Republic of the PhilippinesSupreme Court

Manila   

SECOND DIVISION 

CRISANTA ALCARAZ MIGUEL,Petitioner,   - versus -     JERRY D. MONTANEZ,Respondent.

G.R. No. 191336 Present: CARPIO, J.,Chairperson,PEREZ,SERENO,REYES, andPERLAS-BERNABE, JJ. *

 Promulgated: January 25, 2012 

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

 

DECISION

 

REYES, J.:

 

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court.

Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting aside of the

September 17, 2009 Decision[1] and February 11, 2010 Resolution[2] of the Court of Appeals

(CA) in CA-G.R. SP No. 100544, entitled Jerry D. Montanez v. Crisanta Alcaraz Miguel.

 

Antecedent Facts

 

On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One Hundred

Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00), payable in one (1) year,

or until February 1, 2002, from the petitioner. The respondent gave as collateral therefor his

house and lot located at Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong, Caloocan City.

 

Due to the respondents failure to pay the loan, the petitioner filed a complaint against the

respondent before the Lupong Tagapamayapa of Barangay San Jose, Rodriguez, Rizal. The

parties entered into a Kasunduang Pag-aayos wherein the respondent agreed to pay his loan in

installments in the amount of Two Thousand Pesos (P2,000.00) per month, and in the event the

house and lot given as collateral is sold, the respondent would settle the balance of the loan in

full. However, the respondent still failed to pay, and on December 13, 2004, the Lupong

Tagapamayapa issued a certification to file action in court in favor of the petitioner.

 

On April 7, 2005, the petitioner filed before the Metropolitan Trial Court (MeTC) of

Makati City, Branch 66, a complaint for Collection of Sum of Money. In his Answer with

Counterclaim,[3] the respondent raised the defense of improper venue considering that the

petitioner was a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.

 

After trial, on August 16, 2006, the MeTC rendered a Decision,[4] which disposes as

follows:

 WHEREFORE, premises considered[,] judgment is hereby rendered ordering defendant Jerry D. Montanez to pay plaintiff the following: 

1. The amount of [Php147,893.00] representing the obligation with legal rate of interest from February 1, 2002 which was the date of the loan maturity until the account is fully paid;

 2. The amount of Php10,000.00 as and by way of attorneys fees;

and the costs. SO ORDERED. [5]

  

On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the respondent

raised the same issues cited in his Answer. In its March 14, 2007 Decision, [6] the RTC affirmed

the MeTC Decision, disposing as follows:

 WHEREFORE, finding no cogent reason to disturb the findings of the

court a quo, the appeal is hereby DISMISSED, and the DECISION appealed from is hereby AFFIRMED in its entirety for being in accordance with law and evidence.

 SO ORDERED.[7]

  

Dissatisfied, the respondent appealed to the CA raising two issues, namely, (1) whether

or not venue was improperly laid, and (2) whether or not the Kasunduang Pag-aayos effectively

novated the loan agreement. On September 17, 2009, the CA rendered the assailed Decision,

disposing as follows:

 WHEREFORE, premises considered, the petition is hereby GRANTED.

The appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC) of Makati City, Branch 146, is REVERSED and SET ASIDE. A new judgment is entered dismissing respondents complaint for collection of sum of money, without prejudice to her right to file the necessary action to enforce the Kasunduang Pag-aayos.

 SO ORDERED.[8]

  

Anent the issue of whether or not there is novation of the loan 

contract, the CA ruled in the negative. It ratiocinated as follows:

 Judging from the terms of the Kasunduang Pag-aayos, it is clear that no

novation of the old obligation has taken place. Contrary to petitioners assertion, there was no reduction of the term or period originally stipulated. The original period in the first agreement is one (1) year to be counted from February 1, 2001, or until January 31, 2002. When the complaint was filed before the barangay on February 2003, the period of the original agreement had long expired without compliance on the part of petitioner. Hence, there was nothing to reduce or extend. There was only a change in the terms of payment which is not incompatible with the old agreement. In other words, the Kasunduang Pag-aayos merely supplemented the old agreement.[9]

  

The CA went on saying that since the parties entered into a Kasunduang Pag-

aayos before the Lupon ng Barangay, such settlement has the force and effect of a court

judgment, which may be enforced by execution within six (6) months from the date of settlement

by the Lupon ng Barangay, or by court action after the lapse of such time.[10]Considering that

more than six (6) months had elapsed from the date of settlement, the CA ruled that the remedy

of the petitioner was to file an action for the execution of theKasunduang Pag-aayos in court and

not for collection of sum of money.[11] Consequently, the CA deemed it unnecessary to resolve

the issue on venue.[12]

 

The petitioner now comes to this Court.

 

Issues

 

(1) Whether or not a complaint for sum of money is the proper remedy for the petitioner,

notwithstanding the Kasunduang Pag-aayos;[13] and

 

 

(2) Whether or not the CA should have decided the case on the merits 

rather than remand the case for the enforcement of the Kasunduang Pag-aayos.[14]

 

Our Ruling

 Because the respondent failed to comply with the terms of the Kasunduang Pag-aayos, said agreement is deemed rescinded pursuant to Article 2041 of the New Civil Code and the petitioner can insist on his original demand. Perforce, the complaint for collection of sum of money is the proper remedy.  

The petitioner contends that the CA erred in ruling that she should have followed the

procedure for enforcement of the amicable settlement as provided in the Revised Katarungang

Pambarangay Law, instead of filing a collection case. The petitioner points out that the cause of

action did not arise from the Kasunduang Pag-aayos but on the respondents breach of the

original loan agreement.[15]

 

This Court agrees with the petitioner.

 

It is true that an amicable settlement reached at the barangay conciliation proceedings, like

the Kasunduang Pag-aayos in this case, is binding between the contracting parties and, upon its

perfection, is immediately executory insofar as it is not contrary to law, good morals, good 

customs, public order and public policy.[16] This is in accord with the broad precept of Article

2037 of the Civil Code, viz:

 A compromise has upon the parties the effect and authority of res

judicata; but there shall be no execution except in compliance with a judicial compromise.

  

Being a by-product of mutual concessions and good faith of the parties, an amicable

settlement has the force and effect of res judicata even if not judicially approved.[17]It transcends

being a mere contract binding only upon the parties thereto, and is akin to a judgment that is

subject to execution in accordance with the Rules.[18] Thus, under Section 417 of the Local

Government Code,[19] such amicable settlement or arbitration award may be enforced by

execution by the Barangay Lupon within six (6) months from the date of settlement, or by filing

an action to enforce such settlement in the appropriate city or municipal court, if beyond the six-

month period.

 

Under the first remedy, the proceedings are covered by the Local Government Code and

the Katarungang Pambarangay Implementing Rules and Regulations. ThePunong Barangay is

called upon during the hearing to determine solely the fact of non-compliance of the terms of the

settlement and to give the defaulting party another chance at voluntarily complying with his

obligation under the settlement. Under the second remedy, the proceedings are governed by the

Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by

operation of law, has the force and effect of a final judgment.[20]

 

It must be emphasized, however, that enforcement by execution of the amicable

settlement, either under the first or the second remedy, is only applicable if the contracting parties

have not repudiated such settlement within ten (10) days from the date thereof in accordance with

Section 416 of the Local Government Code. If the amicable settlement is repudiated by one

party, either expressly or impliedly, the other party has two options, namely, to enforce the

compromise in accordance with the Local Government Code or Rules of Court as the case may

be, or to consider it rescinded and insist upon his original demand. This is in accord with Article

2041 of the Civil Code, which qualifies the broad application of Article 2037, viz:

 If one of the parties fails or refuses to abide by the compromise, the other

party may either enforce the compromise or regard it as rescinded and insist upon his original demand.

