referring to controlling interest or shares entitled to
vote, is the definition of a “Philippine national” in the Foreign Investments Act of 1991, 50 to wit:
SEC. 3. Definitions.—As used in this Act:
a. The term “Philippine national” shall mean a citizen of the Philippines; or a domestic partnership or
association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing
business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent
(60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its
non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at
least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must
be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board
of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall
be considered a “Philippine national.” (Emphasis supplied)
In explaining the definition of a “Philippine national,” the Implementing Rules and Regulations of the Foreign
Investments Act of 1991 provide:
“b. “Philippine national” shall mean a citizen of the Philippines or a domestic partnership or association
wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of
the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-
Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least
sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned
and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors
of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered
a Philippine national. The control test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of
outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to
vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title
is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with
appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or
transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-
Philippine nationals.” (Emphasis supplied)
Mere legal title is insufficient to meet the 60 percent Filipino-owned “capital” required in the Constitution. Full
beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting
rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest
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in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is
“considered as non-Philippine national[s].”
Under Section 10, Article XII of the Constitution, Congress may “reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher
percentage as Congress may prescribe, certain areas of investments.” Thus, in numerous laws Congress has
reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the
“capital” of which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of
Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna
Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development
Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine
Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the
term “capital” in Section 11, Article XII of the Constitution is also used in the same context in numerous
laws reserving certain areas of investments to Filipino citizens.
To construe broadly the term “capital” as the total outstanding capital stock, including both common and non-
voting preferred shares, grossly contravenes the intent and letter of the Constitution that the “State shall
develop a self-reliant and independent national economy effectively controlled by Filipinos.” A broad
definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to
control of the public utility.
We shall illustrate the glaring anomaly in giving a broad definition to the term “capital.” Let us assume that a
corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares owned
by Filipinos, with both classes of share having a par value of one peso (P1.00) per share. Under the broad
definition of the term “capital,” such corporation would be considered compliant with the 40 percent
constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than 99.999
percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.
In the example given, only the foreigners holding the common shares have voting rights in the election of
directors, even if they hold only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent,
exercise control over the public utility. On the other hand, the Filipinos, holding more than 99.999 percent of
the equity, cannot vote in the election of directors and hence, have no control over the public utility. This
starkly circumvents the intent of the framers of the Constitution, as well as the clear language of the
Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State
policy of an independent national economy effectively controlled by Filipinos.
The example given is not theoretical but can be found in the real world, and in fact exists in the present case.
Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDT’s
Articles of Incorporation expressly state that “the holders of Serial Preferred Stock shall not be entitled to
vote at any meeting of the stockholders for the election of directors or for any other purpose or
otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any
meeting of stockholders.”51
On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors.
PLDT’s Articles of Incorporation 52 state that “each holder of Common Capital Stock shall have one vote in
respect of each share of such stock held by him on all matters voted upon by the stockholders, and the holders
of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all
other purposes.”53
In short, only holders of common shares can vote in the election of directors, meaning only common
shareholders exercise control over PLDT. Conversely, holders of preferred shares, who have no voting rights in
the election of directors, do not have any control over PLDT. In fact, under PLDT’s Articles of Incorporation,
holders of common shares have voting rights for all purposes, while holders of preferred shares have no voting
right for any purpose whatsoever.
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It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of
PLDT. In fact, based on PLDT’s 2010 General Information Sheet (GIS), 54 which is a document required to be
submitted annually to the Securities and Exchange Commission, 55 foreigners hold 120,046,690 common shares
of PLDT whereas Filipinos hold only 66,750,622 common shares. 56 In other words, foreigners hold 64.27% of
the total number of PLDT’s common shares, while Filipinos hold only 35.73%. Since holding a majority of the
common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of
control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly
mandated in Section 11, Article XII of the Constitution.
Moreover, the Dividend Declarations of PLDT for 2009, 57 as submitted to the SEC, shows that per share the
SIP58 preferred shares earn a pittance in dividends compared to the common shares. PLDT declared dividends
for the common shares at P70.00 per share, while the declared dividends for the preferred shares amounted to
a measly P1.00 per share.59 So the preferred shares not only cannot vote in the election of directors, they also
have very little and obviously negligible dividend earning capacity compared to common shares.
As shown in PLDT’s 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is P5.00 per
share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have
twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of
common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a
minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the authorized capital
stock of PLDT while common shares constitute only 22.15%. 62 This undeniably shows that beneficial interest in
PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the
constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of
Filipinos in accordance with the constitutional mandate. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required for the
State’s grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares,
99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares
earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial
ownership of a public utility.
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the
dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the
Constitution that “[n]o franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens x x x.”
To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises
the sole right to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only
35.73% of PLDT’s common shares, constituting a minority of the voting stock, and thus do not exercise control
over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn
only 1/70 of the dividends that common shares earn; 63 (5) preferred shares have twice the par value of
common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and
common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the
Constitution.
Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value of
P2,328.00 per share,64 while PLDT preferred shares with a par value of P10.00 per share have a current stock
market value ranging from only P10.92 to P11.06 per share, 65 is a glaring confirmation by the market that
control and beneficial ownership of PLDT rest with the common shares, not with the preferred shares.
Indisputably, construing the term “capital” in Section 11, Article XII of the Constitution to include both voting
and non-voting shares will result in the abject surrender of our telecommunications industry to foreigners,
amounting to a clear abdication of the State’s constitutional duty to limit control of public utilities to Filipino
citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain areas of
74
investment to Filipino citizens, such as the exploitation of natural resources as well as the ownership of land,
educational institutions and advertising businesses. The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the
national interest. The Court must perform its solemn duty to defend and uphold the intent and letter of the
Constitution to ensure, in the words of the Constitution, “a self-reliant and independent national
economy effectively controlled by Filipinos.”
Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to
Filipinos specific areas of investment, such as the development of natural resources and ownership of land,
educational institutions and advertising business, is self-executing. There is no need for legislation to
implement these self-executing provisions of the Constitution. The rationale why these constitutional
provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:
“x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional
mandate, the presumption now is that all provisions of the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to
ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the
prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. .
. . Unless the contrary is clearly intended, the provisions of the Constitution should be considered
self-executing, as a contrary rule would give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply refusing to pass the needed implementing
statute.” (Emphasis supplied)
In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice,
agreed that constitutional provisions are presumed to be self-executing. Justice Puno stated:
“Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future
legislation for their enforcement. The reason is not difficult to discern. For if they are not treated as self-
executing, the mandate of the fundamental law ratified by the sovereign people can be easily ignored
and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative
actions may give breath to constitutional rights but congressional inaction should not suffocate them.
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the
rights of a person under custodial investigation, the rights of an accused, and the privilege against self-
incrimination. It is recognized that legislation is unnecessary to enable courts to effectuate constitutional
provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same
treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use
without just compensation.” (Emphasis supplied)
Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the
provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong
Hoo,68 this Court ruled:
“x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien,
and as both the citizen and the alien have violated the law, none of them should have a recourse against the
other, and it should only be the State that should be allowed to intervene and determine what is to be done
with the property subject of the violation. We have said that what the State should do or could do in such
matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun
Ting, et al., 6 G.R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy
should be followed in cases of violations against the constitutional prohibition, courts of justice cannot
go beyond by declaring the disposition to be null and void as violative of the Constitution . x x x”
(Emphasis supplied)
To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935
Constitution, or over the last 75 years, not one of the constitutional provisions expressly reserving specific
areas of investments to corporations, at least 60 percent of the “capital” of which is owned by Filipinos, was
75
enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively
reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities, the
exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the
ownership of educational institutions. All the legislatures that convened since 1935 also miserably failed to
enact legislations to implement these vital constitutional provisions that determine who will effectively control
the national economy, Filipinos or foreigners. This Court cannot allow such an absurd interpretation of the
Constitution.
This Court has held that the SEC “has both regulatory and adjudicative functions.” 69 Under its regulatory
functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully neglects to
perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be compelled by
mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by
law to investigate such violation.
Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the
Articles of Incorporation of any corporation where “the required percentage of ownership of the capital
stock to be owned by citizens of the Philippines has not been complied with as required by existing laws
or the Constitution.”
Thus, the SEC is the government agency tasked with the statutory duty to enforce the nationality requirement
prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities. This Court, in a
petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the
SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do
based on the 2010 GIS that respondent PLDT submitted to the SEC.
Under Section 5(m) of the Securities Regulation Code, 71 the SEC is vested with the “power and function” to
“suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of
corporations, partnerships or associations, upon any of the grounds provided by law.” The SEC is
mandated under Section 5(d) of the same Code with the “power and function” to “investigate x x x the
activities of persons to ensure compliance” with the laws and regulations that SEC administers or enforces.
The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against
violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can
compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present
case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of the
ownership structure of PLDT’s voting shares, as admitted by respondents and as stated in PLDT’s 2010 GIS that
PLDT submitted to SEC.
WHEREFORE, we PARTLY GRANT the petition and rule that the term “capital” in Section 11, Article XII of the
1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the
present case only to common shares, and not to the total outstanding capital stock (common and non-voting
preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply
this definition of the term “capital” in determining the extent of allowable foreign ownership in respondent
Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the law.
SO ORDERED.
Leonardo-De Castro, Brion, Peralta, Bersamin, Del
Castillo, Villarama, Jr., Perez, Mendoza and Sereno, JJ., concur.
Corona, J., I join the dissent of Mr. Justice Velasco.
Velasco, Jr., J., I Dissent. (Please see Dissenting Opinion).
Abad, J., See my Dissenting Opinion.

SEPARATE DISSENTING OPINION
VELASCO, JR., J.:
With due respect, I dissent.
A summary of the pertinent facts is as follows:
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Philippine Long Distance Telephone Company (PLDT), a Philippine-registered telecommunications firm,