  

In the case of Leonor v. Sycip,[21] the Supreme Court (SC) had the occasion to explain this

provision of law. It ruled that Article 2041 does not require an action for rescission, and the

aggrieved party, by the breach of compromise agreement, may just consider it already rescinded,

to wit:

 It is worthy of notice, in this connection, that, unlike Article 2039 of the

same Code, which speaks of "a cause of annulment or rescission of the compromise" and provides that "the compromise may be annulled or rescinded" for the cause therein specified, thus suggesting an action for annulment or rescission, said Article 2041 confers upon the party concerned, not a "cause" for rescission, or the right to "demand" the rescission of a compromise, but the authority, not only to "regard it as rescinded", but, also, to "insist upon his original demand". The language of this Article 2041, particularly when contrasted with that of Article 2039, denotes that no action for rescission is required in said Article 2041, and that the party aggrieved by the breach of a compromise agreement may, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of rescission, for he may "regard" the compromise agreement already "rescinded".[22] (emphasis supplied)

  

As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-compliance

with the amicable settlement paved the way for the application of Article 2041 under which the

other party may either enforce the compromise, following the procedure laid out in the Revised

Katarungang Pambarangay Law, or consider it as rescinded and insist upon his original demand.

To quote:

 In the case at bar, the Revised Katarungang Pambarangay Law provides

for a two-tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the Punong Barangay which is quasi-judicial and summary in nature on mere motion of the party entitled thereto; and (b) an action in regular form, which remedy is judicial. However, the mode of enforcement does not rule out the right of rescission under Art. 2041 of the Civil Code. The availability of the right of rescission is apparent from the wording of Sec. 417 itself which provides that the amicable settlement "may" be enforced by execution by the lupon within six (6) months from its date or by action in the appropriate city or municipal court, if

beyond that period. The use of the word "may" clearly makes the procedure provided in the Revised Katarungang Pambarangay Law directory or merely optional in nature.

 Thus, although the "Kasunduan" executed by petitioner and

respondent before the Office of the Barangay Captain had the force and effect of a final judgment of a court, petitioner's non-compliance paved the way for the application of Art. 2041 under which respondent may either enforce the compromise, following the procedure laid out in theRevised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his original demand. Respondent chose the latter option when he instituted Civil Case No. 5139-V-97 for recovery of unrealized profits and reimbursement of advance rentals, moral and exemplary damages, and attorney's fees. Respondent was not limited to claiming P150,000.00 because although he agreed to the amount in the "Kasunduan," it is axiomatic that a compromise settlement is not an admission of liability but merely a recognition that there is a dispute and an impending litigation which the parties hope to prevent by making reciprocal concessions, adjusting their respective positions in the hope of gaining balanced by the danger of losing. Under the "Kasunduan," respondent was only required to execute a waiver of all possible claims arising from the lease contract if petitioner fully complies with his obligations thereunder. It is undisputed that herein petitioner did not.[24] (emphasis supplied and citations omitted)

  

In the instant case, the respondent did not comply with the terms and conditions of

the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation because it

denotes that the respondent did not intend to be bound by the terms thereof, thereby negating the

very purpose for which it was executed. Perforce, the petitioner has the option either to enforce

the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon his original demand, in

accordance with the provision of Article 2041 of the Civil Code. Having instituted an action for

collection of sum of money, the petitioner obviously chose to rescind the Kasunduang Pag-

aayos. As such, it is error on the part of the CA to rule that enforcement by execution of said

agreement is the appropriate remedy under the circumstances.

 Considering that the Kasunduang Pag-aayos is deemed rescinded by the non-compliance of the respondent of the terms thereof, remanding the case to the trial court for the enforcement of said agreement is clearly unwarranted.  

The petitioner avers that the CA erred in remanding the case to the 

trial court for the enforcement of the Kasunduang Pag-aayos as it prolonged the process, thereby

putting off the case in an indefinite pendency.[25] Thus, the petitioner insists that she should be

allowed to ventilate her rights before this Court and not to repeat the same proceedings just to

comply with the enforcement of the Kasunduang Pag-aayos, in order to finally enforce her right

to payment.[26]

 

The CA took off on the wrong premise that enforcement of the Kasunduang Pag-aayos is

the proper remedy, and therefore erred in its conclusion that the case should be remanded to the

trial court. The fact that the petitioner opted to rescind the Kasunduang Pag-aayos means that she

is insisting upon the undertaking of the respondent under the original loan contract. Thus, the CA

should have decided the case on the merits, as an appeal before it, and not prolong the

determination of the issues by remanding it to the trial court. Pertinently, evidence abounds that

the respondent has failed to comply with his loan obligation. In fact, the Kasunduang Pag-

aayos is the well nigh incontrovertible proof of the respondents indebtedness with the petitioner

as it was executed precisely to give the respondent a second chance to make good on his

undertaking. And since the respondent still reneged in paying his indebtedness, justice demands

that he must be held answerable therefor.

 

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of

Appeals is SET ASIDE and the Decision of the Regional Trial Court, Branch 146,Makati City,

dated March 14, 2007 is REINSTATED.

 SO ORDERED.  

EN BANC

[G.R. No. 156228. December 10, 2003]

MA. TERESA VIDAL, LULU MARQUEZ, and CARLOS SOBREMONTE, petitioners, vs. MA. TERESA O. ESCUETA, represented by HERMAN O. ESCUETA, respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review of the Decision[1] dated July 23, 2002 of the Court of Appeals in CA-G.R. SP NO. 68895 which affirmed the decision[2] of the Regional Trial Court (RTC) ofMandaluyong City, Branch 208, which reversed and set aside the decision[3] of the Metropolitan Trial Court of Mandaluyong City (MTC), Branch 60; and granted the motion for execution filed by private respondent Ma. Teresa O. Escueta in Civil Case No. 17520.

The petition at bar stemmed from the following antecedents:

When Abelardo Escueta died intestate on December 3, 1994, he was survived by his widow Remedios Escueta and their six children, including Ma. Teresa O. Escueta and her brother Herman O. Escueta. Part of his estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon Streets, Barangay Highway Hills, Mandaluyong City, covered by Transfer Certificate of Title (TCT) No. (77083) - 27568, and the house thereon. The property was leased to Rainier Llanera, who sublet the same to 25 persons. The heirs executed an extra-judicial settlement of estate over the property. They also executed a special power of attorney authorizing Ma. Teresa Escueta to sell the said property.[4]

Sometime in 1999, Ma. Teresa Escueta, as a co-owner of the property, filed an ejectment case against Llanera and the sub-lessees before the Lupon of Barangay Highway Hills, docketed as Barangay Case No. 99-09.[5]

In the meantime, on April 15, 1999, the heirs of Abelardo Escueta executed a deed of conditional sale[6] over the property including the house thereon, to Mary Liza Santos forP13,300,000.00 payable as follows:

Down payment ONE MILLION FIVE HUNDRED THOUSAND (P1,500,000.00) which the HEIRS-SELLERS acknowledged receipt thereof with complete and full satisfaction;

Second payment - TEN MILLION EIGHT HUNDRED THOUSAND (P10,800,000.00) after publication of the Extra-Judicial Settlement of the Estate of the late Abelardo Escueta and payment of the taxes with the Bureau of Internal Revenue by the Attorney-in-Fact; and

The balance of ONE MILLION (P1,000,000.00) upon vacation of all the occupants of the subject property within SIX (6) months from date hereof.[7]

The parties further agreed that:

Ms. Maria Teresa Escueta shall deliver unto the BUYER the Owners Duplicate Copy of the title upon receipt of the down payment while the original copies of the Special Power of Attorney shall be delivered upon payment of the Second Payment stated above.

The ATTORNEY-IN-FACT-SELLER shall be responsible for the ejectment of all the tenants in the said subject property.

The ATTORNEY-IN-FACT-SELLER shall pay the estate tax, capital gains tax and documentary stamp tax including the telephone, water and Meralco bills and the publication for the Extra-Judicial Settlement of the estate of the late ABELARDO ESCUETA while the registration and transfer fees shall be shouldered by the BUYER.[8]

On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed an Amicable Settlement,[9] where they agreed that (a) the owners of the property would no longer collect the rentals due from the respondents therein (lessee and sub-lessees) starting May 1999, with the concomitant obligation of the respondents to vacate the property on or before December 1999; (b) time was the essence of the agreement, and that consequently, if the lessee and sub-lessees fail or refuse to vacate the property on or before December 1999, the barangay chairman was authorized without any court order to cause the eviction and removal of all the respondents on the property.[10] The amicable settlement was attested by Pangkat Chairman Jose Acong. The parties did not repudiate the amicable settlement within ten days from the execution thereof. Neither did any of the parties file any petition to repudiate the settlement.

The vendees having paid the down payment and second installment of the price of the property, the vendors caused the cancellation on December 17, 1999, of TCT No. 27568 and the issuance of TCT No. 15324 to and under the names of the vendees Mary Liza Santos, Susana Lim and Johnny Lim.[11] However, Escueta and the other vendors had yet to receive the balance of the purchase price of P1,000,000.00 because the respondents were still in the property.

Llanera vacated the leased premises. Later, twenty of the sub-lessees also vacated the property. By January 2000, five sub-lessees, namely, Ma. Teresa Vidal, Lulu Marquez, Marcelo Trinidad, Carlos Sobremonte,[12] and Jingkee Ang remained in the property, and requested Escueta for extensions to vacate the property. Escueta agreed, but despite the lapse of the extensions granted them, the five sub-lessees refused to vacate the property.

Escueta opted not to have the sub-lessees evicted through the Punong Barangay as provided for in the amicable settlement. Neither did she file a motion with the Punong Barangay for the enforcement of the settlement. Instead, she filed on May 12, 2000, a verified Motion for Execution against the recalcitrant sub-lessees with the MTC for the enforcement of the amicable settlement and the issuance of a writ of execution. The pleading was docketed as Civil Case No. 17520, with Teresa Escueta as plaintiff, and the sub-lessees as defendants.[13]

The defendants opposed the motion[14] alleging that they were enveigled into executing the amicable settlement despite the fact that they had not violated any of the terms and conditions of the verbal lease of the property; they were coerced and forced to enter into such amicable settlement as it was the only way of prolonging their stay in the leased premises; and that they had been paying faithfully and religiously the monthly rentals in advance.

They also contended that the plaintiff came to court with unclean hands, as the property had been sold by the co-owners thereof on June 8, 1999, without notifying them. The real parties-in-interest as plaintiffs, would be the new owners of the property, and not the Escuetas. The defendants further asserted that the amicable settlement was not elevated to or approved by the MTC as required by Section 419 of the Local Government Code (LGC), nor approved by a competent court; hence, there was no judgment to enforce by a new motion for a writ of execution. As such, the plaintiffs motion was premature and procedurally improper. The defendants asserted that the plaintiff must first secure a certification to file action from the

barangay and thereafter, file an action for ejectment against them as required by Section 417 of the LGC. The amicable settlement of the parties before the Lupon cannot be a substitute for an action for ejectment. Finally, they averred that they had been sub-lessees for more than ten years already; hence, had the right of first refusal under Section 6 of the Urban Land Reform Law (P.D. No. 1517). For her part, the plaintiff asserted that there having been no execution of the amicable settlement on or before November 6, 1999 by the Lupon, the settlement may now be enforced by action in the proper city or municipal court.

On February 22, 2001, the court issued an Order[15] denying the Motion for Execution. The court held that the plaintiff was not the real party-in-interest as the subject property had already been sold and titled to Susana Lim, Johnny Lim and Mary Liza Santos. Only the vendees had the right to demand the ejectment of the defendants from the said property. The court further ruled that the defendants had the right of first refusal to purchase the property under Presidential Decree No. 1517. The MTC, however, did not rule on the issue of whether or not the plaintiffs motion for execution was premature.

Aggrieved, the plaintiff, now the appellant, appealed the order to the RTC where she contended that:

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN CONCLUDING THAT PLAINTIFF IS NO LONGER THE REAL PARTY-IN-INTEREST.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN FINDING AND IN CONCLUDING THAT DEFENDANTS CANNOT BE EJECTED AND CAN EXERCISE THE RIGHT OF FIRST REFUSAL.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT FINDING AND IN NOT MAKING THE CONCLUSION THAT DEFENDANTS HAVE VIOLATED THE FINAL AND EXECUTORY THE WRITTEN AMICABLE SETTLEMENT BETWEEN PARTIES EXECUTED IN THEIR BARANGAY CONFRONTATION.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR IN NOT ORDERING THE EJECTMENT OF THE DEFENDANTS AND IN NOT ORDERING SAID DEFENDANTS TO PAY THEIR ARREARAGES IN RENTAL PAYMENTS FROM MAY 1999 UP TO THE DAY THEY ACTUALLY LEAVE THE PREMISES AS WELL AS ATTORNEYS FEES AND DAMAGES.[16]

On August 31, 2001, the RTC rendered a decision holding that the plaintiff-appellant was still the owner of the property when the ejectment case was filed in the office of the barangay captain, and, as such, was the real party-in-interest as the plaintiff in the MTC. Moreover, under the deed of conditional sale between her and the buyers, it was stipulated therein that the purchase price of P1,000,000.00 would be delivered to the vendors only upon the vacation of all the occupants of the subject property within six (6) months from date hereof. She was duty-bound to cause the eviction of the defendant from the property; hence, the appellant, as a co-owner, had a substantial interest in the property. The MTC further held that the sale, having been

executed while the appellants complaint was pending with the Lupon, the action in the MTC may be continued by the plaintiff-appellant.

As to the right of first refusal being asserted by the appellees, the court ruled that there was no showing that the land leased had been proclaimed to be within a specific Urban Land Reform Zone. In fact, the Housing and Land Use Regulatory Board had certified that the subject property was outside the area for priority development; thus, the appellees may not claim that they had been deprived of their preemptive right when no such right existed in the first place. The court did not rule on the third and fourth issues on the ground that the said issues were never raised by the parties. The decretal portion of the RTC decision reads as follows:

PREMISES CONSIDERED, the appeal is GRANTED. The Order dated February 2, 2001 issued by the Metropolitan Trial Court of Mandaluyong City, Branch 60, in Civil Case No. 17520 is hereby REVERSED and SET ASIDE, and a new one is entered granting the Motion for Execution.