was granted an initial 50-year charter and the right to establish a telephone network by Act No. 3436 on
November 28, 1928.1
In 1969, American-owned General Telephone and Electronics Corporation (GTE), a major shareholder of
PLDT, sold 26% of PLDT’s equity to Philippine Telecommunications Investment Corporation (PTIC). 2 PTIC was
incorporated on November 9, 1967 and is engaged in the business of investment holdings. It held 26,034,263 of
PLDT shares, or 13.847% of the total outstanding common stocks of PLDT. 3
In 1977, Prime Holdings Inc. (PHI) was incorporated and 100% owned by the Conjuangco group.
Subsequently, PHI became the owner of 111,415 shares or 46.125% of PTIC by virtue of three (3) Deeds of
Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. 4
On May 9, 1986, the 111,415 PTIC shares held by PHI were sequestered by the Presidential Commission on
Good Government (PCGG) pursuant to Executive Order No. 1. 5
Later, this Court declared the said shares to be owned by the Republic of the Philippines. 6
In 1999, First Pacific Company Limited (First Pacific), a Bermuda-registered, Hong Kong-based investment
firm, acquired the remaining 54% equity of PTIC.7
Thereafter, the government decided to sell its 46.1% stake in PTIC (equivalent to 6.4% indirect stake in
PLDT), designating the Privatization Council of the Philippine Government as the disposition entity. On
December 8, 2006, a public bidding was held where Singapore-based Parallax Capital Management LP
(Parallax) emerged as the highest bidder with an offer of PhP 25,217,556,000. 8
January 31, 2007, the House of Representatives Committee on Good Government conducted a public hearing
on the particulars of the impending sale. Finance Secretary Margarito Teves, Finance Undersecretary John
Sevilla, PCGG Chairperson Camilo Sabio, Commissioners Narciso Nario and Nick Conti, Securities and Exchange
Commission (SEC) General Counsel Vernette Umali-Paco, Philippine Stock Exchange (PSE) Chairperson Jose
Vitug and President Francisco Ed Lim, Development Bank of the Philippines (DBP) President Reynaldo David
and Director Miguel Romero all attended the hearing. 9
In Report No. 2270, the House Committee on Good Government concluded that: (1) the auction of the
government’s PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and
(2) First Pacific’s intended acquisition of the government’s PTIC shares resulting in its 100% ownership in PTIC
will not violate the 40% constitutional limit on foreign ownership of a public utility since PTIC held only
13.847% of the total outstanding common stocks of PLDT. 10
Subsequently, the government informed First Pacific of the results of the bidding and gave it until February
1, 2007 to exercise its right of first refusal as provided under PTIC’s Articles of Incorporation. Consequently,
First Pacific announced that it would match Parallax’s bid. 11 However, First Pacific failed to raise the money for
the purchase by the February 1, 2007 deadline and, instead, yielded the right to PTIC itself. The deadline was
then reset to March 2, 2007.12
On February 14, 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings Inc. (MPAH),
entered into a Conditional Sale and Purchase Agreement with the government for the latter’s 46.1% stake in
PTIC at the price of PhP 25,217,556,000.13 The acquisition was completed on February 28, 2007.
On the same date, Wilson Gamboa (Gamboa) filed the instant petition for prohibition, injunction,
declaratory relief and declaration of nullity of sale of the 111,415 shares of PTIC. He argues that: (1) the
consummation of the impending sale of 111,415 shares to First Pacific violates the constitutional limitation on
foreign ownership of a public utility; (2) respondents committed grave abuse of discretion by allowing the sale
of PTIC shares to First Pacific; (3) respondents have made a complete misrepresentation of the impending sale
by saying that it does not breach the constitutional limitation on foreign ownership of a public utility; and (4)
the sale of common shares to foreigners in excess of 40% of the entire subscribed common capital stock
violates the 1987 Philippine Constitution. 14
After a careful examination of the facts and law applicable to the case, I submit that the petition should be
dismissed.
At the outset, it is strikingly clear that the petition suffers from several jurisdictional and procedural defects.
Petitioner Has No Locus Standi
Petitioner Gamboa claims that he filed the petition in his capacity as a “nominal shareholder of PLDT and as
[a] taxpayer.”15 However, these claims do not clothe him with the requisite legal standing to bring this suit.
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The Rules of Court specifically requires that “[e]very action must be prosecuted or defended in the name of
the real party in interest.”16 A real party in interest is defined as the “party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit.”
Petitioner has failed to allege any interest in the 111,415 PTIC shares nor in any of the previous purchase
contracts he now seeks to annul. He is neither a shareholder of PTIC nor of First Pacific. Also, he has not alleged
that he was an interested bidder in the government’s auction sale of the PTIC shares. Finally, he has not shown
how, as a nominal shareholder of PLDT, he stands to benefit from the annulment of the sale of the 111,415 PTIC
shares or of any of the sales of the PLDT common shares held by foreigners. In fine, petitioner has not shown
any real interest substantial enough to give him the requisite locus standi to question the sale of the
government’s PTIC shares to First Pacific.
Likewise, petitioner’s assertion that he has standing to bring the suit as a “taxpayer” must fail. In Gonzales v.
Narvasa, We discussed that “a taxpayer is deemed to have the standing to raise a constitutional issue when it is
established that public funds have been disbursed in alleged contravention of the law or the
Constitution.”17 In this case, no public funds have been disbursed. In fact, the opposite has happened—there is
an inflow of funds into the government coffers.
Evidently, petitioner Gamboa has no legal standing to bring the present petition before this Court.
This Court Has No Jurisdiction
Petitioner Gamboa filed four (4) different petitions before this Court—declaratory relief, annulment,
prohibition and injunction. However, all of these actions are not within the exclusive and/or original
jurisdiction of the Supreme Court.
Article VII of the 1987 Constitution, particularly Section 5(1), in relation to Sec. 5(5), enumerates the
instances where this Court exercises original jurisdiction:
Article VIII
Section 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls,
and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
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(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts, the admission to the practice of law, the integrated bar, and legal
assistance to the under-privileged. Such rules shall provide a simplified and inexpensive procedure for the
speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase,
or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain
effective unless disapproved by the Supreme Court.
Accordingly, this Court promulgated the Rules of Court, Sec. 1, Rule 56 of which states:
RULE 56
Original Cases
Section 1. Original cases cognizable.—Only petitions for certiorari, prohibition, mandamus, quo warranto,
habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting
ambassadors, other public ministers and consuls may be filed originally in the Supreme Court.
Based on the foregoing provisos, it is patently clear that petitions for declaratory relief, annulment of sale
and injunction do not fall within the exclusive original jurisdiction of this Court.
First, the court with the proper jurisdiction for declaratory relief is the Regional Trial Court (RTC). Sec. 1,
Rule 63 of the Rules of Court stresses that an action for declaratory relief is within the exclusive original
jurisdiction of the RTC, viz.:
“Any person interested under a deed, will, contract or other written instrument, whose rights are affected
by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach
or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties, thereunder.” (Emphasis supplied.)
An action for declaratory relief also requires the following: (1) a justiciable controversy between persons
whose interests are adverse; (2) the party seeking the relief has a legal interest in the controversy; and (3) the
issue is ripe for judicial determination. 18 As previously discussed, petitioner lacks any real interest in this
action; thus, no justiciable controversy between adverse interests exists.
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Further, the Rules of Court also requires that “[a]ll persons who have or claim any interest which would be
affected by the declaration shall be made parties.” 19 The failure to implead all persons with a claim or interest in
the subject matter of the petition for declaratory relief is a jurisdictional defect. 20
What is more, an action for declaratory relief requires that it be filed before “the breach or violation of the
statute, deed, contract, etc. to which it refers. Where the law or contract has already been contravened prior to
the filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action.” 21 Here,
petitioner himself points out the fact that, using the common stockholding basis, the 40% maximum foreign
ownership limit on PLDT was already violated long before the sale of the PTIC shares by the government. 22 In
addition, the sale itself has already been consummated. This only means that an action for declaratory relief is
no longer proper.
Despite this, the ponencia decided to treat the petition for declaratory relief as one for mandamus, citing the
rule that “where the petition has far-reaching implications and raises questions that should be resolved, it may
be treated as one for mandamus.”23 However, such rule is not absolute. In Macasiano v. National Housing
Authority,24 the Court explicitly stated that the exercise of such discretion, whether to treat a petition for
declaratory relief as one for mandamus, presupposes that the petition is otherwise viable or meritorious.
As I shall discuss subsequently in the substantive portion of this opinion, the petition in this case is clearly not
viable or meritorious.
Moreover, one of the reasons pointed out by the Court in Macasiano when it refused to treat the petition for
declaratory relief as one for mandamus was that the petitioner lacked the proper standing to file the petition.
Thus, the petition was subsequently dismissed. This is exactly similar to the instant case. As previously
explained, petitioner has no legal standing to bring the present petition before this Court. He failed to show any
real interest in the case substantial enough to give him the required legal standing to question the sale of the
PTIC shares of the government to First Pacific.
Further, a petition for mandamus is premature if there are administrative remedies available to
petitioner.25 Under the doctrine of primary administrative jurisdiction, “courts cannot or will not determine a
controversy where the issues for resolution demand the exercise of sound administrative discretion requiring
the special knowledge, experience, and services of the administrative tribunal to determine technical and
intricate matters of fact. In other words, if a case is such that its determination requires the expertise,
specialized training and knowledge of an administrative body, relief must first be obtained in an administrative
proceeding before resort to the courts is had even if the matter may well be within their proper
jurisdiction.”26 Along with this, the doctrine of exhaustion of administrative remedies also requires that where
an administrative remedy is provided by statute relief must be sought by exhausting this remedy before the
courts will act.27
In the instant case, the power and authority to determine compliance with the Constitution lies with the SEC.
Under Section 17(4) of the Corporation Code, the SEC has the power to approve or reject the Articles of
Incorporation of any corporation where “the required percentage of ownership of the capital stock to be owned
by citizens of the Philippines has not been complied with as required by existing laws or the Constitution.”
Similarly, under Section 5 of the Securities Regulation Code, the SEC is conferred with the power to suspend or
revoke the franchise or certificate of registration of corporations upon any of the grounds provided by law. 28 It
bears stressing that the SEC also has the power to investigate violations of the Securities Regulation Code and
its Amended Rules. With this, it is clear that petitioner failed to invoke the primary jurisdiction of the SEC with
respect to this matter.
Additionally, the petition contains numerous questions of fact which is not allowed in a petition
for mandamus.29 Hence, based on the foregoing, a petition for mandamus is evidently improper.
Second, since an action for annulment of sale is an ordinary civil action incapable of pecuniary
estimation,30 it also falls within the exclusive original jurisdiction of the RTC. 31
Lastly, although this Court, the CA, and the RTC have “concurrent jurisdiction to issue writs
of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not
give the petitioner unrestricted freedom of choice of court forum.” 32The doctrine of hierarchy of courts dictates
that when jurisdiction is shared concurrently with different courts, the proper suit should first be filed with the
lower-ranking court. Failure to do so is sufficient cause for the dismissal of a petition. 33
In Santiago v. Vasquez,34 the Court took the opportunity to explain why the blatant disregard of the
hierarchy of courts is frowned upon, to wit:
“x x x We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter,
the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of
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courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available
in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be
sought therein. This practice must be stopped, not only because of the imposition upon the precious time of this
Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the
case which often has to be remanded or referred to the lower court as the proper forum under the rules of
procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore,
reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot
be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a
remedy within and calling for the exercise of our primary jurisdiction.”
In the instant case, petitioner should have filed the petition for injunction and prohibition with the trial
courts. Petitioner failed to show any exceptional or compelling circumstance to justify the exception to the rule
of hierarchy of courts. Thus, absent such justification, the rule must be upheld.
In fact, in Fernandez v. Cojuangco,35 which also involved a similar issue, questioning the issuance of PLDT’s
common shares to Smart and NTT’s stockholders on the ground, among others, that such issuance of shares
violated the 40% foreign ownership constitutional restriction for public utilities, this Court issued a Resolution
dismissing the petition filed with it for disregarding the hierarchy of courts.
More importantly, the function of a writ of prohibition is to prevent the performance of an act which is yet
to be done. It is not intended to provide a remedy for acts already performed. 36 The rationale behind this was
discussed in Cabanero v. Torres,37 citing U.S. v. Hoffman,38 viz.:
“The writ of prohibition, as its name imports, is one which commands the person to whom it is directed not
to do something which, by the suggested to the relator, the court is informed he is about to do. If the thing be
already done, it is manifest the writ of prohibition cannot undo it, for that would require an affirmative act; and
the only effect to a writ of prohibition is to suspend all action, and to prevent any further proceeding in the
prohibited direction.”
As previously pointed out, the sale by the government of the PTIC shares had already been completed. Thus,
the Petition for Prohibition has become moot. As a result, this Court has no obligation to entertain the petition.
Finally, it should be noted that the non-joinder of ordinary civil actions with special civil actions is
elementary in remedial law. Sec. 5, Rule 2 of the Rules specifically prohibits the joining of special civil actions or
actions governed by special rules with ordinary civil actions. 39 In this case, petitioner violated this basic rule
when he joined several special civil actions, prohibition and declaratory relief, and the ordinary civil actions for
annulment and injunction.
Violation of Due Process
It is a fundamental guarantee in the Constitution that “[n]o person shall be deprived of life, liberty or
property without due process of law.” 40 Due process has two aspects: substantive and procedural. Substantive
due process is a prohibition of arbitrary laws, while procedural due process is a guarantee of procedural
fairness.41 Here, what petitioner asks of this Court is a finding of a violation of both substantive and procedural
due process.
Sec. 11, Art. XII of the Constitution contemplates of two situations: first, where the applicant of a franchise is a
natural person, he must be a Filipino citizen; and second, where the applicant is a juridical person, 60% of
its capital must be owned by Filipino citizens. In the first scenario, only one person and one property is
involved, i.e., the Filipino citizen and his or her franchise. In the second, two different property holders and two
different properties are involved, i.e., the public utility company holding its franchise and the shareholders
owning the capital of the utility company. However, in both situations, Sec. 11 imposes a qualification for the
retention of property on just one property holder, the franchise holder, as a condition for keeping his or its
franchise. It imposes no nationality qualification on the shareholders of the utility company as a condition for
keeping their shares in the utility company. Thus, if a utility company or the franchise holder fails to maintain
the nationality qualification, only its franchise should be revoked.
In J.G. Summit Holdings, Inc. v. CA,42 this Court had the chance to rule on a similar set of facts. In that case, We
refused to annul the sale of the government’s shares despite the petitioner’s claim that it would breach the
maximum 40% foreign ownership limit found in the Constitution. According to the Court:
“x x x In fact, it can even be said that if the foreign shareholdings of a landholding corporation
exceeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but
the capacity of the corporation to own land—that is, the corporation becomes disqualified to own
land. This finds support under the basic corporate law principle that the corporation and its stockholders are
separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders
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whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot
deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a
landholding corporation even if the latter will exceed the allowed foreign equity, what the law
disqualifies is the corporation from owning land.” (Emphasis supplied.)
Certainly, the Court has differentiated the two property owners and their properties. Confusing the two
would result in “an unreasonable curtailment of property rights without due process of law.” 43
Furthermore, procedural due process requires that before any of the common shares in excess of the 40%
maximum foreign ownership limit can be taken, all the shareholders have to be given notice and a trial should
be held before their shares are taken. This means that petitioner should have impleaded all the foreign natural
and juridical shareholders of PLDT so that they can be heard. The foreign shareholders are considered as an
“indispensable party” or one who:
“has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his
absence, without injuring or affecting that interest[;] a party who has not only an interest in the subject matter
of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting
his interest or leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an indispensable party is a
person in whose absence there cannot be a determination between the parties already before the court which
is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action
before it may properly go forward.”44
At the same time, the Rules of Court explicitly requires the joinder of indispensable parties or “[p]arties in
interest without whom no final determination can be had.” 45 This is mandatory. As held in Pepsico, Inc. v.
Emerald Pizza, Inc.,46 their absence renders all actions of the court null and void, viz.:
“x x x x Their presence is necessary to vest the court with jurisdiction, which is “the authority to hear and
determine a cause, the right to act in a case.” Thus, without their presence to a suit or proceeding, judgment of a
court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of
the court null and void for want of authority to act, not only as to the absent parties but even as to those
present.” (Emphasis supplied.)
In this case, petitioner failed to implead all the indispensable parties. Accordingly, in the absence of such
indispensable parties, this Court is wanting in authority to act or rule on the present petition.
Ultimately, the present petition partakes of a collateral attack on PLDT’s franchise as a public utility with
petitioner pleading as ground PLDT’s alleged breach of the 40% limit on foreign equity. Such is not allowed. As
discussed in PLDT v. National Telecommunications Commission,47 a franchise is a property right that can only be
questioned in a direct proceeding:
“x x x A franchise is a property right and cannot be revoked or forfeited without due process of law. The
determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been
forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert
which, as a rule, belongs to the State “upon complaint or otherwise” x x x the reason being that the abuse of a
franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a
direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful
exercise is primarily a concern of Government.”
Hence, due process requires that for the revocation of franchise a petition for quo warranto be filed directly
attacking the franchise itself.
Evidently, the petition is patently flawed and the petitioner availed himself of the wrong remedies. These
jurisdictional and procedural grounds, by themselves, are ample enough to warrant the dismissal of the
petition. Granting arguendo that the petition is sufficient in substance and form, it will still suffer the same fate.
The Proper Definition of “Capital”
Petitioner’s main substantive issue revolves around the proper definition of the word “capital” found in
Section 11, Article 12 of the Constitution. The said section reads:
under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens;
nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period
than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public. The participation of foreign investors
in the governing body of any public utility enterprise shall be limited to their proportionate share in its
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capital, and all the executive and managing officers of such corporation or association must be citizens
of the Philippines.” (Emphasis supplied.)
He argues that the framers of the Constitution intended the word “capital” to be limited to voting shares
alone and not the total outstanding capital stock (combined total of voting and non-voting shares). Specifically,
he contends that the term “capital” refers only to shares of stock that can vote in the election of the members of
the Board of Directors. The question is, is this the proper definition?
The ponencia resolved this in the affirmative and held that the term “capital” only refers to voting shares
since these are the shares that “have voting rights which translate to control,” 48 i.e., the right to elect directors
who ultimately control or manage the corporation. Generally, these are referred to as “common” shares.
However, he clarified that if preferred shares also have the right to vote in the election of the members of the
Board of Directors, then the term “capital” shall also include such preferred shares. Further,
the ponencia maintains that “mere legal title is insufficient to meet the required Filipino equity,” but that “full
beneficial ownership of the stocks coupled with appropriate voting rights” is required. 49
I beg to disagree with the ponencia’s resolution of this issue for the following reasons:
First, contrary to pronouncement of the ponencia, the intent of the framers of the Constitution was not to
limit the application of the word “capital” to voting or common shares alone. In fact, the Records of the
Constitutional Commission reveal that even though the UP Law Center proposed the phrase “voting stock or
controlling interest,” the framers of the Constitution did not adopt this but instead used the word “capital,” viz.:
MR. BENGZON. We would also like to indicate that perhaps the better term in order to avoid any
conflict or misinterpretations would be the use of the phrase “capital stock.”
MR. NATIVIDAD. Capital stock?
MR. SUAREZ. We will discuss that on the committee level because precisely, there were three
criteria that were submitted. One of them is with reference to the authorized capital stock; the second
would be with respect to the voting rights; and the third would be with respect to the management. And
so, again, we would like to inform the members that the Committee is still trying to polish this particular
provision.50
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MR. FOZ. Mr. Vice-President, in Sections 3 and 9, 51 the provision on equity is both 60 percent, but I
notice that this is now different from the provision in the 1973 Constitution in that the basis for the
equity provision is voting stock or controlling interest instead of the usual capital percentage as provided
for in the 1973 Constitution. We would like to know what the difference would be between the previous
and the proposed provisions regarding equity interest.
MR. VILLEGAS. Commissioner Suarez will answer that.
MR. SUAREZ. Thank you.
As a matter of fact, this particular portion is still being reviewed by this Committee. In Section 1,
Article XIII of the 1935 Constitution, the wording is that the percentage should be based on the capital
which is owned by such citizens. In the proposed draft, this phrase was proposed: “voting stock or
controlling interest.” This was a plan submitted by the UP Law Center.
Three days ago, we had an early morning breakfast conference with the members of the UP Law Center
and precisely, we were seeking clarification regarding the difference. We would have three criteria to go
by: One would be based on capital, which is capital stock of the corporation, authorized, subscribed or
paid up, as employed under the 1935 and the 1973 Constitution. The idea behind the introduction of the
phrase “voting stock or controlling interest” was precisely to avoid the perpetration of dummies, Filipino
dummies of multinationals. It is theoretically possible that a situation may develop where these
multinational interests would not really be only 40 percent but will extend beyond that in the matter of
voting because they could enter into what is known as a voting trust or voting agreement with the rest of
the stockholders and, therefore, notwithstanding the fact that on record their capital extent is only up to
40-percent interest in the corporation, actually, they would be managing and controlling the entire
company. That is why the UP Law Center members suggested that we utilize the words “voting interest”
which would preclude multinational control in the matter of voting, independent of the capital structure
of the corporation. And then they also added the phrase “controlling interest” which up to now they have
not been able to successfully define the exact meaning of. x x x And as far as I am concerned, I am not
speaking in behalf of the Committee, I would feel more comfortable if we go back to the wording of the
1935 and the 1973 Constitution, that is to say, the 60-40 percentage could be based on the capital stock
of the corporation.
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MR. FOZ. I understand that that was the same view of Dean Carale who does not agree with the
other on this panel at the UP Law Center regarding the percentage of the ratio.
MR. Suarez. That is right. Dean Carale shares my sentiment about this matter.
MR. BENGZON. I also share the sentiment of Commissioner Suarez in that respect. So there are
already two in the Committee who want to go back to the wording of the 1935 and the 1973
Constitution.52
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MR. TREÑAS. Madam President, may I propose an amendment on line 14 of Section 3 by
deleting therefrom “whose voting stock and controlling interest.” And in lieu thereof, insert the
CAPITAL so the line should read: “associations at least sixty percent of the CAPITAL is owned by
such citizens.
MR. VILLEGAS. We accept the amendment.
MR. TREÑAS. Thank you.
THE PRESIDENT. The amendment of Commissioner Treñas on line 14 has been accepted by the
Committee.
Is there any objection? (Silence) The Chair hears none; the amendment is approved. 53
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MR. VILLEGAS. Yes, Commissioner Davide has accepted the word “CAPITAL” in place of
“voting stock or controlling interest.” This is an amendment already accepted by the
Committee.54 x x x x
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MR. NOLLEDO. Thank you, Madam President.
I would like to propound some questions to the chairman and members of the committee. I have here
a copy of the approved provisions on Article on the National Economy and Patrimony. On page 2, the first
two lines are with respect to the Filipino and foreign equity and I said: “At least sixty percent of whose
capital or controlling interest is owned by such citizen.”
I notice that this provision was amended by Commissioner Davide by changing “voting stocks” to
“CAPITAL,” but I still notice that there appears the term “controlling interest” which seems to refer to
associations other than corporations and it is merely 50 percent plus one percent which is less than 60
percent. Besides, the wordings may indicate that the 60 percent may be based not only on capital but
also on controlling interest; it could mean 60 percent or 51 percent.
Before I propound the final question, I would like to make a comment in relation to Section 15 since
they are related to each other. I notice that in Section 15, there still appears the phrase “voting stock or
controlling interest.” The term “voting stocks” as the basis of the Filipino equity means that if 60 percent
of the voting stocks belong to Filipinos, foreigners may not own more than 40 percent of the capital as
long as the 40 percent or the excess thereof will cover nonvoting stock. This is aside from the fact that
under the Corporation Code, even nonvoting shares can vote on certain instances.
Control over investments may cover aspects of management and participation in the fruits of production
or exploitation.
So, I hope the committee will consider favorably my recommendation that instead of using
“controlling interests,” we just use “CAPITAL” uniformly in cases where foreign equity is permitted by
law, because the purpose is really to help the Filipinos in the exploitation of natural resources and in the
operation of public utilities. I know the committee, at its own instance, can make the amendment.
What does the committee say?
MR. VILLEGAS. We completely agree with the Commissioner’s views. Actually, it was really an
oversight. We did decide on the word “CAPITAL.” I think it was the opinion of the majority that the
phrase “controlling interest” is ambiguous.
So, we do accept the Commissioner’s proposal to eliminate the phrase “or controlling interest”
in all the provisions that talk about foreign participation. (Emphasis supplied.)
MR. NOLLEDO. Not only in Section 3, but also with respect to Section 15.
Thank you very much.55
Undoubtedly, the framers of the Constitution decided to use the word “capital” in all provisions that talk
about foreign participation and intentionally left out the phrase “voting stocks” or “controlling
83
interest.” Cassus Omissus Pro Omisso Habendus Est—a person, object or thing omitted must have been omitted
intentionally. In this case, the intention of the framers of the Constitution is very clear—to omit the phrases
“voting stock” and “controlling interest.”
Evidently, the framers of the Constitution were more comfortable with going back to the wording of the 1935
and 1973 Constitutions, which is to use the 60-40 percentage for the basis of the capital stock of the
corporation. Additionally, the phrases “voting stock or controlling interest” were also initially used in Secs.
256 and 10,57 Article XII of the 1987 Constitution. These provisions involve the development of natural
resources and certain investments. However, after much debate, they were also replaced with the word
“capital” alone. All of these were very evident in the aforementioned deliberations.
Much more significant is the fact that a comprehensive examination of the constitutional deliberations in
their entirety will reveal that the framers of the Constitution themselves understood that the word capital
includes both voting and non-voting shares and still decided to use “capital” alone, to wit:
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase “voting stock or
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read:
“corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens.”
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be
owned by citizens?
MR. VILLEGAS. That is right.
xxxx
MR. AZCUNA. Yes, but what I mean is that the control should be with the Filipinos.
MR. BENGZON. Yes, that is understood.
MR. AZCUNA. Yes, because if we just say “sixty percent of whose capital is owned by the
Filipinos,” the capital may be voting or non-voting.
MR. BENGZON. That is correct.58
xxxx
MR. GARCIA. Thank you very much, Madam President.
I would like to propose the following amendment on Section 3, line 14 on page 2. I propose to change
the word “sixty” to SEVENTY-FIVE. So, this will read: “or it may enter into co-production, joint venture,
production sharing agreements with Filipino citizens or corporations or associations at least SEVENTY-
FIVE percent of whose CAPITAL stock or controlling interest is owned by such citizens.”
MR. VILLEGAS. This is just a correction. I think Commissioner Azcuna is not insisting on the
retention of the phrase “controlling interest,” so we will retain “CAPITAL” to go back really to the 1935
and 1973 formulations.59 (Emphasis supplied.)
To emphasize, by using the word “capital,” the framers of the Constitution adopted the definition or
interpretation that includes all types of shares, whether voting or non-voting.
The fundamental principle in the construction of constitutional provisions is “to give the intent to the
framers of the organic law and the people adopting it. The intention to which force is to be given is that which is
embodied and expressed in the constitutional provisions themselves.” 60 Generally, “in construing constitutional
provisions which are ambiguous or of doubtful meaning, the courts may consider the debates in the
constitutional convention as throwing light on the intent of the framers of the Constitution. It is true that the
intent of the convention is not controlling by itself, but as its proceeding was preliminary to the adoption by the
people of the Constitution the understanding of the convention as to what was meant by the terms of the
constitutional provision which was the subject of the deliberation, goes a long way toward explaining the
understanding of the people when they ratified it.”61
Second, the ponencia also points to the provisions of the Foreign Investments Act of 1991 (FIA), 62 as a
reinforcement of the interpretation of the word “capital” as only referring to those shares entitled to vote.
However, a careful examination of its provisions would reveal otherwise.
Section 3(a) of the FIA, as amended, defines the term “Philippine national” as:
“SEC. 3. Definitions.—As used in this Act:
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a. The term “Philippine national” shall mean a citizen of the Philippines; of a domestic partnership or
association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing
business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent
(60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its
non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at
least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must
be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board
of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall
be considered a “Philippine national.” (Emphasis supplied.)
The ponencia failed to see the fact that the FIA specifically has the phrase “entitled to vote” after the phrase
“total outstanding capital stock.” Logically, this means that interpreting the phrase “total outstanding capital
stock” alone connotes the inclusion of all types of shares under the term “capital” and not just those that are
entitled to vote. By adding the phrase “entitled to vote,” the FIA sought to distinguish between the shares that
can vote and those that cannot. Thus, it is very clear that even the FIA itself supports the definition of the term
“capital” as including all types of shares.
As a matter of fact, in the Senate deliberations of the FIA, Senator Angara pointed out that the word
“capital,” as used in the 1987 Constitution, includes all types of shares:
Senator Angara. x x x x
Before I leave that point, Mr. President, as we know, the constitutional test is capital. That means,
equity investment, not control. Would this control test then now become an additional requirement to
the constitutional requirement?
Senator Paterno. Well, this is an amplification of the constitutional stipulation, Mr. President. It is a
definition, by law, of what is contained in the Constitution.
Senator Angara. No, Mr. President, because the Constitution requires 60 percent of capital. That
means, whether voting or nonvoting, 60 percent of that must belong to Filipinos. Whereas, under
this proposed definition, it is only the voting shares that we require to be 60 percent owned.
Senator Paterno. Yes.
Senator Angara. So, my question is: Would this requirement of control be in addition to what the
Constitution imposes?
Senator Paterno. No, this would be the definition of what the Constitution requires. We are saying
that it is the capital stock outstanding and entitled to vote. It is the definition of capital as maintained by
the Constitution.
Senator Angara. On the contrary, I am saying that the constitutional test is capital, which is
distinguished from capital stock entitled to vote. Capital means equity which can be voting or
nonvoting, common or preferred. That is the constitutional test. 63 x x x (Emphasis supplied.)
Moreover, it is a well-settled rule of statutory struction that a statute should be construed whenever
possible in a manner that will avoid conflict with the Constitution. 64 Where a statute is reasonably susceptible
of two constructions, one constitutional and the other unconstitutional, the construction in favor of its
constitutionality should be adopted.
In this case, the FIA should be read in harmony with the Constitution. Since the Constitution only provides
for a single requirement for the operation of a public utility under Sec. 11, i.e., 60% capital must be Filipino-
owned, a mere statute cannot add another requirement. Otherwise, such statute may be considered
unconstitutional.
Accordingly, the phrase “entitled to vote” should not be interpreted to be limited to common shares alone or
those shares entitled to vote in the election of members of the Board of Directors. It should also include those
deemed non-voting because they also have voting rights. Sec. 6 of the Corporation Code 65 grants voting rights to
holders of shares of a corporation on certain key fundamental corporate matters despite being classified as
non-voting in the articles of incorporation. These are:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
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3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate
property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.
Clearly, the shares classified as non-voting are also entitled to vote under these circumstances.
In fact, the FIA did not say “entitled to vote in the management affairs of the corporation” or “entitled to vote
in the election of the members of the Board of Directors.” Verily, where the law does not distinguish, neither
should We. Hence, the proper interpretation of the phrase “entitled to vote” under the FIA should be that it
applies to all shares, whether classified as voting or non-voting shares. Such construction is in fact in harmony
with the fundamental law of the land.
Stockholders, whether holding voting or non-voting stocks, have all the rights, powers and privileges of
ownership over their stocks. This necessarily includes the right to vote because such is inherent in and
incidental to the ownership of corporate stocks, and as such is a property right. 66Additionally, control is
another inherent right of ownership.67 The circumstances enumerated in Sec. 6 of the Corporation Code
clearly evince this. It gives voting rights to the stocks deemed as non-voting as to fundamental and
major corporate changes. Thus, the issue should not only dwell on the daily management affairs of the
corporation but also on the equally important fundamental changes that may need to be voted on. On this, the
“non-voting” shares also exercise control, together with the voting shares.
Consequently, the fact that only holders of common shares can elect a corporation’s board of directors does not
mean that only such holders exercise control over the corporation. Particularly, the control exercised by the
board of directors over the corporation, by virtue of the corporate entity doctrine, is totally distinct from the
corporation’s stockholders and any power stockholders have over the corporation as owners.
It is settled that when the activity or business of a corporation falls within any of the partly nationalized
provisions of the Constitution or a special law, the “control test” must also be applied to determine the
nationality of a corporation on the basis of the nationality of the stockholders who control its equity.
The control test was laid down by the Department of Justice (DOJ) in its Opinion No. 18 dated January 19,
1989. It determines the nationality of a corporation with alien equity based on the percentage of capital owned
by Filipino citizens. It reads:
“Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino
citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the
corporation or partnership is less than 60% only the number of shares corresponding to such percentage shall
be counted as of Philippine nationality.”68
In a catena of opinions, the SEC, “the government agency tasked with the statutory duty to enforce the
nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public
utilities,”69 has consistently applied the control test.70
The FIA likewise adheres to the control test. This intent is evident in the May 21, 1991 deliberations of the
Bicameral Conference Committee (Committees on Economic Affairs of the Senate and House of
Representatives), to wit:
CHAIRMAN TEVES. x x x On definition of terms, Ronnie, would you like anything to say here on the
definition of terms of Philippine national?
HON. RONALDO B. ZAMORA. I think we’ve—we have already agreed that we are adopting here the
control test. Wasn’t that the result of the—
CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it clear that the Senate
was not able to make a decision for or against the grandfather rule and the control test, because we had
gone into caucus and we had voted but later on the agreement was rebutted and so we had to go back to
adopting the wording in the present law which is not clearly, by its language, a control test formulation.
HON. ANGARA. Well, I don’t know. Maybe I was absent, Ting, when that happened but my
recollection is that we went into caucus, we debated [the] pros and cons of the control versus the
grandfather rule and by actual vote the control test bloc won. I don’t know when subsequent rejection
took place, but anyway even if the—we are adopting the present language of the law I think by
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interpretation, administrative interpretation, while there may be some differences at the beginning, the
current interpretation of this is the control test. It amounts to the control test.
CHAIRMAN TEVES. That’s what I understood, that we could manifest our decision on the control
test formula even if we adopt the wordings here by the Senate version.
xxxx
CHAIRMAN PATERNO. The most we can do is to say that we have explained—is to say that although
the House Panel wanted to adopt language which would make clear that the control test is the guiding
philosophy in the definition of [a] Philippine national, we explained to them the situation in the Senate
and said that we would be—was asked them to adopt the present wording of the law cognizant of the
fact that the present administrative interpretation is the control test interpretation. But, you know, we
cannot go beyond that.71
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase “voting stock or
This intent is even more apparent in the Implementing Rules and Regulations (IRR) of the FIA. In defining a
“Philippine national,” Section 1(b) of the IRR of the FIA categorically states that for the purposes of
determining the nationality of a corporation the control test should be applied. 72
The cardinal rule in the interpretation of laws is to ascertain and give effect to the intention of the
legislator.73 Therefore, the legislative intent to apply the control test in the determination of nationality must be
given effect.
Significantly, in applying the control test, the SEC has consistently ruled that the determination of the
nationality of the corporation must be based on the entire outstanding capital stock, which includes
both voting and non-voting shares. One such ruling can be found in an Opinion dated November 21, 1989
addressed to Atty. Reynaldo G. Geronimo, to wit:
“As to the basis of computation of the 60-40 percentage nationality requirement under existing laws (whether
it should be based on the number of shares or the aggregate amount in pesos of the par value of the shares), the
following definitions of corporate terms are worth mentioning.
“The term capital stock signifies the aggregate of the shares actually subscribed”. (11 Fletcher, Cyc. Corps.
(1971 Rev. Vol.) sec. 5082, citing Goodnow v. American Writing Paper Co., 73 NJ Eq. 692, 69 A 1014 aff'g 72 NJ
Eq. 645, 66 A, 607).
“Capital stock means the capital subscribed (the share capital)”. (Ibid., emphasis supplied).
“In its primary sense a share of stock is simply one of the proportionate integers or units, the sum of which
constitutes the capital stock of corporation. (Fletcher, sec. 5083).
The equitable interest of the shareholder in the property of the corporation is represented by the term
stock, and the extent of his interest is described by the term shares. The expression shares of stock when
qualified by words indicating number and ownership expresses the extent of the owner’s interest in the
corporate property (Ibid, Sec. 5083, emphasis supplied).
Likewise, in all provisions of the Corporation Code the stockholders’ right to vote and receive dividends is
always determined and based on the “outstanding capital stock”, defined as follows:
“SECTION 137. Outstanding capital stock defined.—The term “outstanding capital stock” as used in this
Code, means the total shares of stock issued to subscribers or stockholders, whether or not fully or partially
paid (as long as there is a binding subscription agreement, except treasury shares.”
The computation, therefore, should be based on the total outstanding capital stock, irrespective of the
amount of the par value of the shares.”
Again in SEC Opinion dated December 22, 2004 addressed to Atty. Priscilla B. Valer, the SEC reiterated the
application of the control test to the total outstanding capital stock irrespective of the amount of the par value
of shares, viz.:
“Under the ‘control concept’, the nationality of the corporation depends on the nationality of the controlling
stockholders. In determining the nationality of a corporation under the ‘control test’, the following ruling was
adopted by the Commission:
xxxx
Hence, we confirm your view that the test for compliance with the nationality requirement is based
on the total outstanding capital stock irrespective of the amount of the par value of shares.”74 (Emphasis
supplied.)
More importantly, the SEC defined “capital” as to include both voting and non-voting in the determination of
the nationality of a corporation, to wit:
87
“In view of the foregoing, it is opined that the term “capital” denotes the sum total of the shares subscribed
and paid by the shareholders, or secured to be paid, irrespective of their nomenclature to be issued by the
corporation in the conduct of its operation. Hence, non-voting preferred shares are considered in the
computation of the 60-40% Filipino-alien equity requirement of certain economic activities under the
Constitution.”75 (Emphasis supplied.)
In fact, the issue in the present case was already answered by the SEC in its Opinion dated February 15,
1988. The opinion was issued as an answer to the query––“Would it be legal for foreigners to own more than
40% of the common shares but not more than 40% of the total outstanding capital stock which would include
both common and non-voting preferred shares?” This is exactly the question in this case. The SEC ruled in the
affirmative and stated:
The pertinent provision of the Philippine Constitution under Article XII, Section 7, reads in part thus:
“No franchise, certificate, or any form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines, or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens. . .” x x x
The issue raised on your letter zeroes in on the meaning of the word “capital” as used in the above
constitutional provision.
Anent thereto, please be informed that the term “capital” as applied to corporations, refers to the money,
property or means contributed by stockholders as the form or basis for the business or enterprise for which the
corporation was formed and generally implies that such money or property or means have been contributed in
payment for stock issued to the contributors. (United Grocers, Ltd. v. United States F. Supp. 834, cited in 11
Fletcher, Cyc. Corp., 1986, rev. vol., sec. 5080 at 18). As further ruled by the court, “capital of a corporation is
the fund or other property, actually or potentially in its possession, derived or to be derived from the sale by it
of shares of its stock or his exchange by it for property other than money. This fund includes not only money or
other property received by the corporation for shares of stock but all balances of purchase money, or
installments, due the corporation for shares of stock sold by it, and all unpaid subscriptions for shares.”
(Williams v. Brownstein, 1F. 2d 470, cited in 11 Fletcher, Cyc. Corp., 1058 rev. vol., sec. 5080, p. 21).
The term “capital” is also used synonymously with the words “capital stock”, as meaning the amount
subscribed and paid-in and upon which the corporation is to conduct its operation. (11 Fletcher, Cyc. Corp.
1986, rev. vol., sec. 5080 at 15). And, as held by the court in Haggard v. Lexington Utilities Co., (260 Ky 251, 84
SW 2d 84, cited in 11 Fletcher, Cyc. Corp., 1958 rev. vol., sec. 5079 at 17), “The capital stock of a corporation
is the amount paid-in by its stockholders in money, property or services with which it is to conduct its
business, and it is immaterial how the stock is classified, whether as common or preferred.”
The Commission, in a previous opinion, ruled that the term ‘capital’ denotes the sum total of the shares
subscribed and paid by the shareholders or served to be paid, irrespective of their
nomenclature. (Letter to Supreme Technotronics Corporation, dated April 14, 1987).
Hence, your query is answered in the affirmative.76 (Emphasis supplied.)
This opinion was reiterated in another Opinion dated July 16, 1996 addressed to Mr. Mitsuhiro Otsuki:
“Relative to the second issue, “In the absence of special provisions the holders of preferred stock in a
corporation are in precisely the same position, both with respect to the corporation itself and with respect to
the creditors of the corporation, as the holders of common stock, except only that they are entitled to receive
dividends on their shares, to the extent guaranteed or agreed upon, before any dividends can be paid to the
holders of common stock. x x x. Accordingly, as a general rule, they are considered in the computation of
the 60-40% Filipino-alien equity percentage requirement, unless the law covering the type of business
to be undertaken provides otherwise.” (Emphasis supplied.)
In Opinion No. 32-03 dated June 2, 2003 addressed to Commissioner Armi Jane R. Borje, the SEC likewise
held that the word “capital” as used in Sec. 11, Art. XII of the 1987 Constitution refers to the entire outstanding
capital stock, regardless of its share classification, viz.:
Please note that Article XII, Section 11 of the Philippine Constitution provides:
“No franchise, certificate, or any other form of authorization for the operation of a public utility shall
be granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of whose capital is owned by such citizens…”
The legal capacity of the corporation to acquire franchise, certificate, or authority for the operation of a
public utility is regulated by the aforequoted Constitutional provision, which requires that at least sixty per
centum (60%) of the capital of such corporation be owned by citizens of the Philippines. However, such
provision does not qualify whether the required ownership of “capital” shall be that of the voting or
non-voting, common or preferred. Hence, it should be interpreted to refer to the sum total of the
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outstanding capital stock, irrespective of the nomenclature or classification as common,