Let the Record of this case be remanded to the court a quo for proper disposition.

SO ORDERED.[17]

A petition for review under Rule 42 was filed with the Court of Appeals by three of the appellees, now petitioners Ma. Teresa Vidal, Lulu Marquez and Carlos Sobremonte. The court, however, dismissed the petition on (1) procedural grounds, and (2) for lack of merit. [18]

On procedural grounds, the CA ruled that the petitioners failed to indicate the specific material dates, showing that their petition was filed on time as required by the rules, and in declaring that they failed to justify their failure to do so.

On the merits of the petition, the appellate court upheld the ruling of the RTC. The decretal portion of the decision of the CA reads:

WHEREFORE, the instant petition is hereby DISMISSED. The assailed Decision of the Regional Trial Court of Mandaluyong City, Branch 208, rendered in Civil Case No. MC01-333-A, dated August 31, 2001 is hereby AFFIRMED.

SO ORDERED.[19]

In their petition at bar, the petitioners assert that the CA erred as follows: (1) in not applying the rules of procedure liberally; (2) in declaring that there was no need for the respondents to file an ejectment case for the eviction of the petitioners; (3) that the real parties-in-interest as plaintiffs in the MTC were the new owners of the property, Susana Lim, Johnny Lim and Mary Liza Santos; (4) in not finding that the Amicable Settlement was obtained through deceit and fraud; and (5) in ruling that the petitioners had no right of first refusal in the purchase and sale of the subject property under Presidential Decree No. 1517.

The petition is bereft of merit.

On the procedural issue, the CA dismissed the petition before it for the petitioners failure to comply with Section 2, par. 1, Rule 42 of the 1997 Rules of Civil Procedure.[20] The CA ratiocinated that there was no justification for a relaxation of the Rules, thus:

Petitioners cited decisions of the Supreme Court where a relaxation of procedural rules was allowed. However, a reading of those cases shows that they are not exactly similar with the present case. In the case of Mactan Cebu International Airport Authority vs. Francisco Cuizon Mangubat, the Supreme Court allowed the late payment of docket fee by the Solicitor General on the ground that the 1997 Rules of Civil Procedure regarding payment of docket fees was still new at that time. The same cannot be said in the present case. The petition was filed on February 28, 2002, almost five years from the issuance of the 1997 Rules of Civil Procedure. The circumstances of typhoon and holiday for failure to obtain a certified true copy of the DOJs Decision, in the case of Hagonoy Market Vendor Association vs.Municipality of Hagonoy, Bulacan, were present in the instant petition. The case of Salazar vs. Court of Appeals is also not similar with the present case.[21]

The petitioners aver in this case that the failure of their counsel to include the material dates in their petition with the CA was, as stated in their Amended Manifestation, because the said counsel was suffering from a slight heart attack. The Court finds the petitioners pretext flimsy. If the petitioners counsel was able to prepare their petition despite her condition, there was no valid reason why she failed to include the material dates required under the Rules of Court. Besides, the petitioners stated in their petition that they had appended a copy of their Amended Manifestation, but failed to do so. If the rules were to be applied strictly, the CA could not be faulted for dismissing the petition.

However, in order to promote their objective of securing a just, speedy and inexpensive dispensation of every action and proceedings, the Rules are to be liberally construed.[22] Rules of procedure are intended to promote, not to defeat substantial justice and, therefore, should not be applied in a very rigid and technical sense. This Court ruled in Buenaflor vs. Court of Appeals, et al.[23] that appeal is an essential part of our judicial system and trial courts and the Court of Appeals are advised to proceed with caution so as not to deprive a party of the right to appeal and that every party litigant should be afforded the amplest opportunity for the proper and just disposition of his cause, free from the constraints of technicalities. The Court has given due course to petitions where to do so would serve the demands of substantial justice and in the exercise of its equity jurisdiction.[24] In this case, the Court opts to apply the rules liberally to enable it to delve into and resolve the cogent substantial issues posed by the petitioners.

We agree with the contention of the petitioners that under Section 416 of the LGC, the amicable settlement executed by the parties before the Lupon on the arbitration award has the force and effect of a final judgment of a court upon the expiration of ten (10) days from the date thereof, unless the settlement is repudiated within the period therefor, where the consent is vitiated by force, violence or intimidation, or a petition to nullify the award is filed before the proper city or municipal court.[25] The repudiation of the settlement shall be sufficient basis for the issuance of a certification to file a complaint.[26]

We also agree that the Secretary of the Lupon is mandated to transmit the settlement to the appropriate city or municipal court within the time frame under Section 418 of the LGC and to furnish the parties and the Lupon Chairman with copies thereof.[27] The amicable settlement

which is not repudiated within the period therefor may be enforced by execution by the Luponthrough the Punong Barangay within a time line of six months, and if the settlement is not so enforced by the Lupon after the lapse of the said period, it may be enforced only by an action in the proper city or municipal court as provided for in Section 417 of the LGC of 1991, as amended, which reads:

SEC. 417. Execution. The amicable settlement or arbitration award may be enforced by execution by the Lupon within six (6) months from the date of the settlement. After the lapse of such time, the settlement may be enforced by action in the proper city or municipal court. (Underlining supplied).

Section 417 of the Local Government Code provides a mechanism for the enforcement of a settlement of the parties before the Lupon. It provides for a two-tiered mode of enforcement of an amicable settlement executed by the parties before the Lupon, namely, (a) by execution of the Punong Barangay which is quasi-judicial and summary in nature on mere motion of the party/parties entitled thereto;[28] and (b) by an action in regular form, which remedy is judicial. Under the first remedy, the proceedings are covered by the LGC and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact of non-compliance of the terms of the settlement and to give the defaulting party another chance at voluntarily complying with his obligation under the settlement. Under the second remedy, the proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law, has the force and effect of a final judgment.

Section 417 of the LGC grants a party a period of six months to enforce the amicable settlement by the Lupon through the Punong Barangay before such party may resort to filing an action with the MTC to enforce the settlement. The raison d etre of the law is to afford the parties during the six-month time line, a simple, speedy and less expensive enforcement of their settlement before the Lupon.

The time line of six months is for the benefit not only of the complainant, but also of the respondent. Going by the plain words of Section 417 of the LGC, the time line of six months should be computed from the date of settlement. However, if applied to a particular case because of its peculiar circumstance, the computation of the time line from the date of the settlement may be arbitrary and unjust and contrary to the intent of the law. To illustrate: Under an amicable settlement made by the parties before the Lupon dated January 15, 2003, the respondents were obliged to vacate the subject property on or before September 15, 2003. If the time line of six months under Section 417 were to be strictly and literally followed, the complainant may enforce the settlement through the Lupon only up to July 15, 2003. But under the settlement, the respondent was not obliged to vacate the property on or before July 15, 2003; hence, the settlement cannot as yet be enforced. The settlement could be enforced only after September 15, 2003, when the respondent was obliged to vacate the property. By then, the six months under Section 417 shall have already elapsed. The complainant can no longer enforce the settlement through the Lupon, but had to enforce the same through an action in the MTC, in derogation of the objective of Section 417 of the LGC. The law should be construed and applied in such a way as to reflect the will of the legislature and attain its objective, and not to cause an injustice. As Justice Oliver Wendell Holmes aptly said, courts are apt to err by sticking too closely to the

words of the law where these words support a policy that goes beyond them. The Court should not defer to the latter that killeth but to the spirit that vivifieth.[29]

In light of the foregoing considerations, the time line in Section 417 should be construed to mean that if the obligation in the settlement to be enforced is due and demandable on the date of the settlement, the six-month period should be counted from the date of the settlement; otherwise, if the obligation to be enforced is due and demandable on a date other than the date of the settlement, the six-month period should be counted from the date the obligation becomes due and demandable.

Parenthetically, the Katarungang Pambarangay Implementing Rules and Regulations, Rule VII, Section 2 provides:

SECTION 2. Modes of Execution. - The amicable settlement or arbitration award may be enforced by execution by the Lupon within six [6] months from date of the settlement or date of receipt of the award or from the date   the obligation stipulated in the settlement or adjudged in the arbitration award becomes due and demandable. After the lapse of such time, the settlement or award may be enforced by the appropriate local trial court pursuant to the applicable provisions of the Rules of Court . An amicable settlement reached in a case referred by the Court having jurisdiction over the case to the Lupon shall be enforced by execution by the said court. (Underlining supplied).

By express provision of Section 417 of the LGC, an action for the enforcement of the settlement should be instituted in the proper municipal or city court. This is regardless of the nature of the complaint before the Lupon, and the relief prayed for therein. The venue for such actions is governed by Rule 4, Section 1 of the 1997 Rules of Civil Procedure, as amended.An action for the enforcement of a settlement is not one of those covered by the Rules on Summary Procedure in civil cases;[30] hence, the rules on regular procedure shall apply, as provided for in Section 1, Rule 5 of the Rules of Civil Procedure, as amended.[31]

As to the requisite legal fees for the filing of an action in the first level court under Section 417 of the Local Government Code, indigents-litigants (a) whose gross income and that of their immediate family do not exceed ten thousand (P10,000.00) pesos a month if residing in Metro Manila, and five thousand (P5,000.00) pesos a month if residing outside Metro Manila, and (b) who do not own real property with an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal fees. Section 18, Rule 141 of the Revised Rules of Court, as amended by A.M. No. 00-2-01-SC, is hereby further amended accordingly.

In this case, the parties executed their Amicable Settlement on May 5, 1999. However, the petitioners were obliged to vacate the property only in January 2000, or seven months after the date of the settlement; hence, the respondent may enforce the settlement through the Punong Barangay within six months from January 2000 or until June 2000, when the obligation of the petitioners to vacate the property became due. The respondent was precluded from enforcing the settlement via an action with the MTC before June 2000. However, the respondent filed on May 12, 2000 a motion for execution with the MTC and not with the Punong Barangay. Clearly, the respondent adopted the wrong remedy. Although the MTC denied the respondents motion for a writ of execution, it was for a reason other than the impropriety of the remedy resorted to by the

respondent. The RTC erred in granting the respondents motion for a writ of execution, and the CA erred in denying the petitioners petition for review.

Normally, the Court would remand the case to the Punong Barangay for further proceedings. However, the Court may resolve the issues posed by the petitioners, based on the pleadings of the parties to serve the ends of justice. It is an accepted rule of procedure for the Court to strive to settle the existing controversy in a single proceeding, leaving no root or branch to bear the seeds of future litigation.[32]

In this case, there is no question that the petitioners were obliged under the settlement to vacate the premises in January 2000. They refused, despite the extensions granted by the respondent, to allow their stay in the property. For the court to remand the case to the Lupon and require the respondent to refile her motion for execution with the Lupon would be an idle ceremony. It would only unduly prolong the petitioners unlawful retention of the premises.[33]

The RTC and the CA correctly ruled that the respondent is the real party-in-interest to enforce amicable settlement. Rule 3, Section 2 of the Rules of Court, as amended, reads:

SEC. 2. Parties in interest. - A real party in interest is 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. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

The party-in-interest applies not only to the plaintiff but also to the defendant. Interest within the meaning of the rules means 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.[34] A real party in interest is one who has a legal right.[35] Since a contract may be violated only by the parties thereto as against each other, in an action upon that contract, the real parties-in-interest, either as plaintiff or as defendant, must be parties to the said contract. [36] The action must be brought by the person who, by substantive law, possesses the right sought to be enforced.[37] In this case, the respondent was the party in the amicable settlement.She is the real party-in-interest to enforce the terms of the settlement because unless the petitioners vacate the property, the respondent and the other vendors should not be paid the balance of P1,000,000.00 of the purchase price of the property under the Deed of Conditional Sale.

The petitioners are estopped from assailing the amicable settlement on the ground of deceit and fraud. First. The petitioners failed to repudiate the settlement within the period therefor.Second. The petitioners were benefited by the amicable settlement. They were allowed to remain in the property without any rentals therefor until December 1998. They were even granted extensions to continue in possession of the property. It was only when the respondent filed the motion for execution that the petitioners alleged for the first time that the respondents deceived them into executing the amicable settlement.[38]

On the petitioners claim that they were entitled to the right of first refusal under P.D. No. 1517, we agree with the disquisition of the trial court, as quoted by the Court of Appeals:

We likewise find no reversible error on the part of [the] RTC in rejecting that the petitioners have a right of first refusal in the purchase and sale of the subject property. As ratiocinated by the court:

xxx. Presidential Decree No. 1517 (The Urban Land Reform Law) does not apply where there is no showing that the land leased has been proclaimed to be within a specific Urban Land Reform Zone. In the instant case, the annex attached to the Proclamation 1967 creating the areas declared as priority development and urban land reform zone ... does not indicate that the barangay where the subject property is located is included therein. This is bolstered by the certification issued by the Housing and Land Regulatory Board to the effect that the location of the property is outside the area of Priority Development. It is therefore a reversible error for the lower court to conclude that defendants-appellees were deprived of their preemptive right when no right exists in the first place.

Indeed, before a preemptive right under PD 1517 can be exercised, the disputed land should be situated in an area declared to be both an APD (Areas for Priority Development) and a ULRZ (Urban Land Reform Zones). Records show, and as not disputed by the petitioners, the disputed property is not covered by the aforementioned areas and zones.[39]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The petitioners and all those acting for and in their behalf are directed to vacate, at their own expense, the property covered by Transfer Certificate of Title No. 15324 of the Register of Deeds of Muntinlupa City and deliver possession of the property to the vendees Mary Liza Santos, Susana Lim and Johnny Lim. This is without prejudice to the right of the vendees to recover from the petitioners reasonable compensation for their possession of the property from January 2000 until such time that they vacate the property. Costs against the petitioners.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Azcuna, and Tinga, JJ., concur.RAPID CITY REALTY AND DEVELOPMENT CORPORATION,

Petitioner,  - versus -    ORLANDO VILLA and LOURDES PAEZ-VILLA,[1]

Respondents. 

G.R. No. 184197 Present: PUNO, C.J., Chairperson,

CARPIO MORALES,NACHURA,*

CASTRO,BERSAMIN, andVILLARAMA, JR., JJ.