preferred, voting or non-voting.” (Emphasis supplied.)
In the same way, the SEC has also adopted the same interpretation of the word “capital” to various laws or
statutes imposing a minimum on Filipino ownership. In an Opinion dated November 11, 1988 addressed to Mr.
Nito Doria, which involved Executive Order No. 226, otherwise known as the Omnibus Investments Code of
1987, the SEC stated:
“For permitted and permissible investments, the maximum percentage of control allowable to foreign investors
is found in Sections 46 and 47 of the Omnibus Investments Code of 1987, copy enclosed. In relation thereto,
“Outstanding capital stock” refers to the total shares issued to subscribers or stockholders, whether or not fully
or partially paid, except treasury shares. (Section 137, Corporation Code of the Philippines), and it is immaterial
how the stock is classified, whether as common or preferred, (SEC Opinions, dated June 13, 1988, April 14,
1987, and February 15, 1988).”
Again, in an Opinion dated October 16, 1981 addressed to Atty. Jose A. Bañ ez which involved Republic Act
No. 1180, otherwise known as the Retail Trade Nationalization Law, the SEC opined that the issuance of
preferred shares to a foreigner will disqualify the corporation from engaging in retail trade, because the law
provides that “no association, partnership, or corporation the capital of which is not wholly owned by citizens
of the Philippines, shall engage directly or indirectly in the retail business.” 77 The SEC held:
Your client will lose its character of being one hundred percent (100%) Filipino-owned if said Japanese entity is
allowed to subscribe to its preferred shares. The issuance of shares to an alien will reduce the ownership of
Filipino citizens to less than the required percentage based on the outstanding capital stock of the corporation,
regardless of the fact that said shares are non-voting and non-convertible.
Please be advised that under the Retail Trade Nationalization Law (R.A. 1180), “No association, partnership, or
corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or
indirectly in the retail business.”
Notably, the foregoing Opinion was rendered before the promulgation of the 1987 Constitution. Thus, it
must be assumed that the framers of the Constitution were aware of the administrative interpretation of the
word “capital” and that they also adhered to the same interpretation when they re-adopted it in the 1987
Constitution from the 1935 and 1973 Constitutions. As held in Laxamana v. Baltazar, “[w]here a statute has
received a contemporaneous and practical interpretation and the statute as interpreted is re-enacted, the
practical interpretation is accorded greater weight than it ordinarily receives, and is regarded as presumptively
the correct interpretation of the law. The rule here is based upon the theory that the legislature is acquainted
with the contemporaneous interpretation of a statute, especially when made by an administrative body or
executive officers charged with the duty of administering or enforcing the law, and therefore impliedly adopts
the interpretation upon re-enactment.”78
Without a doubt, the SEC’s definition of the word “capital” has been consistently applied to include the
entire outstanding capital stock of a corporation, irregardless of whether it is common or preferred or voting or
non-voting.
This contemporaneous construction of the SEC is entitled to great respect and weight especially since it is
consistent with the Constitutional Commission’s intention to use the term “capital” as applying to all shares,
whether common or preferred. It is well to reiterate the principle of contemporaneous construction and the
reason why it is entitled to great respect, viz.:
“x x x As far back as In re Allen, (2 Phil. 630) a 1903 decision, Justice McDonough, as ponente, cited this
excerpt from the leading American case of Pennoyer v. McConnaughy, decided in 1891: “The principle that the
contemporaneous construction of a statute by the executive officers of the government, whose duty it is
to execute it, is entitled to great respect, and should ordinarily control the construction of the statute by
the courts, is so firmly embedded in our jurisprudence that no authorities need be cited to support it.’ (Ibid,
640. Pennoyer v. McConnaughly is cited in 140 US 1. The excerpt is on p. 23 thereof. Cf. Government v.
Municipality of Binalonan, 32 Phil, 634 [1915]) There was a paraphrase by Justice Malcolm of such a
pronouncement in Molina v. Rafferty, (37 Phil. 545) a 1918 decision:” Courts will and should respect the
contemporaneous construction placed upon a statute by the executive officers whose duty it is to enforce it,
and unless such interpretation is clearly erroneous will ordinarily be controlled thereby. (Ibid, 555) Since then,
such a doctrine has been reiterated in numerous decisions.” 79(Emphasis supplied.)
Similarly, the Corporation Code defines “outstanding capital stock” as the “total shares of stock issued.” 80 It
does not distinguish between common and preferred shares. It includes all types of shares.
89
Since foreigners hold 64.27% of to the total number of PLDT’s common shares which are entitled to select
the Board of Directors, the ponencia claims foreigners will elect the majority of the Board of Director in PLDT
and, hence, have control over the company.
This is incorrect.
First of all, it has been established that the word “capital” in the phrase “corporation or associations
organized under the laws of the Philippines, at least sixty per centum of whose ‘capital’ is owned by such
citizens” under Sec. 11, Art. XII of the 1987 Constitution means both common or preferred shares or voting or
non-voting shares. This phrase is qualified by the last sentence of Sec. 11, which reads:
“x x x x The participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.” (Emphasis supplied.)
The aforequoted constitutional provision is unequivocal––it limits the participation of the foreign
investors in the governing body to their proportionate share in the capital of the corporation. Participation is
“the act of taking part in something.” 81 Accordingly, it includes the right to elect or vote for in the election of the
members of the Board of Directors. However, this right to participate in the election is restricted by the first
sentence of Sec. 11 such that their right cannot exceed their proportionate share in the capital, i.e., 40%. In
other words, the right of foreign investors to elect the members of the Board of Directors cannot exceed the
voting rights of the 40% of the common shares, even though their ownership of common shares may exceed
40%. Thus, since they can only vote up to 40% of the common shares of the corporation, they will never be in a
position to elect majority of the members of the Board of Directors. Consequently, control over the membership
of the Board of Directors will always be in the hands of Filipino stockholders although they actually own less
than 50% of the common shares.
Let Us apply the foregoing principles to the situation of PLDT. Granting without admitting that foreigners own
64.27% of PLDT’s common shares and say they own 40% of the total number of common and preferred shares,
still they can only vote up to 40% of the common shares of PLDT since their participation in the election of the
Board of Directors (the governing body of the corporation) is limited by the 40% ownership of the capital
under the first sentence of Sec. 11, Art. XII of the Constitution. The foreigners can only elect members of the
Board of Directors based on their 40% ownership of the common shares and their directors will only constitute
the minority. In no instance can the foreigners obtain the majority seats in the Board of Directors.
Further, the 2010 General Information Sheet (GIS) of PLDT reveals that among the thirteen (13) members of
the Board of Directors, only two (2) are foreigners. It also reveals that the foreign investors only own 13.71% of
the capital of PLDT.82
Obviously, the nomination and election committee of PLDT uses the 40% cap on the foreign ownership of
the capital which explains why the foreigners only have two (2) members in the Board of Directors. It is
apparent that the 64.27% ownership by foreigners of the common shares cannot be used to elect the majority
of the Board of Directors. The fact that the proportionate share of the foreigners in the capital (voting and non-
voting shares or common and preferred shares) is even less than 40%, then they are only entitled to voting
rights equivalent to the said proportionate share in the capital and in the process elect only a smaller number
of directors. This is the reality in the instant case. Hence, the majority control of Filipinos over the management
of PLDT is, at all times, assured.
This intent to limit the participation of the foreign investors in the governing body of the corporation was
solidified in Commonwealth Act No. 108, otherwise known as the Anti-Dummy Law. Sec. 2-A of the
aforementioned law, as amended, provides in part:
“x x x Provided, finally, that the election of aliens as members of the Board of Directors of governing body of
corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their
allowable participation or share in the capital of such entities.”
The view that the definition of the word “capital” is limited to common or voting shares alone would
certainly have the effect of removing the 60-40% nationality requirement on the non-voting shares. This would
then give rise to a situation wherein foreign interest would not really be limited to only 40% but may even
extend beyond that because foreigners could also own the entire 100% of the preferred or non-voting shares.
As a result, Filipinos will no longer have effective ownership of the corporate assets which may include lands.
This is because the actual Filipino equity constitutes only a minority of the entire outstanding capital stock.
Therefore, the company would then be technically owned by foreigners since the actual ownership of at least
90
60% of the entire outstanding capital stock would be left to the hands of the foreigners. Allowing this to happen
would violate and circumvent the purpose for which the provision in the Constitution was created. 83
This situation was the subject matter of the Opinion dated December 27, 1995 addressed to Mr. George
Lavidia where the SEC opined that for the computation of the required minimum 60% Filipino ownership in a
land owning corporation, both voting and preferred non-voting shares must be included, to wit:
“The [law] does not qualify whether the required ownership of “capital stock” are voting or non-voting.
Hence, it should be interpreted to mean the sum total of the capital stock subscribed, irrespective of
their nomenclature and whether or not they are voting or non-voting. The use of the phrase “capital
stock belongs” connotes that in order to comply with the Filipino nationality requirement for land
ownership, it is necessary that the criterion of “beneficial ownership” should be met, not merely the
control of the corporation.
To construe the 60-40% equity requirement is merely based on the voting shares, disregarding the
preferred non-voting shares, not on the total outstanding subscribed capital stock, would give rise to a
situation where the actual foreign interest would not really be only 40% but may extend beyond that
because they could also own even the entire preferred non-voting shares. In this situation, Filipinos
may have the control in the operation of the corporation by way of voting rights, but have no effective
ownership of the corporate assets which include lands, because the actual Filipino equity constitutes
only a minority of the entire outstanding capital stock. Therefore, in essence, the company, although
controlled by Filipinos, is beneficially owned by foreigners since the actual ownership of at least 60% of
the entire outstanding capital stocks would be in the hands of foreigners. Allowing this situation would
open the floodgates to circumvention of the intent of the law to make the Filipinos the principal
beneficiaries in the ownership of Philippine alienable lands.
xxxx
Thus, for purpose of “land ownership”, non-voting preferred shares should be included in the computation
of the statutory 60-40% Filipino-alien equity requirement. To rule otherwise would result in the emergence of
foreign beneficial ownership of land, thereby defeating the purpose of the law. On the other hand, to view the
equity ratio as determined on the basis of the entire outstanding capital stock would be to uphold the
unequivocal purpose of the above-cited law of ensuring Filipino rightful domination of land ownership.”
(Emphasis supplied.)
Clearly, applying the ponencia’s definition of the word “capital” will give rise to a greater anomaly because it
will result in the foreigner’s obtaining beneficial ownership over the corporation, which is contrary to the
provisions of the Constitution; whereas interpreting “capital” to include both voting and non-voting shares will
result in giving both legal and beneficial ownership of the corporation to the Filipinos.
In the event that the word “capital” is construed as limited to common or voting shares only, it should not
have any retroactive effect. Reliance in good faith on the opinions issued by the SEC, the regulating body in
charged with the duty to enforce the nationality required by the Constitution, should not prejudice any one,
especially not the foreign investors. Giving such interpretation retroactive effect is tantamount to violation of
due process and would impact negatively on the various foreign investments already present in the country.
Accordingly, such construction should only be applied prospectively.
In sum, the Constitution requires that 60% of the capital be owned by Filipinos. It further requires that the
foreign ownership of capital be limited to 40%, as well as its participation in the governing body of the public
utility corporation be limited to its proportionate share in the capital which cannot exceed 40% thereof. As a
result, control over the Board of Directors and full beneficial ownership of 60% of the capital stock of the
corporation are secured in the hands of the Filipinos.
I, therefore, vote to DISMISS the petition.
DISSENTING OPINION
ABAD, J.:
In 1928, the legislature enacted Act 3436, granting Philippine Long Distance Telephone Company (PLDT) a
franchise to provide telecommunications services across the country. Forty years later in 1969, General
Telephone and Electronics Corporation, an American company and major PLDT stock-holder, sold 26% of
PLDT’s equity to the Philippine Telecommunications Investment Corporation (PTIC).
Subsequently, PTIC assigned 46% of its equity or 111,415 shares of stock to Prime Holdings, Inc. In 1986,
the Presidential Commission on Good Government sequestered these shares. Eventually, the Court declared
these as properties of the Republic of the Philippines.
91
In 1999, First Pacific, a Bermuda-registered and Hongkong-based investment firm, acquired the remaining
54% of PTIC’s equity in PLDT.
In 2006, the government’s Inter-agency Privatization Council offered to auction the 46% PTIC equity in
PLDT that the Court adjudged to the Republic. Parallax Venture Fund XXVII won with a bid of P25.2 billion or
US$510 million. First Pacific announced that it would exercise its right of first refusal and buy those shares by
matching Parallax’s bid. In 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings, Inc.,
entered into a Conditional Sale and Purchase Agreement with the national government involving the 46% PTIC
equity for P25.2 billion or US$510 million.
In this petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale, petitioner
Wilson P. Gamboa, a PLDT stockholder, seeks to annul the sale of the 46% PTIC equity or 111,415 shares of
stock to Metro Pacific on the ground that it violates Section 11, Article XII of the 1987 Constitution which limits
foreign ownership of a public utility company to 40% of its capital. Gamboa claims that since PTIC is a PLDT
stockholder, the sale of the 46% of its equity is actually an indirect sale of 6.3% PLDT equity or 12 million
shares of stock. This would increase First Pacific’s equity in PLDT from 30.7% to 37%, and concomitantly
increase the common shareholdings of foreigners in PLDT to about 64.27%.
The action presents two primordial issues:
1. Whether or not the Court can hear and decide Gamboa’s petition for prohibition, injunction, declaratory
relief, and declaration of nullity of sale; and
2. Whether or not Metro Pacific’s acquisition of 46% of PTIC’s equity violates the constitutional limit on
foreign ownership of the capital of PLDT, a public utility company, provided under Section 11, Article XII of the
1987 Constitution.
One. The objection to the idea of the Court hearing and deciding Gamboa’s action seems to have some
basis in the rules. Under Section 1, Rule 56 of the Rules of Court, only the following cases may be filed originally
in the Supreme Court:
“Sec. 1. Original cases cognizable.—Only petitions for certiorari, prohibition, mandamus, quo warranto,
habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting
ambassadors, other public ministers and consuls may be filed originally in the Supreme Court.”
Strictly speaking, Gamboa actions for injunction, declaratory relief, and declaration of nullity of sale are not
among the cases that can be initiated before the Supreme Court. Those actions belong to some other tribunal.
And, although the Court has original jurisdiction in prohibition cases, the Court shares this authority with the
Court of Appeals and the Regional Trial Courts. But this concurrence of jurisdiction does not give the parties
absolute and unrestrained freedom of choice on which court the remedy will be sought. They must observe the
hierarchy of courts. 1 As a rule, the Supreme Court will not entertain direct resort to it unless the remedy
desired cannot be obtained in other tribunals. Only exceptional and compelling circumstances such as cases of
national interest and of serious implications justify direct resort to the Supreme Court for the extraordinary
remedy of writ of certiorari, prohibition, or mandamus.2
The majority of the Court of course suggests that although Gamboa entitles his actions as ones for
injunction, declaratory relief, and declaration of nullity of sale, what controls the nature of such actions are the
allegations of his petition. And a valid special civil action for mandamus can be made out of those allegations
since respondent Secretary of Finance, his undersecretary, and respondent Chairman of the Securities and
Exchange Commission are the officials who appear to have the duty in law to implement the foreign ownership
restriction that the Constitution commands.3
To a certain extent, I agree with the position that the majority of my colleagues takes on this procedural
issue. I believe that a case can be made for giving due course to Gamboa’s action. Indeed, there are in his actions
compelling reasons to relax the doctrine of hierarchy of courts. The need to address the important question of
defining the constitutional limit on foreign ownership of public utilities under Section 11, Article XII of the 1987
Constitution, a bedrock policy adopted by the Filipino people, is certainly a matter of serious national interest.
Such policy is intended to develop a self-reliant and independent national economy effectively controlled by
Filipino entrepreneurs.
Indeed, as the Court said in Espina v. Zamora,4 the provisions of Article XII of the 1987 Constitution lay down
the ideals of economic nationalism. One of these is the Filipinization of public utilities under Section 11 which
recognizes the very strategic position of public utilities both in the national economy and for national
security.5 The participation of foreign capital is encouraged since the establishment and operation of public
92
utilities may require the investment of substantial capital that Filipino citizens could possibly not afford. But at
the same time, the Constitution wants to limit foreign involvement to prevent them from assuming control of
public utilities which may be inimical to national interest. 6
Two. Still, the question is whether it is for the Court to decide in this case the shape and substance of what
the Constitution meant when it restricted the size of foreign ownership of the capital of public utility
corporations provided for in Section 11, Article XII of the 1987 Constitution which reads:
utility shall be granted except to citizens of the Philippines or to corporations or associations organized under
the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; x x x.”
Gamboa contends that the constitutional limit on foreign ownership in public utilities should be based on
the ownership of common or voting shares since it is through voting that stockholders are able to have
control over a corporation. Preferred or non-voting shares should be excluded from the reckoning.
But this interpretation, adopted by the majority, places on the Court the authority to define and interpret the
meaning of “capital” in section 11. I believe, however, that such authority should be for Congress to exercise
since it partakes of policy making founded on a general principle laid down by the fundamental law. The capital
restriction written in the constitution lacks sufficient details for orderly and meaningful implementation.
Indeed, in the twenty-four years that the provision has been in the Constitution, no concrete step has been
taken by any government agency to see to its actual implementation given the absence of clear legislative
guidance on how to go about it.
It has been said that a constitution is a system of fundamental laws for the governance and administration of
a nation. It prescribes the permanent framework of a system of government, assigns to the different
departments their respective powers and duties, and establishes certain fixed principles on which the
government is founded.7 But while some constitutional provisions are self-executing, others are not.
A constitutional provision is self-executing if it fixes the nature and extent of the right conferred and the
liability imposed such that they can be determined by an examination and construction of its terms, and there
is no language indicating that the subject is referred to the legislature for action. On the other hand, if the
provision needs a supplementary or enabling legislation, it is merely a declaration of policy and principle which
is not self-executing.8
Here, the Constitution simply states that no franchise for the operation of a public utility shall be granted to
a corporation organized under Philippine laws unless at least sixty per centum of its capital is owned by
Filipino citizens.
Evidently, the Constitution fails to provide for the meaning of the term “capital,” considering that the shares of
stock of a corporation vary in kinds. The usual classification depends on how profits are to be distributed and
which stockholders have the right to vote the members of the corporation’s board of directors.
The Corporation Code does not offer much help, albeit it only confuses, since it uses the terms “capital,”
“capital stock,” or “outstanding capital stock” interchangeably. “Capital” refers to the money, property, or
means contributed by stockholders in the corporation and generally implies that the same have been
contributed in payment for stock issued to the stockholders. 9 “Capital stock” signifies the amount subscribed
and paid-in in money, property or services. 10 “Outstanding capital stock” means the total shares of stock issued
to stockholders, whether or not fully or partially paid, except treasury shares. 11
Meanwhile, the Foreign Investments Act of 1991 defines a “Philippine national” as, among others, a corporation
organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled
to vote is owned and held by citizens of the Philippines. 12 This gives the impression, as Justice Carpio noted,
that the term “capital” refers only to controlling interest or shares entitled to vote. 13
On the other hand, government agencies such as the Securities and Exchange Commission, institutions, and
corporations (such as the Philippine National Oil Company-Energy Development Corporation) interpret the
term “capital” to include both preferred and common shares. 14
Under this confusing legislative signals, the Court should not leave the matter of compliance with the
constitutional limit on foreign ownership in public utilities, a matter of transcendental importance, to judicial
legislation especially since any ruling the Court makes on the matter could have deep economic repercussions.
This is not a concern over which the Court has competence. The 1987 Constitution laid down the general
framework for restricting foreign ownership of public utilities. It is apt for Congress to build up on this
framework by defining the meaning of “capital,” establishing rules for the implementation of the State policy,
93
providing sanctions for its violation, and vesting in the appropriate agency the responsibility for carrying out
the purposes of such policy.
Parenthetically, there have been several occasions in the past where Congress provided supplementary or
enabling legislation for constitutional provisions that are not self-executing. To name just some: the
Comprehensive Agrarian Reform Law of 1988, 15 the Indigenous Peoples Rights Act of 1997, 16 the Local
Government Code of 1991,17 the Anti-Graft and Corrupt Practices Act,18 the Speedy Trial Act of 1998,19 the
Overseas Absentee Voting Act of 2003, 20 the Party-List System Act,21 the Paternity Leave Act of 1996, 22 and the
Solo Parents’ Welfare Act of 2000.23
Based on the foregoing, I vote to DENY the petition on the ground that the constitutional limit on foreign
ownership in public utilities under Section 11, Article XII of the 1987 Constitution is not a self-executing
provision and requires an implementing legislation for its enforcement.
Petition partly granted.
Note.—Only citizens of the Philippines can own and hold, directly or indirectly, the capital stock of a rural
bank, subject only to the exception also clearly stated in the same provision. (Nunga, Jr. vs. Nunga III, 574 SCRA
760 [2008])
11. G.R. No. 167391. June 8, 2011.*