 Promulgated:February 11, 2010

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

D E C I S I O N 

 CARPIO MORALES, J.: 

Sometime in 2004, Rapid City Realty and Development Corporation (petitioner) filed a

complaint for declaration of nullity of subdivision plans . . . mandamus and damages against

several defendants including Spouses Orlando and Lourdes Villa (respondents). The complaint,

which was docketed at the Regional Trial Court of Antipolo City as Civil Case No. 04-7350, was

lodged at Branch 71 thereof.

After one failed attempt at personal service of summons, Gregorio Zapanta (Zapanta),

court process server, resorted to substituted service by serving summons upon respondents

househelp who did not acknowledge receipt thereof and refused to divulge their names. Thus

Zapanta stated in the Return of Summons:

 THIS IS TO CERTIFY that on September 24, 2004, the undersigned caused the service of summons together with a copy of the complaint with its annexes to defendant Spouses Lourdes Estudillo Paez-Cline and Orlando Villa at their given address at 905 Padre Faura Street, Ermita Manila, as per information given by two lady househelps who are also residing at the said address,   the defendant spouses are not around   at that time. On the 27 th   of September, 2004, I returned to the same place to serve the summons. I served the summons and the copy of the complaint with its annexes to the two ladies ( The same lady househelp I met on Sept. 24, 2004) but they refused to sign to acknowledge receipt and they refused to tell their name as per instruction of the defendants. With me who can attest to the said incident is Mr. Jun Llanes, who was with me at that time. [2] x x x (emphasis and underscoring supplied) 

 

Despite substituted service, respondents failed to file their Answer, prompting petitioner to file a

Motion to Declare Defendants[-herein respondents] in Default which the trial court granted by

Order of May 3, 2005.

 

More than eight months thereafter or on January 30, 2006, respondents filed a Motion to Lift

Order of Default,[3] claiming that on January 27, 2006 they officially received all pertinent

papers such as Complaint and Annexes. Motion to Dismiss of the Solicitor General and the

ORDER dated May 3, 2005 granting the Motion to Declare [them] in Default. And they denied

the existence of two women helpers who allegedly refused to sign and acknowledge receipt of

the summons. In any event, they contended that assuming that the allegation were true, the

helpers had no authority to receive the documents.[4]

By Order of July 17, 2006, the trial court set aside the Order of Default and gave herein

respondents five days to file their Answer. Respondents just the same did not file an Answer,

drawing petitioner to again file a Motion to declare them in default, which the trial

court again granted by Order of February 21, 2007.

 

On April 18, 2007, respondents filed an Omnibus Motion for reconsideration of the second order

declaring them in default and to vacate proceedings, this time claiming that the trial court did not

acquire jurisdiction over their persons due to invalid service of summons.

 

The trial court denied respondents Omnibus Motion by Order of May 22, 2007 and

proceeded to receive ex-parte evidence for petitioner.

 

Respondents, via certiorari, challenged the trial courts February 21, 2007 and April 18, 2007

Orders before the Court of Appeals.

 

In the meantime, the trial court, by Decision of September 4, 2007, rendered judgment in

favor of petitioner.

 

By Decision of April 29, 2008,[5] the appellate court annulled the trial courts Orders declaring

respondents in default for the second time in this wise:

 In assailing the orders of the trial court through their Motion to Lift and later their Omnibus Motion the petitioners [herein-respondents] never raised any other defense in avoidance of the respondents [herein petitioners] claim, and instead focused all their energies on questioning the said courts jurisdiction. The   latter motion   clearly stated prefatorily their counsels reservation or special appearance to question jurisdiction over the persons of the petitioners. A party who makes a special appearance in court challenging the jurisdiction of said court based on the ground of invalid service of summons is not deemed to have submitted himself to the jurisdiction of the court.[6] (citation omitted; italics, emphasis and underscoring supplied) 

 

Petitioners motion for reconsideration having been denied by the appellate court by Resolution

of August 12, 2008, it comes to the Court via petition for review on certiorari, arguing in the

main that respondents, in filing the first Motion to Lift the Order of Default, voluntarily

submitted themselves to the jurisdiction of the court.

 

The petition is impressed with merit.

 

It is settled that if there is no valid service of summons, the court can still acquire jurisdiction

over the person of the defendant by virtue of the latters voluntary appearance. Thus Section 20 of

Rule 14 of the Rules of Court provides:

 Sec. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person shall not be deemed a voluntary appearance. 

 

And Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy, et

al. enlightens:

 Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power of legal processes exerted over his person, or his voluntary appearance in court. As a general proposition, one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of the court. It is by reason of this rule that we have had occasion to declare that the filing of motions to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, is considered voluntary submission to the courts jurisdiction. This, however, is tempered by the concept of conditional appearance, such that a party who makes a   special appearance   to challenge, among others, the courts jurisdiction over his person cannot be considered to have submitted to its authority. Prescinding from the foregoing, it is thus clear that:(1) Special appearance operates as an exception to the general rule on voluntary appearance;

 (2) Accordingly, objections to the jurisdiction of the court   over the person of the defendant  must be   explicitly made , i.e., set forth in an unequivocal manner ; and (3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in instances where a pleading or motion seeking affirmative relief is filed and submitted to the court for resolution.[7] (italics and underscoring supplied) 

 

In their first Motion to Lift the Order of Default[8] dated January 30, 2006, respondents alleged:

 

x x x x4. In the case of respondents, there is no reason why they should not receive the

Orders of this Honorable Court since the subject of the case is their multi-million real estate property and naturally they would not want to be declared in default or lose the same outright without the benefit of a trial on the merits;

 5. It would be the height of injustice if the respondents is [sic] denied the equal

protection of the laws[;] 6. Respondents must be afforded Due process of Law as enshrined in the New

Constitution, which is a basic right of every Filipino, since they were not furnished copies of pleadings by the plaintiff and the Order dated May 3, 2005;

 x x x x[9]

 

 

and accordingly prayed as follows:

 WHEREFORE, . . . it is most respectfully prayed . . . that the Order dated

May 5, 2005 declaring [them] in default be LIFTED.[10]

 

 

Respondents did not, in said motion, allege that their filing thereof was a special appearance for

the purpose only to question the jurisdiction over their persons. Clearly, they had acquiesced to

the jurisdiction of the court.

 

WHEREFORE, the petition is GRANTED. The assailed Court of Appeals Decision of April

29, 2008 is REVERSED and SET ASIDE.

 

Let the original records of Civil Case No. 04-7350 be remanded to the court of origin, Regional

Trial Court of Antipolo City, Branch 71.

 

SO ORDERED.

SECOND DIVISION

G.R. No. 173946, June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner, v. COURT OF APPEALS AND LOLITA G. TOLEDO,Respondents.