PHIL-VILLE DEVELOPMENT AND HOUSING CORPORATION, petitioner, vs. MAXIMO BONIFACIO,
CEFERINO R. BONIFACIO, APOLONIO B. TAN, BENITA B. CAINA, CRISPINA B. PASCUAL, ROSALIA B. DE
GRACIA, TERESITA S. DORONIA, CHRISTINA GOCO AND ARSENIO C. BONIFACIO, in their capacity as the
surviving heirs of the late ELEUTERIA RIVERA VDA. DE BONIFACIO, respondents.
Land Titles; Quieting of Title; In an action for quieting of title, the competent court is tasked to determine the
respective rights of the complainant and the other claimants, not only to place things in their proper places, and
make the claimant, who has no rights to said immovable, respect and not disturb the one so entitled, but also for
the benefit of both, so that whoever has the right will see every cloud of doubt over the property dissipated, and he
can thereafter fearlessly introduce any desired improvements, as well as use, and even abuse the property.—
Quieting of title is a common law remedy for the removal of any cloud upon, doubt, or uncertainty affecting title
to real property. Whenever there is a cloud on title to real property or any interest in real property by reason of
any instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective, but is, in truth
and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title. In such action, the competent court is tasked to determine
the respective rights of the complainant and the other claimants, not only to place things in their proper places,
and make the claimant, who has no rights to said immovable, respect and not disturb the one so entitled, but
also for the benefit of both, so that whoever has the right will see every cloud of doubt over the property
dissipated, and he can thereafter fearlessly introduce any desired improvements, as well as use, and even abuse
the property.
Same; Same; Requisites.—In order that an action for quieting of title may prosper, two requisites must
concur: (1) the plaintiff or complainant has a legal or equitable title or interest in the real property subject of
the action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting cloud on his title must be
shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
Same; Same; Elements.—The cloud on title consists of: (1) any instrument, record, claim, encumbrance or
proceeding; (2) which is apparently valid or effective; (3) but is in truth and in fact invalid, ineffective, voidable,
or unenforceable; and (4) may be prejudicial to the title sought to be quieted. The fourth element is not present
in the case at bar.
Same; Same; An action to quiet title is characterized as a proceeding quasi in rem.—Significantly, an action
to quiet title is characterized as a proceeding quasi in rem. In an action quasi in rem, an individual is named a
defendant and the purpose of the proceeding is to subject his interests to the obligation or loan burdening the
property. Actions quasi in rem deal with the status, ownership or liability of a particular property but which are
intended to operate on these questions only as between the particular parties to the proceedings and not to
ascertain or cut off the rights or interests of all possible claimants. The judgment therein is binding only upon
the parties who joined in the action.
Same; Same; Declaratory Relief; 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.—An action for declaratory relief presupposes that there has been no
actual breach of the instruments involved or of the rights arising thereunder. Since the purpose of an action for
94
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 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.
Same; Same; Same; The nature of the relief in an action for declaratory relief is that the judgment in the case
can be carried into effect without requiring the parties to pay damages or to perform any act.—In the present
case, petitioner filed a complaint for quieting of title after it was served a notice to vacate but before it could be
dispossessed of the subject properties. Notably, the Court of Appeals, in CA-G.R. SP No. 43034, had earlier set
aside the Order which granted partial partition in favor of Eleuteria Rivera and the Writ of Possession issued
pursuant thereto. And although petitioner’s complaint is captioned as Quieting of Title and Damages, all that
petitioner prayed for, is for the court to uphold the validity of its titles as against that of respondents’. This is
consistent with the nature of the relief in an action for declaratory relief where the judgment in the case can be
carried into effect without requiring the parties to pay damages or to perform any act. Thus, while petitioner
was not able to demonstrate that respondents’ TCT No. C-314537 in the name of Eleuteria Rivera constitutes a
cloud over its title, it has nevertheless successfully established its ownership over the subject properties and
the validity of its titles which entitles it to declaratory relief.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Felix B. Lerio for petitioner.
Herrera, Teehankee, Faylona and Cabrera Law Office for respondents.
VILLARAMA, JR., J.:
This petition for review on certiorari1 seeks to set aside the Decision 2 dated January 31, 2005 and
Resolution3 dated March 15, 2005 of the Court of Appeals in CA-G.R. SP No. 62211. The Court of Appeals
dismissed the Complaint4 for Quieting of Title and Damages filed by Phil-Ville Development and Housing
Corporation (Phil-Ville) and denied its Motion for Reconsideration. 5
The factual antecedents, as culled from the records, are as follows.
Phil-Ville Development and Housing Corporation is the registered owner of three parcels of land designated as
Lots 1-G-1, 1-G-2 and 1-G-3 of the subdivision plan Psd-1-13-006209, located in Caloocan City, having a total
area of 8,694 square meters and covered by Transfer Certificates of Title (TCT) Nos. 270921, 6 2709227 and
270923.8 Prior to their subdivision, the lots were collectively designated as Lot 1-G of the subdivision plan Psd-
2731 registered in the name of Phil-Ville under TCT No. T-148220. 9 Said parcels of land form part of Lot 23-A of
the Maysilo Estate originally covered by Original Certificate of Title (OCT) No. 994 10 registered on May 3, 1917
in the name of Isabel Gil de Sola as the judicial administratrix of the estate of Gonzalo Tuason and thirty-one
(31) others. PhilVille acquired the lots by purchase from N. Dela Merced and Sons, Inc. on July 24, 1984.
Earlier, on September 27, 1961, a group composed of Eleuteria Rivera, Bartolome P. Rivera, Josefa R.
Aquino, Gregorio R. Aquino, Pelagia R. Angeles, Modesta R. Angeles, Venancio R. Angeles, Felipe R. Angeles
Fidela R. Angeles and Rosauro R. Aquino, claiming to be the heirs of Maria de la Concepcion Vidal, a co-owner to
the extent of 1-189/1000% of the properties covered by OCT Nos. 982, 983, 984, 985 and 994 of the Hacienda
Maysilo, filed a petition with the Court of First Instance (CFI) of Rizal in Land Registration Case No. 4557. They
prayed for the substitution of their names on OCT No. 994 in place of Maria de la Concepcion Vidal. Said
petition was granted by the CFI in an Order11 dated May 25, 1962.
Afterwards, the alleged heirs of Maria de la Concepcion Vidal filed a petition for the partition of the
properties covered by OCT Nos. 982, 983, 984, 985 and 994. The case was docketed as Civil Case No. C-424 in
the CFI of Rizal, Branch 12, Caloocan City. On December 29, 1965, the CFI granted the petition and appointed
three commissioners to determine the most equitable division of the properties. 12 Said commissioners,
however, failed to submit a recommendation.
Thirty-one (31) years later, on May 22, 1996, Eleuteria Rivera filed a Supplemental Motion 13 in Civil Case No. C-
424, for the partition and segregation of portions of the properties covered by OCT No. 994. The Regional Trial
Court (RTC), Branch 120, of Caloocan City, through Judge Jaime D. Discaya, to whom the case was transferred,
granted said motion. In an Order 14 dated September 9, 1996, Judge Discaya directed the segregation of portions
of Lots 23, 28-A-1 and 28-A-2 and ordered the Register of Deeds of Caloocan City to issue to Eleuteria Rivera
new certificates of title over them. Three days later, the Register of Deeds of Caloocan, Yolanda O. Alfonso,
issued to Eleuteria Rivera TCT No. C-314537 15 covering a portion of Lot 23 with an area of 14,391.54 square
95
meters. On December 12, 1996, the trial court issued another Order directing the acting Branch Clerk to issue a
Certificate of Finality of the Order dated September 9, 1996.
Thereafter, one Rosauro R. Aquino filed a petition for certiorari contesting said Order of December 12, 1996
and impugning the partial partition and adjudication to Eleuteria Rivera of Lots 23, 28-A-1 and 28-A-2 of the
Maysilo Estate. The case was docketed as CA-G.R. SP No. 43034 at the Court of Appeals.
Meanwhile, a writ of possession 16 was issued in Eleuteria Rivera’s favor on December 26, 1996 upon the
Order17 of Judge Discaya issued on the same date. Accordingly, Sheriff Cesar L. Cruz served a Notice to
Vacate18 dated January 2, 1997 upon Phil-Ville, requiring it to vacate Lots 23-A and 28. Bonifacio Shopping
Center, Inc., which occupied Lot 28-A-2, was also served a copy of the notice. Aggrieved, Bonifacio Shopping
Center, Inc. filed a petition for certiorari and prohibition, docketed as CA-G.R. SP No. 43009, before the Court of
Appeals. In a Decision19 dated February 19, 1997, the appellate court set aside and declared as void the Order
and Writ of Possession dated December 26, 1996 and the Notice to Vacate dated January 2, 1997. The appellate
court explained that a party who has not been impleaded in a case cannot be bound by a writ of possession
issued in connection therewith.
Subsequently, on February 22, 1997, Eleuteria Rivera Vda. de Bonifacio died at the age of 96.20
On April 23, 1997, the Secretary of Justice issued Department Order No. 137 creating a special committee to
investigate the circumstances surrounding the issuance of OCT No. 994 and its derivative titles.
On April 29, 1997, the Court of Appeals rendered a Decision 21 in CA-G.R. SP No. 43034 granting Rosauro R.
Aquino’s petition and setting aside the RTC’s Order of September 9, 1996, which granted Eleuteria Rivera’s
prayer for partition and adjudicated in her favor portions of Lots 23, 28-A-1 and 28-A-2 of the Maysilo Estate.
The appellate court likewise set aside the Order and the Writ of Possession dated December 26, 1996.
Nonetheless, on June 5, 1997, petitioner filed a complaint for quieting of title and damages against the
surviving heirs of Eleuteria Rivera Vda. de Bonifacio (namely Maximo R. Bonifacio, Ceferino R. Bonifacio,
Apolonia B. Tan, Benita B. Caina, Crispina B. Pascual, Rosalia B. de Gracia, Teresita S. Doronia, Christina B. Goco,
Arsenio C. Bonifacio, Carmen B. Bernardino and Danilo C. Bonifacio) and the Register of Deeds of Caloocan City.
The case was docketed as Civil Case No. C-507 in the RTC of Caloocan City, Branch 122.
On October 7, 1997, then Senator Marcelo B. Fernan filed P.S. Resolution No. 1032 directing the Senate
Committees on Justice and Human Rights and on Urban Planning, Housing and Resettlement to conduct a
thorough investigation, in aid of legislation, of the irregularities surrounding the titling of the properties in the
Maysilo Estate.
In a Decision22 dated March 24, 2000, the Caloocan RTC ordered the quieting of Phil-Ville’s titles over Lots 1-G-
1, 1-G-2 and 1-G-3, declaring as valid TCT Nos. 270921, 270922 and 270923 in Phil-Ville’s name. The fallo of
said Decision reads:
“WHEREFORE, and in view of the foregoing, judgment is hereby rendered as follows:
1. Ordering the quieting of title of the plaintiff over Lots 1-G-1, 1-G-2 and 1-G-3, all the subd. plan Psd-1-
13-006209, being a portion of Lot 1-G, Psd-2731, LRC Rec. No. 4429, situated in Kalookan City, as owner thereof
in fee simple and with full faith and credit;
2. Declaring Transfer Ce[r]tificates of Title Nos. 270921, 270922 and 270923 in the name of Phil-Ville
Development and Housing Corporation over the foregoing parcels of land issued by the Registry of Deeds for
Kalookan City, as valid and effective;
3. Declaring Transfer Certificate of Title No. C-314537 over Lot 23, being a portion of Maysilo Estate
situated in Maysilo, Kalookan City, in the name of Eleuteria Rivera, issued by the Registry of Deeds for Kalookan
City, as null and void and with no force and effect;
4. Ordering the private defendants to surrender to the Registry of Deeds for Kalookan City, thru this
Court, the Owner’s Duplicate Certificate of said Transfer Certificate of Title No. C-314537 in the name of
Eleuteria Rivera;
5. Directing the public defendant, Register of Deeds of Kalookan City to cancel both Transfer Certificate of
Title Nos. C-314537 in the name of Eleuteria Rivera on file with the Register of Deeds for Kalookan City, and the
Owner’s Duplicate copy of Transfer Certificate of Title No. C-314537 being required to be surrendered by the
private defendants; and
6. Ordering the private defendants to pay plaintiff, jointly and severally, the sum of P10,000.00, as and by
way of attorney’s fees, plus the costs of suit.
SO ORDERED.”23
In upholding Phil-Ville’s titles, the trial court adopted the conclusion in Senate Committee Report No.
103124 dated May 25, 1998 that there is only one OCT No. 994, registered on May 3, 1917, and that OCT No.
994, purportedly registered on April 19, 1917 (from which Eleuteria Rivera’s title originated) does not exist.
The trial court also found that it was physically impossible for respondents to be the heirs of Eleuteria Rivera’s
96
grandmother, Maria de la Concepcion Vidal, one of the registered owners of OCT No. 994, because Maria de la
Concepcion was born sometime in 1903, later than Eleuteria Rivera who was born in 1901. 25 Lastly, the RTC
pointed out that contrary to the contentions of Rivera’s heirs, there is no overlapping of titles inasmuch as Lot
23 lies far from Lot 23-A, where Phil-Ville’s lands are located.
On April 13, 2000, Atty. K.V. Faylona, on behalf of respondents, addressed a letter 26 to the Branch Clerk of
Court of the Caloocan City RTC requesting the complete address of Phil-Ville and its counsel. Supposedly,
respondents’ counsels of record, Attys. Nicomedes Tolentino and Jerry D. Bañ ares, had abandoned the defense
but still kept the records of the case. Thus, the Notice of Appeal 27 on behalf of respondents was filed by Atty.
Faylona while two of the heirs, Danilo Bonifacio and Carmen Bernardino, filed a separate Notice of
Appeal28 through their own counsel. The appeals were consolidated and docketed as CA-G.R. CV No. 66547.
On April 17, 2000, respondents withdrew their appeal and instead filed before this Court a Petition for Review
on Certiorari,29 which was docketed as G.R. No. 142640. In a Resolution 30 dated September 25, 2000, the Court
referred the petition to the Court of Appeals for adjudication on the merits since the case does not involve pure
questions of law. Respondents moved for reconsideration of the Resolution, but the Court denied their motion.
Thus, respondents’ petition was transferred to the Court of Appeals and docketed as CA-G.R. SP No. 62211.
Meanwhile, on October 17, 2002, the Court of Appeals rendered a Decision 31 in CA-G.R. CV No. 66547,
dismissing the appeal as regards Danilo Bonifacio and Carmen Bernardino. Yet, along with Danilo and Carmen,
respondents moved for reconsideration on the contention that they are not bound by the judgment since they
had withdrawn their appeal therein. The Court of Appeals denied said motion in a Resolution dated June 7,
2004. Danilo, Carmen and respondents elevated the case to the Supreme Court through a Petition for Review
on Certiorari, which was docketed as G.R. No. 163397. Said petition, however, was denied by this Court in a
Resolution dated September 8, 2004 for being filed out of time.
Subsequently, on January 31, 2005, the Court of Appeals promulgated its assailed Decision in CA-G.R. SP No.
62211, setting aside the RTC judgment and dismissing Phil-Ville’s complaint. The appellate court held that the
RTC had no jurisdiction to hear Phil-Ville’s complaint as it effectively seeks to annul the Order dated May 25,
1962 of the CFI in LRC No. 4557, which directed the substitution of the late Eleuteria Rivera and her co-heirs in
place of Maria de la Concepcion Vidal as registered owners on OCT No. 994. The appellate court likewise
affirmed the validity of OCT No. 994 registered on April 19, 1917 citing the Supreme Court Decisions
in Metropolitan Waterworks and Sewerage Systems v. Court of Appeals 32 and Heirs of Luis J. Gonzaga v. Court of
Appeals33 as precedents.
Phil-Ville sought reconsideration34 of the decision, but the Court of Appeals denied its motion in the assailed
Resolution dated March 15, 2005. Hence, this petition.
Petitioner alleges that:
I.
THE HONORABLE COURT OF APPEALS (FORMER NINTH DIVISION) ACTED WITHOUT JURISDICTION ON THE
PETITION FOR REVIEW OF RESPONDENTS MAXIMO BONIFACIO, ET AL. IN CA-G.R SP NO. 62211 BECAUSE OF
THE EARLIER DISMISSAL OF THEIR APPEAL IN CA-G.R NO. 66547.
II.
THE HONORABLE COURT OF APPEALS (FORMER NINTH DIVISION) ACTED WITHOUT JURISDICTION ON THE
PETITION FOR REVIEW FILED BY RESPONDENTS MAXIMO BONIFACIO, ET AL. IN CA-G.R. NO. SP 62211
WHICH DOES NOT RAISE PURE QUESTION[S] OF LAW OR ISSUE[S] OF JURISDICTION AND THEREFORE THE
PROPER REMEDY AVAILABLE TO THEM IS ORDINARY APPEAL WHICH, AS STATED, HAD ALREADY BEEN
DISMISSED IN CA-G.R. CV NO. 66547.
III.
THE HONORABLE COURT OF APPEALS (FORMER NINTH DIVISION) COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN HOLDING THAT THE TRIAL COURT
HAS NO JURISDICTION ON THE COMPLAINT FOR QUIETING OF TITLE FILED BY PETITIONER PHIL-VILLE IN
CIVIL CASE NO. C-507, OR IN THE ALTERNATIVE, IN FAILING TO DECLARE RESPONDENTS MAXIMO
[BONIFACIO], ET AL. ALREADY IN ESTOPPEL TO RAISE THE SAID ISSUE OF JURISDICTION. 35
Condensed, petitioner puts in issue the following: (1) whether the Court of Appeals committed grave abuse of
discretion in taking cognizance of respondents’ petition; and (2) whether the Court of Appeals committed grave
abuse of discretion in declaring that the trial court had no jurisdiction over Civil Case No. C-507.
Pertinently, however, the genuine issue in this case is whether TCT No. C-314537 in the name of Eleuteria
Rivera constitutes a cloud over petitioner’s titles over portions of Lot 23-A of the Maysilo Estate.
Petitioner argues mainly that the Court of Appeals acted without jurisdiction in resolving respondents’
petition for review since it had dismissed their appeal in CA-G.R. CV No. 66547 for failure to file brief. Petitioner
97
also points out that respondents’ petition is defective because Maximo Bonifacio alone signed its verification
and certification of non-forum shopping without proof that he was authorized to sign for the other
respondents. It contends that the ruling in MWSS v. Court of Appeals and Heirs of Gonzaga v. Court of
Appeals will not invalidate its titles because it is not a party to any of said cases. As well, petitioner invokes the
finding in the joint investigation by the Senate and the Department of Justice (DOJ) that there is only one OCT
No. 994, that is, the one registered on May 3, 1917. It maintains that the trial court had jurisdiction to hear its
action since it is one for quieting of title and not for annulment of the CFI Order dated May 25, 1962.
Conversely, respondents rely on MWSS v. Court of Appeals and Heirs of Gonzaga v. Court of Appeals that
upheld the titles emanating from OCT No. 994 registered on April 19, 1917. Therefore, they insist that
petitioner has no cause of action to seek the nullification of their title which is a derivative of said OCT.
Respondents reiterate that since they had withdrawn their appeal in CA-G.R. CV No. 66547, the Court of
Appeals decision therein applies only to Danilo Bonifacio and Carmen Bernardino. Lastly, they believe that
petitioner’s action is one for annulment of judgment, which is foreign to the jurisdiction of the trial court.
Petitioner argues in its first two assignments of errors that the Court of Appeals acted with grave abuse of
discretion in entertaining respondents’ petition. However, said contention deserves scant consideration since
the Court of Appeals, in CA-G.R. SP No. 62211, properly assumed jurisdiction over respondents’ case after the
same was referred to it by this Court through our Resolution dated September 25, 2000. The issue raised by
respondents, as petitioners in G.R. No. 142640, was purely a question of fact that is beyond the power of this
Court to resolve. Essentially, respondents asked the Court to determine the ownership of the lots purportedly
covered by petitioner’s titles.
Neither do we find merit in petitioner’s contention that the dismissal of the appeal in CA-G.R. CV No. 66547
is binding on respondents. The appellate court itself recognized the withdrawal of appeal filed by respondents,
thus:
“… However, defendants Maximo R. Bonifacio, et al. withdrew their appeal so that the only appellants herein
are defendants-appellants Danilo R. Bonifacio, et al.”36
So did the trial court err in taking cognizance of petitioner’s action for quieting of title contrary to
respondents’ assertion that it is actually one for annulment of the CFI Order dated May 25, 1962? To this query,
we rule in the negative.
The nature of an action is determined by the material allegations of the complaint and the character of the
relief sought by plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to
all or only some of such relief.37
In its complaint, petitioner alleges:
“27. That said TCT No. C-314537 of the late Eleuteria Rivera, although apparently valid and effective, are
in truth and in fact invalid and ineffective[;]
27.1. An examination of Decree No. 36455 issued on April 19, 1917 in LRC Case No. 4429 and also of
OCT No. 994 which was issued … pursuant thereto will show that Lot 23 covered by the said TCT No. C-
3145 7 of the late Eleuteria Rivera is not one of the 34 parcels of land covered by said Decree No. 36455
and OCT 994;
27.2. That, as hereinbefore stated, the same TCT No. C-314537 of the late Eleuteria Rivera is a
direct transfer from OCT No. 994 which was registered on April 19, 1917. The fact, however, is that there
is only one OCT No. 994 which was issued … pursuant to Decree No. 36455 in LRC Case No. 4429 and
said OCT 994 was registered with the Register of Deeds of Rizal on May 3, 1917. The Office of the
Register of Deeds of Caloocan City or of Malabon or of Pasig City has no record of any OCT No. 994 that
was allegedly registered on April 19, 1917;
27.3. That said TCT No. C-314537 of the late Eleuteria Rivera could not cover Lot 23-A or any
portion/s thereof because, as hereinbefore recited, the whole of Lot 23-A had been totally disposed of as
early as July 24, 1923 and she and/or any of her alleged predecessors-in-interest is not among those
named in the memorandum of encumbrances of OCT No. 994 as vendees or vendors of said Lot 23-A;” 38
Ultimately, petitioner submits that a cloud exists over its titles because TCT No. C-314537 in the name of
Eleuteria Rivera purports to cover the same parcels of land covered by petitioner’s TCT Nos. 270921, 270922
and 270923. It points out that what appears to be a valid and effective TCT No. C-314537 is, in truth, invalid
because it covers Lot 23 which is not among those described in the OCT No. 994 on file with the Register of
Deeds of Rizal and registered on May 3, 1917. Petitioner notes that the OCT No. 994 allegedly registered on
April 19, 1917 and from which TCT No. C-314537 was derived, is not found in the records of the Register of
Deeds. In other words, the action seeks the removal of a cloud from Phil-Ville’s title and/or the confirmation of
its ownership over the disputed properties as the successor-in-interest of N. Dela Merced and Sons, Inc.
98
Quieting of title is a common law remedy for the removal of any cloud upon, doubt, or uncertainty affecting
title to real property. Whenever there is a cloud on title to real property or any interest in real property by
reason of any instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective, but is,
in truth and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action
may be brought to remove such cloud or to quiet the title. In such action, the competent court is tasked to
determine the respective rights of the complainant and the other claimants, not only to place things in their
proper places, and make the claimant, who has no rights to said immovable, respect and not disturb the one so
entitled, but also for the benefit of both, so that whoever has the right will see every cloud of doubt over the
property dissipated, and he can thereafter fearlessly introduce any desired improvements, as well as use, and
even abuse the property.39
In order that an action for quieting of title may prosper, two requisites must concur: (1) the plaintiff or
complainant has a legal or equitable title or interest in the real property subject of the action; and (2) the deed,
claim, encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid
or inoperative despite its prima facie appearance of validity or legal efficacy.40
As regards the first requisite, we find that petitioner was able to establish its title over the real properties
subject of this action. Petitioner submitted in evidence the Deed of Absolute Sale 41 by which it acquired the
subject property from N. Dela Merced and Sons, Inc., as well as copies of OCT No. 994 dated May 3, 1917 and all
the derivative titles leading to the issuance of TCT Nos. 270921, 270922 and 270923 in petitioner’s name as
follows:
Title Registration Holder
No. Date
8004 July 24, 1923 Vedasto
Galino
8059 September 3, -ditto-
1923
8160 October 24, -ditto-
1923
8164 November 6, Juan Cruz
1923 Sanchez
8321 February 26, -ditto-
1924
8734 September Emilio
11, 1924 Sanchez
12946 November -ditto-
21, 1927
28315 July 16, 1935 Eastern
Syndicate
Mining Co.,
Inc.
39163 November Royal
18, 1939 Lawrence
Rutter
43559 July 26, 1941 Mapua
Institute of
Technology
18767 June 16, Sofia
1950 Nepomuceno
57541 March 13, Leona N. de
1958 Jesus,
Pacifico
Nepomuceno,
Sofia
Nepomuceno,
Soledad
Nepomuceno
de Jesus
81679 December Pacifico
99
Title Registration Holder

No. Date
15, 1960 Nepomuceno,
Sofia N. Jugo,
Soledad
N. de Jesus
(81680) December Pacifico
17745 15, 1960 Nepomuceno
& Co.
C- April Pacifico
13794 21, Nepomuceno &
1978 Co. Inc.
C- May N. de La Merced
14603 16, & Sons,
1978 Inc.
T- April Phil-Ville
148220 22, Development
1987 and Housing
Corp.42
Petitioner likewise presented the Proyecto de particion de la Hacienda de Maysilo 43 to prove that Lot 23-A, of
which petitioner’s Lots 1-G-1, 1-G-2 and 1-G-3 form part, is among the 34 lots covered by OCT No. 994
registered on May 3, 1917. It produced tax receipts accompanied by a Certification 44 dated September 15, 1997
issued by the City Treasurer of Caloocan stating that Phil-Ville has been religiously paying realty taxes on the
lots. Its documentary evidence also includes a Plan 45 prepared by the Chief of the Geodetic Surveys Division
showing that Lot 23-A of the Maysilo Estate is remotely situated from Lot 23 portion of the Maysilo Estate.
Petitioner ties these pieces of evidence to the finding in the DOJ Committee Report 46 dated August 28, 1997 and
Senate Committee Report No. 1031 dated May 25, 1998 that, indeed, there is only one OCT No. 994, that is, the
one registered on May 3, 1917.
On the other hand, respondents have not adduced competent evidence to establish their title to the
contested property or to dispute petitioner’s claim over the same. It must be noted that the RTC Order dated
September 9, 1996 in Civil Case No. C-424, which resulted in the issuance of TCT No. C-314537 in the name of
Eleuteria Rivera had long been set aside by the Court of Appeals in CA-G.R. SP No. 43034.
Clearly, respondents’ claim anchored primarily on TCT No. C-314537 lacks legal basis. Rather, they rely simply
on the Court’s pronouncement in MWSS v. Court of Appeals and Heirs of Gonzaga v. Court of Appeals that OCT
No. 994 registered on May 3, 1917 and all titles emanating from it are void.
The Supreme Court sustained said decisions in the case of Manotok Realty, Inc. v. CLT Realty Development
Corporation47 promulgated on November 29, 2005. In said case, the Court declared void the titles of the
Manotoks and Aranetas which were derived from OCT No. 994 registered on May 3, 1917 consistent with its
ruling in MWSS and Gonzaga. The Court disregarded the DOJ and Senate reports on the alleged anomalies
surrounding the titling of the Maysilo Estate.
However, on motion for reconsideration, the Court issued a Resolution 48 dated December 14, 2007 which
created a Special Division of the Court of Appeals to hear the consolidated cases on remand. The Special
Division was tasked to hear and receive evidence, conclude the proceedings and submit to the Court a report on
its findings as well as recommend conclusions within three months from the finality of said Resolution.
However, to guide the proceedings before the Special Division, the Court laid the following definitive
conclusions:
“… First, there is only one OCT 994. As it appears on the record, that mother title was received for
transcription by the Register of Deeds on 3 May 1917, and that should be the date which should be reckoned as
the date of registration of the title. It may also be acknowledged, as appears on the title, that OCT No. 994
resulted from the issuance of the decree of registration on April 1917, although such date cannot be considered
as the date of the title or the date when the title took effect.
Second. Any title that traces its source to OCT No. 994 dated April 1917 is void, for such mother title is
inexistent. The fact that the Dimson and CLT titles made specific reference to an OCT No. 994 dated April 1917
casts doubt on the validity of such titles since they refer to an inexistent OCT. This error alone is, in fact,
sufficient to invalidate the Dimson and CLT claims over the subject property if singular reliance is placed by
them on the dates appearing on their respective titles.
100
Third. The decisions of this Court in MWSS v. Court of Appeals and Gonzaga v. Court of Appeals cannot apply
to the cases at bar, especially in regard to their recognition of an OCT No. 994 dated 19 April 1917, a title which
we now acknowledge as inexistent. Neither could the conclusions in MWSS [and] Gonzaga with respect to an
OCT No. 994 dated 19 April 1917 bind any other case operating under the factual setting the same as or similar
to that at bar.”49 (Emphasis supplied.)
Eventually, on March 31, 2009, the Supreme Court issued a Resolution 50 reversing its Decision of November
29, 2005 and declaring certain titles in the names of Araneta and Manotok valid. In the course of discussing the
flaws of Jose Dimson’s title based on his alleged 25% share in the hereditary rights of Bartolome Rivera,
Eleuteria Rivera’s co-petitioner in LRC No. 4557, the Court noted:
“… However, the records of these cases would somehow negate the rights of Rivera to claim from Vidal. The
Verification Report of the Land Registration Commission dated 3 August 1981 showed that Rivera was 65 years
old on 17 May 1963 (as gathered from the records of Civil Case Nos. 4429 and 4496). It can thus be deduced
that, if Rivera was already 65 years old in 1963, then he must have been born around 1898. On the other hand,
Vidal was only nine (9) years in 1912; hence, she could have been born only on [1903]. This alone creates an
unexplained anomalous, if not ridiculous, situation wherein Vidal, Rivera’s alleged grandmother, was seven (7)
years younger than her alleged grandson. Serious doubts existed as to whether Rivera was in fact an heir of
Vidal, for him to claim a share in the disputed portions of the Maysilo Estate.” 51
The same is true in this case. The Death Certificate 52 of Eleuteria Rivera reveals that she was 96 years old
when she died on February 22, 1997. That means that she must have been born in 1901. That makes Rivera
two years older than her alleged grandmother Maria de la Concepcion Vidal who was born in 1903. Hence, it
was physically impossible for Eleuteria Rivera to be an heir of Maria de la Concepcion Vidal.
Moreover, the Partition Plan of the Maysilo Estate shows that Lot 23-A was awarded, not to Maria de la
Concepcion Vidal, but to Isabel Tuason, Esperanza Tuason, Trinidad Jurado, Juan O’ Farrell and Angel O’
Farrell.53 What Vidal received as her share were Lot 6 and portions of Lots 10 and 17, all subject to the
usufructuary right of her mother Mercedes Delgado. This was not at all disputed by respondents.
On the other hand, Vedasto Galino, who was the holder of TCT No. 8004 registered on July 24, 1923 and to
whom petitioner traces its titles, was among the successful petitioners in Civil Case No. 391 entitled Rosario
Negrao, et al. v. Concepcion Vidal, et al., who sought the issuance of bills of sale in favor of the actual occupants
of certain portions of the Maysilo Estate.
Be that as it may, the second requisite in an action for quieting of title requires that the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy. Article 476 of the Civil Code provides:
“Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and
in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any interest
therein.”
Thus, the cloud on title consists of: (1) any instrument, record, claim, encumbrance or proceeding; (2) which
is apparently valid or effective; (3) but is in truth and in fact invalid, ineffective, voidable, or unenforceable; and
(4) may be prejudicial to the title sought to be quieted. The fourth element is not present in the case at bar.
While it is true that TCT No. C-314537 in the name of Eleuteria Rivera is an instrument that appeared to be
valid but was subsequently shown to be invalid, it does not cover the same parcels of land that are described in
petitioner’s titles. Foremost, Rivera’s title embraces a land measuring 14,391.54 square meters while
petitioner’s lands has an aggregate area of only 8,694 square meters. On the one hand, it may be argued that
petitioner’s land could be subsumed within Rivera’s 14,391.54-square meter property. Yet, a comparison of the
technical descriptions of the parties’ titles negates an overlapping of their boundaries.
The technical description of respondents’ TCT No. C-314537 reads:
“A parcel of land (Lot 23, being a portion of Maysilo Estate) situated in Maysilo, Caloocan, Metro Manila, Island
of Luzon. Bounded on the NW., along line 1-2 by Blk. 2; on the SW., along line 2-3 by Jacinto Street, along lines
3-4-5 by Blk. 4; along line 5-6 by Bustan St., and San Diego St., on the S., along lines 6-7-8 by Blk. 13, all of
Caloocan Cadastre; on the NE., along line 8-9 by Caloocan Cadastre; and on the N., along line 9-1 by Epifanio de
los Santos Avenue. Beginning at a point marked “1” on plan, being S. 28 deg. 30’E., 530.50 m. from MBM No. 1,
Caloocan Cadastre; thence S. 07 deg. 20’W., 34.00 m. to point 2; S. 17 deg. 10’E., 12.00 m. to point 3; (0/illegible)
S. 15 deg. 31’E., 31.00 m. to point 4; S. 27 deg. 23’E., 22.50 m. to point 5;
S. 38 deg. 41’E., 43.20 m. to point 6; S. 71 deg. 35’E., 10.60 m. to point 7;
N. 84 deg. 30’E., 38.80 m. to point 8; N. 11 deg. 40’W., 131.20 m. to point 9;
101
N. 89 deg. 10’W., 55.00 m. to the point of beginning; containing an area of FOURTEEN THOUSAND THREE
HUNDRED NINETY ONE SQUARE METERS AND FIFTY FOUR SQUARE DECIMETERS (14,391.54). more or
less. All points referred to are indicated on the plan and are marked on the ground by Old Ps. cyl. conc. mons. 15
x 60 cm.; bearings true;”54(Emphasis supplied).
On the other hand, the technical description of petitioner’s lands before they were subdivided under TCT
No. T-148220 is as follows:
“A parcel of land (Lot No. 1-G of the subdivision plan Psd-2731, being a portion of Lot 23-A, Maysilo Estate,
GLRO Rec. No. 4429), situated in the Municipality of Caloocan, Province of Rizal. Bounded on the North.,
by Calle A. Samson; on the East., by properties of Gregoria de Jesus, Arcadio de Jesus and Felix de Jesus;
on the South., by properties of Lucas Bustamante and Patricio Galauran; and on the West., by property of
Patricio Galauran; and Lot No. 1-E of the subdivision plan. Beginning at a point marked “1” on plan, being N.69
deg. 27’E., 1600.19 m. from BLLM No. 1, Mp. of Caloocan, more or less, thence S. 21 deg. 25’E., 44.78 m. to point
2; thence S. 14 deg. 57’E., 37.24 m. to point 3; thence S. 81 deg. 11’W., 20.28 m. to point 4; thence S. 86 deg.
06’W., 15.45 m. to point 5; thence N. 67 deg. 20’W., 15.91 m. to point 6; thence N. 35 deg. 19’W., 37.56 m. to
point 7; thence N. 27 deg. 11’W., 12.17 m. to point 8; thence N. 19 deg. 26’W., 23.32 m. to point 9; thence N. 13
deg. 08’W., 28.25 m. to point 10; thence S. 78 deg. 45’W., 13.00 m. to point 11; thence N. 0 deg. 56’E., 48.92 m. to
point 12; thence N. 89 deg. 13’E., 53.13 m. to point 13; thence S. 21 deg. 24’E., 67.00 m. to the point of
beginning; containing an area of EIGHT THOUSAND SIX HUNDRED NINETY FOUR (8,694) SQUARE METERS,
more or less. All points referred to are indicated on the plan and are marked on the ground points 1,2,3 and 13
by Old PLS conc. mons. point 4,6,7,8 and 9 by Old PLS stone mons.; points 5 to 10 and old stakes points 11 and
12 by PLS conc. mons. bearings true, declination 1 deg. 08’E., date of the original survey, Sept. 8-27, Oct. 4-21
and Nov. 17-18, 1911 and that of the subdivision survey, Oct. 14 and 15, 1927.” 55 (Emphasis supplied).
Such disparity in location is more vividly illustrated in the Plan prepared by Engr. Privadi J.G. Dalire, Chief
of the Geodetic Surveys Division, showing the relative positions of Lots 23 and 23-A. As it appears on the Plan,
the land covered by respondents’ TCT No. C-314537 lies far west of petitioner’s lands under TCT Nos. 270921,
270922 and 270923. Strictly speaking, therefore, the existence of TCT No. C-314537 is not prejudicial to
petitioner’s titles insofar as it pertains to a different land.
Significantly, an action to quiet title is characterized as a proceeding quasi in rem.56 In an action quasi in rem,
an individual is named a defendant and the purpose of the proceeding is to subject his interests to the
obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability of a
particular property but which are intended to operate on these questions only as between the particular
parties to the proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The
judgment therein is binding only upon the parties who joined in the action. 57
Yet, petitioner was well aware that the lots encompassed by its titles are not the same as that covered by
respondents’ title. In its complaint, Phil-Ville alleges:
“27.4 That Lot 23, being a portion of Maysilo Estate, as described in said TCT No. C-314537 of the late
Eleuteria Rivera when plotted using its tie line to MBM No. 1, Caloocan Cadastre is outside Lot 23-A of the
Maysilo Estate. This must be so because Lot 23 is not [a] portion of Lot 23-A, Maysilo Estate….” 58
This brings petitioner’s action within the purview of Rule 63 of the Rules of Court on Declaratory Relief.
Section 1 of Rule 63 provides:
“SECTION 1. Who may file petition.—Any person interested under a deed, will, contract or other written
instrument, whose rights are affected by a statute, executive order or regulation, ordinance or any other
Trial Court to determine any question of construction or validity arising, and for a declaration of his
rights or duties, thereunder.
An action for the 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.” (Emphasis supplied).
An action for declaratory relief presupposes that there has been no actual breach of the instruments involved
or of the 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 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.
102
In the present case, petitioner filed a complaint for quieting of title after it was served a notice to vacate but
before it could be dispossessed of the subject properties. Notably, the Court of Appeals, in CA-G.R. SP No. 43034,
had earlier set aside the Order which granted partial partition in favor of Eleuteria Rivera and the Writ of
Possession issued pursuant thereto. And although petitioner’s complaint is captioned as Quieting of Title and
Damages, all that petitioner prayed for, is for the court to uphold the validity of its titles as against that of
respondents’. This is consistent with the nature of the relief in an action for declaratory relief where the
judgment in the case can be carried into effect without requiring the parties to pay damages or to perform any
act.59
Thus, while petitioner was not able to demonstrate that respondents’ TCT No. C-314537 in the name of
Eleuteria Rivera constitutes a cloud over its title, it has nevertheless successfully established its ownership over
the subject properties and the validity of its titles which entitles it to declaratory relief.
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated January 31, 2005 and
Resolution dated March 15, 2005 of the Court of Appeals in CA-G.R. SP No. 62211 are SET ASIDE. The Decision
dated March 24, 2000 of the Caloocan RTC in Civil Case No. C-507 is hereby REINSTATED and UPHELD.
No pronouncement as to costs.
SO ORDERED.
Carpio-Morales (Chairperson), Brion, Bersamin and Sereno, JJ., concur.
12. G.R. No. 170656. August 15, 2007.*

THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the
Metropolitan Manila Development Authority, petitioners, vs. VIRON TRANSPORTATION CO., INC.,
respondent.
G.R. No. 170657. August 15, 2007.*
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA DEVELOPMENT
AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority,
petitioners, vs. MENCORP TRANSPORTATION SYSTEM, INC., respondent.
Declaratory Relief; Requisites; The requirement of the presence of a justiciable controversy is satisfied when

an actual controversy or the ripening seeds thereof exist between the parties, all of whom are sui juris and before
the court, and the declaration sought will help in ending the controversy.—The following are the essential
requisites for a declaratory relief petition: (a) there must be a justiciable controversy; (b) the controversy must
be between persons whose interests are adverse; (c) the party seeking declaratory relief must have a legal
interest in the controversy; and (d) the issue invoked must be ripe for judicial determination. The requirement
of the presence of a justiciable controversy is satisfied when an actual controversy or the ripening seeds thereof
exist between the parties, all of whom are sui juris and before the court, and the declaration sought will help in
ending the controversy. A question becomes justiciable when it is translated into a claim of right which is
actually contested.
Same; Metropolitan Manila Development Authority (MMDA); For the transportation companies to wait for
the actual issuance by the Metropolitan Manila Development Authority of an order for the closure of their bus
terminals would be foolhardy for, by then, the proper action to bring would no longer be for declaratory relief
which must be brought before there is a breach or violation of rights.—The MMDA’s resolve to immediately
implement the Project, its denials to the contrary notwithstanding, is also evident from telltale circumstances,
foremost of which was the passage by the MMC of Resolution No. 03-07, Series of 2003 expressing its full
support of the immediate implementation of the Project. Notable from the 5th Whereas clause of the MMC
Resolution is the plan to “remove the bus terminals located along major thoroughfares of Metro Manila and an
urgent need to integrate the different transport modes.” The 7th Whereas clause proceeds to mention the
establishment of the North and South terminals. As alleged in Viron’s petition, a diagram of the GMA-MTS North
Bus/Rail Terminal had been drawn up, and construction of the terminal is already in progress. The MMDA, in
its Answer and Position Paper, in fact affirmed that the government had begun to implement the Project. It thus
appears that the issue has already transcended the boundaries of what is merely conjectural or anticipatory.
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the
closure of respondents’ bus terminals would be foolhardy for, by then, the proper action to bring would no
longer be for declaratory relief which, under Section 1, Rule 63 of the Rules of Court, must be
brought before there is a breach or violation of rights.
President; Power of Control; Since, under the law, the Department of Transportation and Communications
(DOTC) is authorized to establish and administer programs and projects for transportation, it follows that the
President may exercise the same power and authority to order the implementation of the Project, which
103
admittedly is one for transportation.—It is readily apparent from the abovequoted provisions of E.O. No. 125, as
amended, that the President, then possessed of and exercising legislative powers, mandated the DOTC to be the
primary policy, planning, programming, coordinating, implementing, regulating and administrative entity to
promote, develop and regulate networks of transportation and communications. The grant of authority to the
DOTC includes the power to establish and administer comprehensive and integrated programs for
transportation and communications. As may be seen further, the Minister (now Secretary) of the DOTC is
vested with the authority and responsibility to exercise the mandate given to the department. Accordingly, the
DOTC Secretary is authorized to issue such orders, rules, regulations and other issuances as may be necessary to
ensure the effective implementation of the law. Since, under the law, the DOTC is authorized to establish and
administer programs and pro jects for transportation, it follows that the President may exercise the same
power and authority to order the implementation of the Project, which admittedly is one for transportation.
Such authority springs from the President’s power of control over all executive departments as well as the
obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution.
Police Power; The powers vested in the Department of Transportation and Communications (DOTC)
Secretary to establish and administer comprehensive and integrated programs for transportation and
communications and to issue orders, rules and regulations to implement such mandate have been so delegated for
the good and welfare of the people.—Respecting the President’s authority to order the implementation of the
Project in the exercise of the police power of the State, suffice it to stress that the powers vested in the DOTC
Secretary to establish and administer comprehensive and integrated programs for transportation and
communications and to issue orders, rules and regulations to implement such mandate (which, as previously
discussed, may also be exercised by the President) have been so delegated for the good and welfare of the
people. Hence, these powers partake of the nature of police power.
Same; Words and Phrases; Police power is the plenary power vested in the legislature to make, ordain, and
establish wholesome and reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good
and welfare of the people.—Police power is the plenary power vested in the legislature to make, ordain, and
establish wholesome and reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the
good and welfare of the people. This power to prescribe regulations to promote the health, morals, education,
good order or safety, and general welfare of the people flows from the recognition that salus populi est suprema
lex—the welfare of the people is the supreme law.
Same; While police power rests primarily with the legislature, such power may be delegated to President,
administrative boards, as well as to the lawmaking bodies of municipal corporations.—While police power rests
primarily with the legislature, such power may be delegated, as it is in fact increasingly being delegated. By
virtue of a valid delegation, the power may be exercised by the President and administrative boards as well as
by the lawmaking bodies of municipal corporations or local governments under an express delegation by the
Local Government Code of 1991.
Same; Metropolitan Manila Development Authority; It is the Department of Transportation and
Communications (DOTC), and not the Metropolitan Manila Development Authority (MMDA), which is authorized
to establish and implement a project such as the one subject of the cases at bar; By designating the Metropolitan
Manila Development Authority (MMDA) as the implementing agency of the Project, the President clearly
overstepped the limits of the authority conferred by law, rendering E.O. No. 179 ultra vires.—The authority of the
President to order the implementation of the Project notwithstanding, the designation of the MMDA as the
implementing agency for the Project may not be sustained. It is ultra vires, there being no legal basis therefor. It
bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA, which
is authorized to establish and implement a project such as the one subject of the cases at bar. Thus, the
President, although authorized to establish or cause the implementation of the Project, must exercise the
authority through the instrumentality of the DOTC which, by law, is the primary implementing and
administrative entity in the promotion, development and regulation of networks of transportation, and the one
so authorized to establish and implement a project such as the Project in question. By designating the MMDA as
the implementing agency of the Project, the President clearly overstepped the limits of the authority conferred
by law, rendering E.O. No. 179 ultra vires.
Same; Same; Metropolitan Manila Development Authority (MMDA) is not vested with police power.—In light
of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement the
Project as envisioned by the E.O; hence, it could not have been validly designated by the President to undertake
the Project. It follows that the MMDA cannot validly order the elimination of respondents’ terminals. Even the
MMDA’s claimed authority under the police power must necessarily fail in consonance with the above-quoted
ruling in MMDA v. Bel-Air Village Association, Inc., 328 SCRA 836 (2000), and this Court’s subsequent ruling
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in Metropolitan Manila Development Authority v. Garin, 456 SCRA 176 (2005), that the MMDA is not vested with
police power.
Same; Tests for Valid Exercise of Police Power; The police power legislation must be firmly grounded on
public interest and welfare and a reasonable relation must exist between the purposes and the means.—Even
assuming arguendo that police power was delegated to the MMDA, its exercise of such power does not satisfy
the two tests of a valid police power measure, viz.: (1) the interest of the public generally, as distinguished from
that of a particular class, requires its exercise; and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. Stated differently, the police
power legislation must be firmly grounded on public interest and welfare and a reasonable relation must exist
between the purposes and the means.
Same; Common Carriers; The Court fails to see how the prohibition against the existence of bus terminals
can be considered a reasonable necessity to ease traffic congestion in the metropolis—less intrusive measures such
as curbing the proliferation of “colorum” buses, vans and taxis entering Metro Manila and using the streets for
parking and passenger pick-up points might even be more effective in easing the traffic situation, as well as the
strict enforcement of traffic rules and the removal of obstructions from major thoroughfares.—As in Lucena, 452
SCRA 174 (2005), this Court fails to see how the prohibition against the existence of respondents’ terminals can
be considered a reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the
elimination of respondents’ bus terminals brings forth the distinct possibility and the equally harrowing reality
of traffic congestion in the common parking areas, a case of transference from one site to another. Less
intrusive measures such as curbing the proliferation of “colorum” buses, vans and taxis entering Metro Manila
and using the streets for parking and passenger pick-up points, as respondents suggest, might even be more
effective in easing the traffic situation. So would the strict enforcement of traffic rules and the removal of
obstructions from major thoroughfares.
Same; Due Process; A bus company’s certificate of public convenience confers no property right, and are
mere licenses or privileges which must yield to legislation safeguarding the interests of the people.—As to the
alleged confiscatory character of the E.O., it need only to be stated that respondents’ certificates of public
convenience confer no property right, and are mere licenses or privileges. As such, these must yield to
legislation safeguarding the interest of the people.
Same; Common Carriers; The establishment, as well as the maintenance of vehicle parking areas or
passenger terminals, is generally considered a necessary service to be provided by provincial bus operators—
eliminating the terminals would thus run counter to the provisions of the Public Service Act.—The establishment,
as well as the maintenance of vehicle parking areas or passenger terminals, is generally considered a necessary
service to be provided by provincial bus operators like respondents, hence, the investments they have poured
into the acquisition or lease of suitable terminal sites. Eliminating the terminals would thus run counter to the
provisions of the Public Service Act.
Administrative Law; It is the Department of Transportation and Communications (DOTC)—as the primary
policy, planning, programming, coordinating, implementing, regulating and administrative entity to promote,
develop and regulate networks of transportation and communications—which has the power to establish and
administer a transportation project like the Project subject of the case at bar.—This Court commiserates with the
MMDA for the roadblocks thrown in the way of its efforts at solving the pestering problem of traffic congestion
in Metro Manila. These efforts are commendable, to say the least, in the face of the abominable traffic situation
of our roads day in and day out. This Court can only interpret, not change, the law, however. It needs only to be
reiterated that it is the DOTC—as the primary policy, planning, programming, coordinating, implementing,
regulating and administrative entity to promote, develop and regulate networks of transportation and
communications—which has the power to establish and administer a transportation project like the
Project subject of the case at bar.
PETITION for review on certiorari of the orders of the Regional Trial Court of Manila, Br. 26.
The Solicitor General for petitioners.
Cesar B. Brillantes for Mencorp Transporation System, Inc.