D E C I S I O N

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of

Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent’s petition forcertiorari upon a finding that the trial court committed grave abuse of discretion in denying respondent’s motion to dismiss the complaint against her.3 Based on this finding, the Court of Appeals reversed and set aside the Orders, dated 8 November 20044 and 22 December 2004,5respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance of a writ of preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended Answer7 in which she alleged, among others, that her husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a motion, dated 5 August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance with the verbal order of the court during the 11 October 1999 hearing of the case, respondent submitted the required names and addresses of the heirs.11Petitioner then filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel be substituted by his children as party-defendants. It appears that this motion was granted by the trial court in an Order dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing, among others, the dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of the parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen days within which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead filed a motion to dismiss the complaint, citing the following as grounds: (1) that the complaint failed to implead an indispensable party or a real party in interest; hence, the case must be dismissed for failure to state a cause of action; (2) that the trial court did not acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the substitution of the deceased Manuel by his heirs; and (4) that the court must also dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on the ground that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by laches" since respondent failed to raise the issue despite several chances to do so.18

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery, during the trial of the case, of evidence that would constitute a ground for dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:cralavvonlinelawlibrary

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the latter voluntarily appeared or submitted to the court or by coercive process issued by the court to him, x x x. In this case, it is undisputed that when [petitioner] Boston filed the complaint on December 24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo could not have acquired jurisdiction over the person of defendant Manuel S. Toledo.

x x x the court a quo’s denial of [respondent’s] motion to dismiss was based on its finding that [respondent’s] attack on the jurisdiction of the court was already barred bylaches as [respondent] failed to raise the said ground in its [sic] amended answer and during the pre-trial, despite her active participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss x x x [respondent] is not estopped [from] raising the question on jurisdiction. Moreover, when issue on jurisdiction was raised by [respondent], the court a quo had not yet decided the case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the motion for reconsideration;chanroblesvirtualawlibrary

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already dead. The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only the wife, considering that the estate of Manuel S. Toledo is an indispensable party, which stands to be benefited or be injured in the outcome of the case. x x x

x x x x

[Respondent’s] motion to dismiss the complaint should have been granted by public respondent judge as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with another debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in conformity with the provision of Section 6, Rule 86 of the Rules of Court, x x x.20

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:cralavvonlinelawlibrary

1. Respondent is already estopped from questioning the trial court’s jurisdiction;chanroblesvirtualawlibrary

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an indispensable party;chanroblesvirtualawlibrary

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the dismissal of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file its claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s motion to dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to be done by the court before a case is finally decided on the merits.21 Therefore, "the proper remedy in such a case is to appeal after a decision has been rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts – acts which courts or judges have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions made by the courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the outright dismissal of the motion for having been filed in clear contravention of the express mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a

motion to dismiss shall be filed within the time for but before the filing of an answer to the complaint or pleading asserting a claim.24

More importantly, respondent’s motion to dismiss was filed after petitioner has completed the presentation of its evidence in the trial court,25 giving credence to petitioner’s and the trial court’s conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to delay the prompt resolution of the case against her.

Also worth mentioning is the fact that respondent’s motion to dismiss under consideration herein is not the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier motion to dismiss26 on the sole ground of the unenforceability of petitioner’s claim under the Statute of Frauds, which motion was denied by the trial court. More telling is the following narration of the trial court in its Order denying respondent’s motion for reconsideration of the denial of her motion to dismiss:cralavvonlinelawlibrary

As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of defendants’ evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendant[s], the hearing on March 31, 2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception of defendants’ evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants’ witness, hearing was reset to September 24 and October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x.27nadcralavvonlinelawlibrary

Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and then the motion to dismiss at issue here, as well as several motions for postponement, lends credibility to the position taken by petitioner, which is shared by the trial court, that respondent is deliberately impeding the early disposition of this case.  The filing of the second motion to dismiss was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from deviating or straying off course from established jurisprudence on [the] matter, x x x had in fact faithfully observed the law and legal precedents in this case."29 The Court of Appeals, therefore, erred not only in entertaining respondent’s petition for certiorari, it likewise erred in ruling that the trial court committed grave abuse of discretion when it denied respondent’s motion to dismiss.

On whether or not respondent is estopped fromquestioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction over the person of Manuel should not be an issue in this case. A protracted discourse on jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been raised as an issue from the lower court, to the Court of Appeals and, finally, before this Court. For the sake of clarity, and in order to finally settle the controversy and fully dispose of all the issues in this case, it was deemed imperative to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial court’s jurisdiction was filed more than six years after her amended answer was filed. According to petitioner, respondent had several opportunities, at various stages of the proceedings, to assail the trial court’s jurisdiction but never did so for six straight years.  Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that respondent’s failure to raise the question of jurisdiction at an earlier stage bars her from later questioning it, especially since she actively participated in the proceedings conducted by the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3) jurisdiction over the issues of the case; and (4) in cases involving property, jurisdiction over the res or the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue involved was the authority of the then Court of First Instance to hear a case for the collection of a sum of money in the amount of P1,908.00 which amount was, at that time, within the exclusive original jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga v. Court of Appeals,32 the issue for consideration was the authority of the regional trial court to hear and decide an action for reformation of contract and damages involving a subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction over the complaint for ejectment because the issue of ownership was raised in the pleadings. Finally, in People v. Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was charged, falls within the concurrent jurisdiction of municipal courts or city courts and the then courts of first instance, and that the judgment of the court of first instance, to which she had appealed the municipal court's conviction, should be deemed null and void for want of jurisdiction as her appeal should have been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts concerned over the subject matter of the case based on estoppel by laches, declaring that

parties cannot be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they submitted their cause voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no application in this case. Instead, the principles relating to jurisdiction over the person of the parties are pertinent herein.

The Rules of Court provide:cralavvonlinelawlibrary

RULE 9EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. — Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.

RULE 15MOTIONS

Sec. 8. Omnibus motion. — Subject to the provisions of Section 1 of Rule 9, a motion attacking a pleading, order, judgment, or proceeding shall include all objections then available, and all objections not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack of jurisdiction over the subject matter can always be raised anytime, even for the first time on appeal, since jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel by laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense.37 If the objection is not raised either in a motion to dismiss or in the answer, the objection to the jurisdiction over the person of the plaintiff or the defendant is deemed waived by virtue of the first sentence of the above-quoted Section 1 of  Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the first time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss and is, consequently, not estopped from raising the question of jurisdiction. As the question of jurisdiction involved here is that over the person of the defendant Manuel, the same is deemed waived if not raised in the answer or a motion to dismiss. In any case, respondent

cannot claim the defense since "lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only be asserted by the party who can thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A defendant is informed of a case against him when he receives summons. "Summons is a writ by which the defendant is notified of the action brought against him.  Service of such writ is the means by which the court acquires jurisdiction over his person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was no valid service of summons upon him, precisely because he was already dead even before the complaint against him and his wife was filed in the trial court. The issues presented in this case are similar to those in the case of Sarsaba v. Vda. de Te.41

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle and damages, with prayer for the delivery of the truck pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion to dismiss was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants, in view of the fact that Sereno was already dead when the complaint for recovery of possession was filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues submitted for resolution in both cases is similar: whether or not a case, where one of the named defendants was already dead at the time of its filing, should be dismissed so that the claim may be pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants died before summons was served on him, the trial court should have dismissed the complaint against all the defendants and the claim should be filed against the estate of the deceased defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but as to all the defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno.42 This is exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:cralavvonlinelawlibrary

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants should have been dismissed, considering that the RTC never acquired jurisdiction over the person of Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to the person claiming it.Obviously, it is now impossible for Sereno

to invoke the same in view of his death.Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants. Failure to serve summons on Sereno’s person will not be a cause for the dismissal of the complaint against the other defendants, considering that they have been served with copies of the summons and complaints and have long submitted their respective responsive pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible defenses and objections personal to them in their respective motions to dismiss and their subsequent answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to dismiss.