Rondaris, Rondaris and Associates Law Office for Viron Transportation Co.
CARPIO-MORALES, J.:
The following conditions in 1969, as observed by this Court:
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“Vehicles have increased in number. Traffic congestion has moved from bad to worse, from tolerable to critical.
The number of people who use the thoroughfares has multiplied x x x,” 1
have remained unchecked and have reverberated to this day. Traffic jams continue to clog the streets of Metro
Manila, bringing vehicles to a standstill at main road arteries during rush hour traffic and sapping people’s
energies and patience in the process.
The present petition for review on certiorari, rooted in the traffic congestion problem, questions the
authority of the Metropolitan Manila Development Authority (MMDA) to order the closure of provincial bus
terminals along Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial Court
(RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005, 2 which resolved a motion for reconsideration filed by herein
respondents, declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O., “unconstitutional as it
constitutes an unreasonable exercise of police power.” The second assailed Order of November 23,
20053 denied petitioners’ motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, “PROVIDING FOR THE
ESTABLISHMENT OF GREATER MANILA MASS TRANSPORT SYSTEM,” the pertinent portions of which read:
“WHEREAS, Metro Manila continues to be the center of employment opportunities, trade and commerce of the
Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of Bulacan, Cavite,
Laguna, and Rizal, owing to the continued movement of residents and industries to more affordable and
economically viable locations in these provinces;
WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to undertake measures to
ease traffic congestion in Metro Manila and ensure the convenient and efficient travel of commuters within its
jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro Manila has been the numerous buses plying the
streets that impedes [sic] the flow of vehicles and commuters due to the inefficient connectivity of the different
transport modes;
WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and providing more convenient access to the mass transport
system to the commuting public through the provision of mass transport terminal facilities that would integrate
the existing transport modes, namely the buses, the rail-based systems of the LRT, MRT and PNR and to
facilitate and ensure efficient travel through the improved connectivity of the different transport modes;
WHEREAS, the national government must provide the necessary funding requirements to immediately
implement and render operational these projects; and extent to MMDA such other assistance as may be
warranted to ensure their expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, by virtue of the powers
vested in me by law, do hereby order:
Section 1. THE PROJECT.—The project shall be identified as GREATER MANILA TRANSPORT SYSTEM
Project.
Section 2. PROJECT OBJECTIVES.—In accordance with the plan proposed by MMDA, the project aims to
develop four (4) interim intermodal mass transport terminals to integrate the different transport modes, as
well as those that shall hereafter be developed, to serve the commuting public in the northwest, north, east,
south, and southwest of Metro Manila. Initially, the project shall concentrate on immediately establishing the
mass transport terminals for the north and south Metro Manila commuters as hereinafter described.
Section 3. PROJECT IMPLEMENTING AGENCY.—The Metropolitan Manila Development Authority
(MMDA), is hereby designated as the implementing Agency for the project. For this purpose, MMDA is directed to
undertake such infrastructure development work as may be necessary and, thereafter, manage the project until
it may be turned-over to more appropriate agencies, if found suitable and convenient. Specifically, MMDA shall
have the following functions and responsibilities:
a)Cause the preparation of the Master Plan for the projects, including the designs and costing;
b)Coordinate the use of the land and/or properties needed for the project with the respective agencies and/or
entities owning them;
c)Supervise and manage the construction of the necessary structures and facilities;
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d)Execute such contracts or agreements as may be necessary, with the appropriate government agencies,
entities, and/or private persons, in accordance with existing laws and pertinent regulations, to facilitate the
implementation of the project;
e)Accept, manage and disburse such funds as may be necessary for the construction and/or implementation of
the projects, in accordance with prevailing accounting and audit polices and practice in government.
f)Enlist the assistance of any national government agency, office or department, including local government
units, government-owned or controlled corporations, as may be necessary;
g)Assign or hire the necessary personnel for the above purposes; and
h)Perform such other related functions as may be necessary to enable it to accomplish the objectives and
purposes of this Executive Order.4 (Emphasis in the original; italics supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro Manila has
been the numerous buses plying the streets and the inefficient connectivity of the different transport
modes;5 and the MMDA had “recommended a plan to decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and providing more and convenient access to the mass transport
system to the commuting public through the provision of mass transport terminal facilities” 6 which plan is
referred to under the E.O. as the Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body of the
MMDA, issued Resolution No. 03-07 series of 2003 7 expressing full support of the Project. Recognizing the
imperative to integrate the different transport modes via the establishment of common bus parking terminal
areas, the MMC cited the need to remove the bus terminals located along major thorough-fares of Metro
Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the business of
public transportation with a provincial bus operation, 9 filed a petition for declaratory relief10 before the
RTC11 of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA, through
Chairman Fernando, was “poised to issue a Circular, Memorandum or Order closing, or tantamount to closing,
all provincial bus terminals along EDSA and in the whole of the Metropolis under the pretext of traffic
regulation.”12 This impending move, it stressed, would mean the closure of its bus terminal in Sampaloc, Manila
and two others in Quezon City.
Alleging that the MMDA’s authority does not include the power to direct provincial bus operators to abandon
their existing bus terminals to thus deprive them of the use of their property, Viron asked the court to construe
the scope, extent and limitation of the power of the MMDA to regulate traffic under R.A. No. 7924, “AN ACT
CREATING THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY, DEFINING ITS POWERS AND
FUNCTIONS, PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES.”
Viron also asked for a ruling on whether the planned closure of provincial bus terminals would contravene
the Public Service Act and related laws which mandate public utilities to provide and maintain their own
terminals as a requisite for the privilege of operating as common carriers. 13
Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar
petition for declaratory relief14 against Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the possessory
rights of owners and operators of public land transportation units over their respective terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all
provincial bus terminals along EDSA and in the whole of the metropolis and to transfer their operations to
common bus terminals,15 Mencorp prayed for the issuance of a temporary restraining order (TRO) and/or writ
of preliminary injunction to restrain the impending closure of its bus terminals which it was leasing at the
corner of EDSA and New York Street in Cubao and at the intersection of Blumentritt, Laon Laan and Halcon
Streets in Quezon City. The petition was docketed as Civil Case No. 03-106224 and was raffled to Branch 47 of
the RTC of Manila.
Mencorp’s petition was consolidated on June 19, 2003 with Viron’s petition which was raffled to Branch 26
of the RTC, Manila.
Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its application for the issuance of a
preliminary injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down to whether 1) the MMDA’s
power to regulate traffic in Metro Manila included the power to direct provincial bus operators to abandon and
close their duly established and existing bus terminals in order to conduct business in a common terminal; (2)
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the E.O. is consistent with the Public Service Act and the Constitution; and (3) provincial bus operators would
be deprived of their real properties without due process of law should they be required to use the common bus
terminals.
Upon the agreement of the parties, they filed their respective position papers in lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the E.O.
pursuant to R.A. No. 7924, which empowered the MMDA to administer Metro Manila’s basic services including
those of transport and traffic management.
The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied the two
tests of lawful subject matter and lawful means, hence, Viron’s and Mencorp’s property rights must yield to
police power.
On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of September 8,
2005, reversed its Decision, this time holding that the E.O. was “an unreasonable exercise of police power”; that
the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does not include the power to order the
closure of Viron’s and Men-corp’s existing bus terminals; and that the E.O. is inconsistent with the provisions of
the Public Service Act.
Petitioners’ motion for reconsideration was denied by Resolution of November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory relief
are not present, there being no justiciable controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the
President has the authority to undertake or cause the implementation of the Project. 19
Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as nothing in
the body of the E.O. mentions or orders the closure and elimination of bus terminals along the major
thoroughfares of Metro Manila. Viron and Mencorp, they argue, failed to produce any letter or communication
from the Executive Department apprising them of an immediate plan to close down their bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to government agencies to
coordinate with the MMDA and to make available for use government property along EDSA and South
Expressway corridors. They add that the only relation created by the E.O. is that between the Chief Executive
and the implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to meet the
requirement of justiciability was not among the issues defined for resolution in the Pre-Trial Order of January
12, 2004. It is equally true, however, that the question was repeatedly raised by petitioners in their Answer to
Viron’s petition,20 their Comment of April 29, 2003 opposing Mencorp’s prayer for the issuance of a TRO, 21 and
their Position Paper of August 23, 2004.22
In bringing their petitions before the trial court, both respondents pleaded the existence of the essential
requisites for their respective petitions for declaratory relief, 23 and refuted petitioners’ contention that a
justiciable controversy was lacking. 24 There can be no denying, therefore, that the issue was raised and
discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition: (a) there must be a justiciable
controversy; (b) the controversy must be between persons whose interests are adverse; (c) the party seeking
declaratory relief must have a legal interest in the controversy; and (d) the issue invoked must be ripe for
judicial determination.25
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy or
the ripening seeds thereof exist between the parties, all of whom are sui juris and before the court, and the
declaration sought will help in ending the controversy. 26 A question becomes justiciable when it is translated
into a claim of right which is actually contested.27
In the present cases, respondents’ resort to court was prompted by the issuance of the E.O. The 4th Whereas
clause of the E.O. sets out in clear strokes the MMDA’s plan to “de-congest traffic by eliminating the bus
terminals now located along major Metro Manila thoroughfares and providing more convenient access to the
mass transport system to the commuting public through the provision of mass transport terminal facilities x x
x.” (Emphasis supplied)
Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for north-
and south-bound commuters. For this purpose, Section 8 directs the Department of Budget and Management to
allocate funds of not more than one hundred million pesos (P100,000,000) to cover the cost of the construction
of the north and south terminals. And the E.O. was made effective immediately.
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The MMDA’s resolve to immediately implement the Project, its denials to the contrary notwithstanding, is
also evident from telltale circumstances, foremost of which was the passage by the MMC of Resolution No. 03-
07, Series of 2003 expressing its full support of the immediate implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to “remove the bus terminals
located along major thoroughfares of Metro Manila and an urgent need to integrate the different transport
modes.” The 7th Whereas clause proceeds to mention the establishment of the North and South terminals.
As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn up, and
construction of the terminal is already in progress. The MMDA, in its Answer 28 and Position Paper,29 in fact
affirmed that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural or
anticipatory.
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the
closure of respondents’ bus terminals would be foolhardy for, by then, the proper action to bring would no
longer be for declaratory relief which, under Section 1, Rule 63 30 of the Rules of Court, must be
brought before there is a breach or violation of rights.
As for petitioners’ contention that the E.O. is a mere administrative issuance which creates no relation with
third persons, it does not persuade. Suffice it to stress that to ensure the success of the Project for which the
concerned government agencies are directed to coordinate their activities and resources, the existing bus
terminals owned, operated or leased by third persons like respondents would have to be eliminated; and
respondents would be forced to operate from the common bus terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their bus
terminals would mean, among other things, the loss of income from the operation and/or rentals of stalls
thereat. Precisely, respondents claim a deprivation of their constitutional right to property without due process
of law.
Respondents have thus amply demonstrated a “personal and substantial interest in the case such that [they
have] sustained, or will sustain, direct injury as a result of [the E.O.’s] enforcement.” 31 Consequently, the
established rule that the constitutionality of a law or administrative issuance can be challenged by one who will
sustain a direct injury as a result of its enforcement has been satisfied by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals
under the E.O. which, they argue, is unconstitutional because it violates both the Constitution and the Public
Service Act; and that neither is the MMDA clothed with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the President’s authority to undertake or to cause
the implementation of the Project. They assert that the authority of the President is derived from E.O. No. 125,
“REORGANIZING THE MINISTRY OF TRANSPORTATION AND COMMUNICATIONS DEFINING ITS POWERS AND
FUNCTIONS AND FOR OTHER PURPOSES,” her residual power and/or E.O. No. 292, otherwise known as the
Administrative Code of 1987. They add that the E.O. is also a valid exercise of the police power.
E.O. No. 125,32 Dated January 30, 1987.
which former President Corazon Aquino issued in the exercise of legislative
powers, reorganized the then Ministry (now Department) of Transportation and Communications. Sections 4,
5, 6 and 22 of E.O. 125, as amended by E.O. 125-A, 33 read:
“SECTION 4. Mandate.—The Ministry shall be the primary policy, planning, programming, coordinating,
implementing, regulating and administrative entity of the Executive Branch of the government in the
promotion, development and regulation of dependable and coordinated networks of transportation and
communication systems as well as in the fast, safe, efficient and reliable postal, transportation and
communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
(a)Promote the development of dependable and coordinated networks of transportation and communications
systems;
(b)Guide government and private investment in the development of the country’s intermodal
transportation and communications systems in a most practical, expeditious, and orderly fashion for
maximum safety, service, and cost effectiveness; (Emphasis and italics supplied)
xxxx
SECTION 5. Powers and Functions.—To accomplish its mandate, the Ministry shall have the following
powers and functions:
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(a)Formulate and recommend national policies and guidelines for the preparation and implementation of
integrated and comprehensive transportation and communications systems at the national, regional and local
levels;
(b)Establish and administer comprehensive and integrated programs for transportation and
communications, and for this purpose, may call on any agency, corporation, or organization, whether public or
private, whose development programs include transportation and communications as an integral part thereof,
to participate and assist in the preparation and implementation of such program;
(c)Assess, review and provide direction to transportation and communications research and development
programs of the government in coordination with other institutions concerned;
(d)Administer all laws, rules and regulations in the field of transportation and
communications; (Emphasis and italics supplied)
xxxx
SECTION 6. Authority and Responsibility.—The authority and responsibility for the exercise of the
mandate of the Ministry and for the discharge of its powers and functions shall be vested in the Minister
of Transportation and Communications, hereinafter referred to as the Minister, who shall have supervision
and control over the Ministry and shall be appointed by the President. (Emphasis and italics supplied)
SECTION 22. Implementing Authority of Minister.—The Minister shall issue such orders, rules,
regulations and other issuances as may be necessary to ensure the effective implementation of the
provisions of this Executive Order.” (Emphasis and italics supplied)
It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the President, then
possessed of and exercising legislative powers, mandated the DOTC to be the primary policy, planning,
programming, coordinating, implementing, regulating and administrative entity to promote, develop and
regulate networks of transportation and communications. The grant of authority to the DOTC includes the
power to establish and administer comprehensive and integrated programs for transportation and
communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and
responsibility to exercise the mandate given to the department. Accordingly, the DOTC Secretary is authorized to
issue such orders, rules, regulations and other issuances as may be necessary to ensure the effective
implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer programs and projects for
transportation, it follows that the President may exercise the same power and authority to order the
implementation of the Project, which admittedly is one for transportation.
Such authority springs from the President’s power of control over all executive departments as well as the
obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution which provides:
“SECTION 17. The President shall have control of all the ex-ecutive departments, bureaus and offices. He shall
ensure that the laws be faithfully executed.”
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987. Notably,
Section 38, Chapter 37, Book IV of the same Code defines the President’s power of supervision and control over
the executive departments, viz.:
“SECTION 38. Definition of Administrative Relationships.—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:
(1) Supervision and Control.—Supervision and control shall include authority to act directly whenever
a specific function is entrusted by law or regulation to a subordinate; direct the performance of duty;
restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials
or units; determine priorities in the execution of plans and programs. Unless a different meaning is explicitly
provided in the specific law governing the relationship of particular agencies the word “control” shall
encompass supervision and control as defined in this paragraph. x x x” (Emphasis and italics supplied)
Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President may act
directly or merely direct the performance of a duty. 34
Respecting the President’s authority to order the implementation of the Project in the exercise of the police
power of the State, suffice it to stress that the powers vested in the DOTC Secretary to establish and administer
comprehensive and integrated programs for transportation and communications and to issue orders, rules and
regulations to implement such mandate (which, as previously discussed, may also be exercised by the
110
President) have been so delegated for the good and welfare of the people. Hence, these powers partake of the
nature of police power.
Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and
reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good and welfare of the
people.35 This power to prescribe regulations to promote the health, morals, education, good order or safety,
and general welfare of the people flows from the recognition that salus populi est suprema lex—the welfare of
the people is the supreme law.
While police power rests primarily with the legislature, such power may be delegated, as it is in fact
increasingly being delegated.36 By virtue of a valid delegation, the power may be exercised by the President and
administrative boards37 as well as by the lawmaking bodies of municipal corporations or local governments
under an express delegation by the Local Government Code of 1991. 38
The authority of the President to order the implementation of the Project notwithstanding, the designation of
the MMDA as the implementing agency for the Project may not be sustained. It is ultra vires, there being no
legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA,
which is authorized to establish and implement a project such as the one subject of the cases at bar. Thus, the
President, although authorized to establish or cause the implementation of the Project, must exercise the
authority through the instrumentality of the DOTC which, by law, is the primary implementing and
administrative entity in the promotion, development and regulation of networks of transportation, and the one
so authorized to establish and implement a project such as the Project in question.
By designating the MMDA as the implementing agency of the Project, the President clearly overstepped the
limits of the authority conferred by law, rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of authority
to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area 39 as a “special development and administrative
region” and placed the administration of “metro-wide” basic services affecting the region under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform “planning, monitoring and
coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of
metro-wide services,” including transport and traffic management. 40 Section 5 of the same law enumerates the
powers and functions of the MMDA as follows:
“(a)Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for
the delivery of metro-wide services, land use and physical development within Metropolitan Manila, consistent
with national development objectives and priorities;
(b)Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide
services which shall indicate sources and uses of funds for priority programs and projects, and which shall
include the packaging of projects and presentation to funding institutions;
(c)Undertake and manage on its own metro-wide programs and projects for the delivery of specific services
under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate
project management offices;
(d)Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify
bottlenecks and adopt solutions to problems of implementation;
(e)The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate
the implementation of all programs and projects concerning traffic management, specifically pertaining
to enforcement, engineering and education.—Upon request, it shall be extended assistance and cooperation,
including but not limited to, assignment of personnel, by all other government agencies and offices concerned;
(f)Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds
of violations of traffic rules and regulations, whether moving or non-moving in nature, and confiscate and
suspend or revoke drivers’ licenses in the enforcement of such traffic laws and regulations, the provisions of RA
4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic laws
and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP,
traffic enforcers of local government units, duly licensed security guards, or members of nongovernmental
organizations to whom may be delegated certain authority, subject to such conditions and requirements as the
Authority may impose; and
111
(g)Perform other related functions required to achieve the objectives of the MMDA, including the undertaking
of delivery of basic services to the local government units, when deemed necessary subject to prior
coordination with and consent of the local government unit concerned.” (Emphasis and italics supplied)
The scope of the function of MMDA as an administrative, coordinating and policy-setting body has been settled
in Metropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc. 41 In that case, the
Court stressed:
“Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7) basic services. One of these
is transport and traffic management which includes the formulation and monitoring of policies, standards
and projects to rationalize the existing transport operations, infrastructure requirements, the use of
thoroughfares and promotion of the safe movement of persons and goods. It also covers the mass transport
system and the institution of a system of road regulation, the administration of all traffic enforcement
operations, traffic engineering services and traffic education programs, including the institution of a single
ticketing system in Metro Manila for traffic violations. Under this service, the MMDA is expressly authorized to
“to set the policies concerning traffic” and “coordinate and regulate the implementation of all traffic
management programs.” In addition, the MMDA may install and administer a single ticketing system,” fix,
impose and collect fines and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts: formulation, coordination,
regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system
and administration. There is no syllable in R.A. No. 7924 that grants the MMDA police power, let alone legislative
power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative
bodies of the local government units, there is no provision in R.A. No. 7924 that empowers the MMDA or
its Council to ‘enact ordinances, approve resolutions and appropriate funds for the general welfare’ of
the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a ‘development authority.’
It is an agency created for the purpose of laying down policies and coordinating with the various
national government agencies, people’s organizations, non-governmental organizations and the private
sector for the efficient and expeditious delivery of basic services in the vast metropolitan area. All its
functions are administrative in nature and these are actually summed up in the charter itself, viz.:
‘SECTION 2. Creation of the Metropolitan Manila Development Authority.—. . .
The MMDA shall perform planning, monitoring and co-ordinative functions, and in the
process exercise regulatory and supervisory authority over the delivery of metro-wide services within
Metro Manila, without diminution of the autonomy of the local government units concerning purely local
matters.’42 (Emphasis and italics supplied)
In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement
the Project as envisioned by the E.O; hence, it could not have been validly designated by the President to
undertake the Project. It follows that the MMDA cannot validly order the elimination of respondents’ terminals.
Even the MMDA’s claimed authority under the police power must necessarily fail in consonance with the
above-quoted ruling in MMDA v. Bel-Air Village Association, Inc. and this Court’s subsequent ruling
in Metropolitan Manila Development Authority v. Garin 43 that the MMDA is not vested with police power.
Even assuming arguendo that police power was delegated to the MMDA, its exercise of such power does not
satisfy the two tests of a valid police power measure, viz.: (1) the interest of the public generally, as
distinguished from that of a particular class, requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. 44 Stated
differently, the police power legislation must be firmly grounded on public interest and welfare and a
reasonable relation must exist between the purposes and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic congestion is a public, not merely a
private, concern. The Court therein held that public welfare underlies the contested statute authorizing the
Director of Public Works to promulgate rules and regulations to regulate and control traffic on national roads.
Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at the bottom of any
regulatory measure designed “to relieve congestion of traffic, which is, to say the least, a menace to public
safety.”47 As such, measures calculated to promote the safety and convenience of the people using the
thoroughfares by the regulation of vehicular traffic present a proper subject for the exercise of police power.
Notably, the parties herein concede that traffic congestion is a public concern that needs to be addressed
immediately. Indeed, the E.O. was issued due to the felt need to address the worsening traffic congestion in
Metro Manila which, the MMDA so determined, is caused by the increasing volume of buses plying the major
thoroughfares and the inefficient connectivity of existing transport systems. It is thus beyond cavil that the
motivating force behind the issuance of the E.O. is the interest of the public in general.
112
Are the means employed appropriate and reasonably necessary for the accomplishment of the purpose. Are
they not duly oppressive?
With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to “eliminate[e] the bus
terminals now located along major Metro Manila thoroughfares and provid[e] more convenient access to the
mass transport system to the commuting public through the provision of mass transport terminal facilities x x
x.”48 Common carriers with terminals along the major thoroughfares of Metro Manila would thus be compelled
to close down their existing bus terminals and use the MMDA-designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances were passed by
the Sangguniang Panlungsod of Lucena, directing public utility vehicles to unload and load passengers at the
Lucena Grand Central Terminal, which was given the exclusive franchise to operate a single common terminal.
Declaring that no other terminals shall be situated, constructed, maintained or established inside or within the
city of Lucena, the sanggunian declared as inoperable all temporary terminals therein.
The ordinances were challenged before this Court for being unconstitutional on the ground that, inter alia,
the measures constituted an invalid exercise of police power, an undue taking of private property, and a
violation of the constitutional prohibition against monopolies.
Citing De la Cruz v. Paras 50 and Lupangco v. Court of Appeals,51 this Court held that the assailed ordinances were
characterized by overbreadth, as they went beyond what was reasonably necessary to solve the traffic problem
in the city. And it found that the compulsory use of the Lucena Grand Terminal was unduly oppressive because
it would subject its users to fees, rentals and charges.
“The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that rights are
exercised within the framework of the law and the laws are enacted with due deference to rights.
A due deference to the rights of the individual thus requires a more careful formulation of solutions to
societal problems.
From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang Panlungsod
had identified the cause of traffic congestion to be the indiscriminate loading and unloading of passengers by
buses on the streets of the city proper, hence, the conclusion that the terminals contributed to the proliferation
of buses obstructing traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright
proscription against the existence of all terminals, apart from that franchised to petitioner, can be
considered as reasonably necessary to solve the traffic problem, this Court has not been enlightened. If
terminals lack adequate space such that bus drivers are compelled to load and unload passengers on the streets
instead of inside the terminals, then reasonable specifications for the size of terminals could be instituted, with
permits to operate the same denied those which are unable to meet the specifications.
In the subject ordinances, however, the scope of the proscription against the maintenance of
terminals is so broad that even entities which might be able to provide facilities better than the
franchised terminal are barred from operating at all.” (Emphasis and italics supplied)
As in Lucena, this Court fails to see how the prohibition against the existence of respondents’ terminals can be
considered a reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the elimination
of respondents’ bus terminals brings forth the distinct possibility and the equally harrowing reality of traffic
congestion in the common parking areas, a case of transference from one site to another.
Less intrusive measures such as curbing the proliferation of “colorum” buses, vans and taxis entering Metro
Manila and using the streets for parking and passenger pick-up points, as respondents suggest, might even be
more effective in easing the traffic situation. So would the strict enforcement of traffic rules and the removal of
obstructions from major thorough-fares.
As to the alleged confiscatory character of the E.O., it need only to be stated that respondents’ certificates of
public convenience confer no property right, and are mere licenses or privileges. 52 As such, these must yield to
legislation safeguarding the interest of the people.
Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents’ terminals
not only because no authority to implement the Project has been granted nor legislative or police power been
delegated to it, but also because the elimination of the terminals does not satisfy the standards of a valid police
power measure.
Finally, an order for the closure of respondents’ terminals is not in line with the provisions of the Public
Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order No. 202,
creating the Land Transportation Franchising and Regulatory Board or LFTRB) vested the Public Service
113
Commission (PSC, now the LTFRB) with “x x x jurisdiction, supervision and control over all public services and
their franchises, equipment and other properties x x x.”
Consonant with such grant of authority, the PSC was empowered to “impose such conditions as to
construction, equipment, maintenance, service, or operation as the public interests and convenience may
reasonably require”53 in approving any franchise or privilege.
Further, Section 16 (g) and (h) of the Public Service Act 54 provided that the Commission shall have the power,
upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the contrary:
(g)To compel any public service to furnish safe, adequate, and proper service as regards the manner of
furnishing the same as well as the maintenance of the necessary material and equipment.
(h)To require any public service to establish, construct, maintain, and operate any reasonable extension of
its existing facilities, where in the judgment of said Commission, such extension is reasonable and practicable
and will furnish sufficient business to justify the construction and maintenance of the same and when the
financial condition of the said public service reasonably warrants the original expenditure required in making
and operating such extension.” (Emphasis and italics supplied)
The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is generally
considered a necessary service to be provided by provincial bus operators like respondents, hence, the
investments they have poured into the acquisition or lease of suitable terminal sites. Eliminating the terminals
would thus run counter to the provisions of the Public Service Act.
This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving the
pestering problem of traffic congestion in Metro Manila. These efforts are commendable, to say the least, in the
face of the abominable traffic situation of our roads day in and day out. This Court can only interpret, not
change, the law, however. It needs only to be reiterated that it is the DOTC—as the primary policy, planning,
programming, coordinating, implementing, regulating and administrative entity to promote, develop and
regulate networks of transportation and communications—which has the power to establish and
administer a transportation project like the Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it is not
authorized to implement cannot pass muster.
WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is
declared NULL and VOID for being ultra vires.
SO ORDERED.
Puno (C.J.), Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Azcun
a, Tinga, Chico-Nazario, Garcia, Velasco, Jr., Nachura and Reyes, JJ., concur.
Petition denied, Executive Order No. 179 declared null and void for being ultra vires.
Notes.—The test of constitutionality of a police power measure is limited to an inquiry on whether the
restriction imposed on constitutional rights is reasonable, and not whether it imposes a restriction on those
rights. (Mirasol vs. Department of Public Works and Highways, 490 SCRA 318 [2006])
A municipality failed to comply with the due process clause when it passed a resolution recommending the
closure or transfer of location of a gasoline filling station maintaining that the same was less than 100 meters
from the nearest public school and church when the records do not show that it even attempted to measure the
distance, notwithstanding that such distance was crucial in determining whether there was an actual violation
of the zoning ordinance. (Parayno vs. Jovellanos, 495 SCRA 85 [2006])
13. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. STANDARD INSURANCE CO., INC.,
RESPONDENT.
DECISION
BERSAMIN, J.:
At issue is the authority of the Regional Trial Court (RTC) to enjoin the enforcement or implementation of
Section 108 and Section 184 of the National Internal Revenue Code of 1997 (NIRC) through an original action
for declaratory relief.
The Case
114
This appeal by petition for review on certiorari is being directly brought by the Commissioner of Internal
Revenue (petitioner)[1] to challenge the judgment rendered on May 8, 2015[2] and the order issued on July 10,
2015,[3] whereby the Regional Trial Court (RTC), Branch 66, in Makati City in Civil Case No. 14-1330, an action
for declaratory relief initiated by the respondent, respectively permanently enjoined the petitioner, or any
persons acting on her behalf from proceeding with the implementation or enforcement of Section 108 and
Section 184 of the NIRC against the respondent, and denied her motion for reconsideration.
Antecedents
On February 13, 2014, the respondent received from the Bureau of Internal Revenue (BIR) a Preliminary
Assessment Notice (PAN) regarding its liability amounting to P377,038,679.55 arising from a deficiency in the
payment of documentary stamp taxes (DST) for taxable year 2011. The respondent contested the PAN through
its letter dated February 27, 2014, but the petitioner nonetheless sent to it a formal letter of demand dated
March 27, 2014. Although the respondent requested reconsideration on April 22, 2014,[4] it received on
December 4, 2014 the Final Decision on Disputed Assessment (FDDA) dated November 25, 2014, declaring its
liability for the DST deficiency, including interest and compromise penalty, totaling P418,830,567.46.[5] On
December 11, 2014, it sought reconsideration of the FDDA, and objected to the tax imposed pursuant to Section
184 of the NIRC as violative of the constitutional limitations on taxation.[6]
Meanwhile, the respondent also received a demand for the payment of its deficiency income tax, value-added
tax, premium tax, DST, expanded withholding tax, and fringe benefit tax for taxable year 2012,[7] and
deficiency DST for taxable year 2013.[8]
On December 19, 2014, the respondent commenced Civil Case No. 14-1330 in the RTC (with prayer for issuance
of a temporary restraining order (TRO) or of a writ of preliminary injunction) for the judicial determination of
the constitutionality of Section 108 and Section 184 of the NIRC with respect to the taxes to be paid by non-life
insurance companies. In its petition, the respondent contended that the facts of the case must be appreciated in
light of the effectivity of Republic Act (R.A.) No. 1000 I entitled An Act Reducing the Taxes on Life Insurance
Policies, whereby the tax rate for life insurance premiums was reduced from 5% to 2%; and the pendency of
deliberations on House Bill (H.B.) No. 3235 entitled An Act Rationalizing the Taxes Imposed on Non-Life
Insurance Policies, whereby an equal treatment for both life and non-life companies was being sought as a
response to the supposed inequality generated by the enactment of R.A. No. 10001.
On December 23, 2014, the RTC issued the TRO prayed for by enjoining the BIR, its agents, representatives,
assignees, or any persons acting for and in its behalf from implementing the provisions of the NIRC adverted to
with respect to the FDDA for the respondent's taxable year 2011, and to the pending assessments for taxable
years 2012 and 2013.
Later, on January 13, 2015, the RTC issued the writ of preliminary injunction.
On May 8, 2015, the RTC rendered the assailed judgment wherein it opined that although taxes were self-
assessing, the tax system merely created liability on the part of the taxpayers who still retained the right to
contest the particular application of the tax laws; and holding that the exercise of such right to contest was not
considered a breach of the provision itself as to deter the action for declaratory relief,[9] and decreed thusly:
WHEREFORE, premises considered, the respondent, its agents, representatives, or any persons acting on its
behalf is hereby permanently enjoined from proceeding with the implementation or enforcement of Sections
108 and 184 of the National Internal Revenue Code against petitioner Standard Insurance Co., Inc. until the
Congress shall have enacted and passed into law House Bill No. 3235 in conformity with the provisions of the
Constitution.
SO ORDERED.[10]
The petitioner moved for reconsideration of the judgment, but on July 10, 2015 the RTC denied the motion for
reconsideration.[11]
Hence, the petitioner has appealed directly to the Court,[12] stating that:
I.
115
THE TRIAL COURT ERRED IN TAKING COGNIZANCE OF THE INSTANT CASE BECAUSE A PETITION FOR
DECLARATORY RELIEF IS NOT APPLICABLE TO CONTEST TAX ASSESSMENTS.
II.
THE TRIAL COURT ERRED IN TAKING COGNIZANCE OF THE INSTANT CASE BECAUSE THE PETITION FOR
DECLARATORY RELIEF IS FATALLY DEFECTIVE FOR FAILING TO SATISFY THE BASIC REQUISITES UNDER
RULE 63 OF THE RULES OF COURT.
III.
THE TRIAL COURT ERRED IN ADJUDGING SECTIONS 108 AND 184 OF THE NIRC AS VIOLATIVE OF THE EQUAL
PROTECTION CLAUSE.
IV.
THE TRIAL COURT GRAVELY ERRED IN GRANTING INJUNCTIVE RELIEF IN FAVOR OF RESPONDENT, THE
SAME (I) BEING SPECIFICALLY PROHIBITED BY SECTION 218 OF THE NIRC; AND (II) HAVING BEEN GRANTED
WITHOUT FACTUAL OR LEGAL BASIS.
V.
THE TRIAL COURT ERRED IN ACCORDING THE RELIEF ADJUDGED, GIVEN THAT: (A) THE RESULTANT
REMEDY FALLS OUTSIDE THE PURVIEW OF AN ACTION FOR DECLARATORY RELIEF; AND (II) IT IS
VIOLATIVE OF THE RULE THAT JUDICIAL DECISIONS MUST FINALLY DETERMINE THE RIGHTS, OBLIGATIONS
AND RESPONSIBILITIES OF PARTIES.[13]
Two substantial issues are presented for resolution. The first is the propriety of the action for declaratory
relief; the other, the legal competence of the RTC to take cognizance of the action for declaratory relief.
Ruling of the Court
The appeal is meritorious.
1.
The injunctive relief is not available as a remedy to assail the collection of a tax
The more substantial reason that should have impelled the RTC to desist from taking cognizance of the
respondent's petition for declaratory relief except to dismiss the petition was its lack of jurisdiction.
We start by reminding the respondent about the inflexible policy that taxes, being the lifeblood of the
Government, should be collected promptly and without hindrance or delay. Obeisance to this policy is
unquestionably dictated by law itself. Indeed, Section 218 of the NIRC expressly provides that "[n]o court shall
have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or
charge imposed by th[e] [NIRC]."[14] Also, pursuant to Section 11[15] of R.A. No. 1125, as amended, the
decisions or rulings of the Commissioner of Internal Revenue, among others, assessing any tax, or levying, or
distraining, or selling any property of taxpayers for the satisfaction of their tax liabilities are immediately
executory, and their enforcement is not to be suspended by any appeals thereof to the Court of Tax Appeals
unless "in the opinion of the Court [of Tax Appeals] the collection by the Bureau of Internal Revenue or the
Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer," in which case
the Court of Tax Appeals "at any stage of the proceeding may suspend the said collection and require the
taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount."
In view of the foregoing, the RTC not only grossly erred in giving due course to the petition for declaratory
relief, and in ultimately deciding to permanently enjoin the enforcement of the specified provisions of the NIRC
against the respondent, but even worse acted without jurisdiction.
116
2.
Action for declaratory relief was procedurally improper as a remedy
We further indicate that even assuming, arguendo, that the RTC had jurisdiction to act on the petition in Civil
Case No. 14-1330, it nevertheless misappreciated the propriety of declaratory relief as a remedy.
An action for declaratory relief is governed by Section 1, Rule 63 of the Rules of Court.[16] It is predicated on
the attendance of several requisites, specifically: (1) the subject matter of the controversy must be a deed, will,
contract or other written instrument, statute, executive order or regulation, or ordinance; (2) the terms of said
documents and the validity thereof are doubtful and require judicial construction; (3) there must have been no
breach of the documents in question; (4) there must be an actual justiciable controversy or the "ripening seeds"
of one between persons whose interests are adverse; (5) the issue must be ripe for judicial determination; and
(6) adequate relief is not available through other means or other forms of action or proceeding.[17]
The third, fourth, fifth and sixth requisites were patently wanting.
Firstly, the third requisite was not met due to the subject of the action (i.e. statute) having been infringed or
transgressed prior to the institution of the action.[18] We observe in this regard that the RTC seemed to believe
that the tax assessments issued had merely created a liability against the respondent as the taxpayer, and that
its suit for declaratory relief was but consistent with protesting the assessments. The RTC's belief was
absolutely devoid of legal foundation, however, simply because internal revenue taxes, being self-assessing,
required no further assessment to give rise to the liability of the taxpayer.[19]
Specifically, the assessments for DST deficiencies of the respondent for the years 2011, 2012 and 2013, as
imposed pursuant to Section 184 of the NIRC were the subject of the respondent's petition for declaratory
relief. Said legal provision states:
Section 184. Stamp Tax on Policies of Insurance Upon Property. - On all policies of insurance or other
instruments by whatever name the same may be called, by which insurance shall be made or renewed upon
property of any description, including rents or profits, against peril by sea or on inland waters, or by fire or
lightning, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos
(P4.00), or fractional part thereof, of the amount of premium charged: Provided, however, That no
documentary stamp tax shall be collected on reinsurance contracts or on any instrument by which cession or
acceptance of insurance risks under any reinsurance agreement is effected or recorded.
What was being thereby taxed was the privilege of issuing insurance policies; hence, the taxes accrued at the
time the insurance policies were issued. Verily, the violation of Section 184 of the NIRC occurred upon the
taxpayer's failure or refusal to pay the correct DST due at the time of issuing the non-life insurance policies.
Inasmuch as the cause of action for the payment of the DSTs pursuant to Section 108[20] and Section 184 of the
NIRC accrued upon the respondent's failure to pay the DST at least for taxable year 2011 despite notice and
demand, the RTC could not procedurally take cognizance of the action for declaratory relief.
Secondly, the apprehension of the respondent that it could be rendered technically insolvent through the
imposition of the iniquitous taxes imposed by Section 108 and Section 184 of the NIRC,[21] laws that were
valid and binding, did not render the action for declaratory relief fall within the purview of an actual
controversy that was ripe for judicial determination. The respondent was thereby engaging in speculation or
conjecture, or arguing on probabilities, not actualities. Therein lay the prematurity of its action, for a justiciable
controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not
one that is conjectural or merely anticipatory.[22]
Admittedly, the respondent sought in the RTC the determination of its right to be assessed the correct taxes
under Section 108 and Section 184 of the NIRC by contending said tax provisions to be invalid and
unconstitutional for their unequal treatment of life and non-life insurance policies. The respondent cited R.A.
No. 10001 and House Bill No. 3235 in support of its contention. Obviously, the challenge mounted by the
respondent against the tax provisions in question could be said to be based on a contingency that might or
might not occur. This is because the Congress has not yet addressed the difference in tax treatment of the life
and non-life insurance policies. Under the circumstances, the respondent would not be entitled to declaratory
relief because its right - still dependent upon contingent legislation - was still inchoate.
117
Lastly, the respondent's adequate remedy upon receipt of the FDDA for the DST deficiency for taxable year
2011 was not the action for declaratory relief but an appeal taken in due course to the Court of Tax Appeals.
Instead of appealing in due course to the CTA, however, it resorted to the RTC to seek and obtain declaratory
relief. By choosing the wrong remedy, the respondent lost its proper and true recourse. Worse, the choice of the
wrong remedy rendered the assessment for the DST deficiency for taxable year 2011 final as a consequence. As
such, the petition for declaratory relief, assuming its propriety as a remedy for the respondent, became mooted
by the finality of the assessment.
With not all the requisites for the remedy of declaratory relief being present, the respondent's petition for
declaratory relief had no legal support and should have been dismissed by the RTC.
WHEREFORE, the Court GRANTS the petition for review on certiorari; ANNULS and SETS ASIDE the decision
rendered in Civil Case No. 14-1330 on May 8, 2015 by the Regional Trial Court, Branch 66, in Makati City;
DISMISSES Civil Case No. 14-1330 on the ground of lack of jurisdiction; QUASHES the writ of preliminary
injunction issued against the Commissioner of Internal Revenue in Civil Case No. 14-1330 for being issued
without jurisdiction; and ORDERS the respondent to pay the costs of suit.
SO ORDERED.

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RULE 63: DECLARATORY RELIEF AND SIMILAR REMEDIES

1. G.R. No. 137794. August 11, 2010.*

This Court explained in Parco vs. Court of Appeals that:

2. G.R. No. 175064. September 18, 2009.*

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The RTC thus decreed:

Petition for Review v. Petition for Certiorari

Administrative control and supervision of Plaza Rizal

3. G.R. No. 150806. January 28, 2008.*

Same; Same; Requisites.—Decisional law enumerates the requisites of an action for declaratory relief, as

Contracts; Interpretation of Contracts; Essential to contract construction is the ascertainment of the intention of

Obligations and Contracts; Extraordinary Inflation or Deflation; Words and Phrases; Inflation,

During the effectivity of the contract, Ponciano died.

We are not convinced.

Now, on the substantive law issues.

Article 1250 of the Civil Code states:

4. G.R. No. 144101. September 16, 2005.*

Same; Civil Law; Mortgages; Prescription; An action to enforce a right arising from a mortgage should be

PETITION for review on certiorari of a decision of the Court of Appeals.

Nonetheless, the petition must fail.

5. G.R. No. 154599. January 21, 2004.*

Same; Same; Same; Judicial and Quasi-Judicial Function, distinguished.—A respondent is said to be

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The antecedents are as follows:

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

WHEREFORE, the petition is DISMISSED.

6. No. L-21036. June 30, 1977.*

7. No. L-29673. November 12, 1987.*

PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Constitutional Law; Executive Department; Government-Owned and Controlled Corporations; Government-Owned

CORONA, C.J., Separate Opinion:

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition.

The Antecedent Facts

The Case for the Respondents

The Court’s Ruling

A. Certiorari is not the proper remedy.

B. Petitioner lacks locus standi.

“Section 9. Moratorium on Increases in Salaries, Allowances, Incentives and Other Benefits.—

C. The petition has a defective jurat.

D. The petition has been mooted by supervening events.

WHEREFORE, premises considered, the petition is DISMISSED. No costs.

Corona (C.J.), See separate opinion.

Lack of Standing and Mootness

Consistency with Existing Laws

Sections 2 to 6 of EO 7 is an enumeration of the guidelines and components of a rationalized compensation and

For purposes of clarity, Section 9 of Joint Resolution No. 4 provides:

10. G.R. No. 176579. June 28, 2011.*

VELASCO, JR., J., Separate Dissenting Opinion:

ABAD, J., Dissenting Opinion:

Angara, Abello, Concepcion, Regala and Cruz for Napoleon L. Nazareno.

The Ruling of the Court

The petition is partly meritorious.

Petitioner has locus standi

The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

Abad, J., See my Dissenting Opinion.

Philippine Long Distance Telephone Company (PLDT), a Philippine-registered telecommunications firm,

outstanding capital stock, irrespective of the nomenclature or classification as common,

11. G.R. No. 167391. June 8, 2011.*

Title Registration Holder

12. G.R. No. 170656. August 15, 2007.*