On whether or not the estate of ManuelToledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:cralavvonlinelawlibrary

SEC. 7. Compulsory joinder of indispensable parties. — Parties-in-interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case that a final adjudication cannot be made in his or her absence, without injuring or affecting that interest. He or she is a party who has not only an interest in the subject matter of the controversy, but "an interest of such nature that a final decree cannot be made without affecting [that] interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete or equitable." Further, an indispensable party is one who must be included in an action before it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. Also, a person is not an indispensable party if his presence would merely permit complete relief between him or her and those already parties to the action, or if he or she has no interest in the subject matter of the action." It is not a sufficient reason to declare a person to be an indispensable party simply because his or her presence will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an indispensable party to the collection case, for the simple reason that the obligation of Manuel and his wife, respondent herein, is solidary.

The contract between petitioner, on the one hand and respondent and respondent’s husband, on the other, states:cralavvonlinelawlibrary

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (P1,400,000.00)] x x x.47

The provisions and stipulations of the contract were then followed by the respective signatures of respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner may collect the entire amount of the obligation from respondent only. The aforementioned provision states: "The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected."

In other words, the collection case can proceed and the demands of petitioner can be satisfied by respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel is not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:cralavvonlinelawlibrary

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise, they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the Revised Rules of Court, which latter provision has been retained in the present Rules of Court without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this Court held that where two persons are bound in solidum for the same debt and one of them dies, the whole indebtedness can be proved against the estate of the latter, the decedent’s liability being absolute and primary;  x x x. It is evident from the foregoing that Section 6 of

Rule 87 provides the procedure should the creditor desire to go against the deceased debtor, but there is certainly nothing in the said provision making compliance with such procedure a condition precedent before an ordinary action against the surviving solidary debtors, should the creditor choose to demand payment from the latter, could be entertained to the extent that failure to observe the same would deprive the court jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code expressly allows the creditor to proceed against any one of the solidary debtors or some or all of them simultaneously. There is, therefore, nothing improper in the creditor’s filing of an action against the surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v. Asuncion51 where the Supreme Court pronounced:cralavvonlinelawlibrary

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary obligation) has the option whether to file or not to file a claim against the estate of the solidary debtor. x x x

x x x x

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against whom he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against the surviving debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to require the creditor to proceed against the estate, making it a condition precedent for any collection action against the surviving debtors to prosper, would deprive him of his substantive rights provided by Article 1216 of the New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court, petitioner has no choice but to proceed against the estate of [the deceased debtor] only. Obviously, this provision diminishes the [creditor’s] right under the New Civil Code to proceed against any one, some or all of the solidary debtors. Such a construction is not sanctioned by principle, which is too well settled to require citation, that a substantive law cannot be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can

proceed as against respondent only. That petitioner opted to collect from respondent and not from the estate of Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as against her, should be dismissed so that petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel asparty defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "[n]either misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the capacity to sue or be sued in the event that the claim by or against the misjoined party is pursued in a separate case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered a misjoinder, as in fact, the action would have proceeded against him had he been alive at the time the collection case was filed by petitioner. This being the case, the remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as party-defendant cannot simply be dropped from the case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de Te,52 whose facts, as mentioned earlier, resemble those of this case, should be followed herein.  There, the Supreme Court agreed with the trial court when it resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:cralavvonlinelawlibrary

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein, does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were validly served with summons and the case with respect to the answering defendants may still proceed independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to Dismiss the Complaint which was denied by the Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim against the estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the Rules of Court, which states that: [o]nly natural or juridical persons, or entities authorized by law may be parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v. Militante,54 held:cralavvonlinelawlibrary

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally exists and is legally capable of being sued, is brought before it. It has even been held that the question of the legal personality of a party defendant is a question of substance going to the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may not be named a party defendant in a court action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law, the complaint may be dismissed on the ground that the pleading asserting the claim states no cause of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court, because a complaint cannot possibly state a cause of action against one who cannot be a party to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the dismissal of the case as against him, thus did the trial court err when it ordered the substitution of Manuel by his heirs. Substitution is proper only where the party to be substituted died during the pendency of the case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which states:cralavvonlinelawlibrary

Death of party;duty of counsel. — Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired jurisdiction over his person and, in effect, there was no party to be substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22 December 2004, respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672 against respondent Lolita G. Toledo only, in accordance with the above pronouncements of the Court, and to decide the case with dispatch.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Villarama, Jr.,* JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila  

EN BANC   PHILIPPINE COCONUT G.R. Nos. 177857-58, PRODUCERS FEDERATION, INC.(COCOFED), MANUEL V. DELROSARIO, DOMINGO P. ESPINA,SALVADOR P. BALLARES,JOSELITO A. MORALEDA,PAZ M. YASON,VICENTE A. CADIZ,CESARIA DE LUNA TITULAR, andRAYMUNDO C. DE VILLA,Petitioners, - versus - REPUBLIC OF THE PHILIPPINES,Respondent, WIGBERTO E. TAADA,OSCAR F. SANTOS,SURIGAO DEL SUR FEDERATIONOF AGRICULTURALCOOPERATIVES (SUFAC) andMORO FARMERS ASSOCIATIONOF ZAMBOANGA DEL SUR

(MOFAZS), represented byROMEO C. ROYANDOYAN,Intervenors.x------------------------------------------------xDANILO S. URSUA, G.R. No. 178193Petitioner, - versus -  REPUBLIC OF THE PHILIPPINES,Respondent,x------------------------------------------------x    Present: 

CORONA, C.J.,CARPIO,*

VELASCO, JR.,LEONARDO-DE CASTRO,*

BRION,**

PERALTA,*

BERSAMIN,DEL CASTILLO,ABAD,VILLARAMA, JR.,PEREZ,MENDOZA,SERENO,REYES, andPERLAS-BERNABE, JJ.  

Promulgated: 

January 24, 2012x-----------------------------------------------------------------------------------------x  

D E C I S I O N 

VELASCO, JR., J.: 

 The Case

   

Cast against a similar backdrop, these consolidated petitions for review under Rule 45 of

the Rules of Court assail and seek to annul certain issuances of the Sandiganbayan in its Civil

Case No. 0033-A entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr.,

et al., Defendants, COCOFED, et al., BALLARES, et al., Class Action Movants , and Civil Case

No. 0033-F entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,

Defendants. Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting into eight

(8) amended complaints of CC No. 0033 entitled, Republic of the Philippines v. Eduardo

Cojuangco, Jr., et al., a suit for recovery of ill-gotten wealth commenced by the Presidential

Commission on Good Government (PCGG), for the Republic of the Philippines (Republic),

against Ferdinand E. Marcos and several individuals, among them, Ma. Clara Lobregat

(Lobregat) and petitioner Danilo S. Ursua (Ursua). Lobregat and Ursua occupied, at one time or

another, directorial or top management positions in either the Philippine Coconut Producers

Federation, Inc. (COCOFED) or the Philippine Coconut Authority (PCA), or both.[1] Each of the

eight (8) subdivided complaints correspondingly impleaded as defendants only the alleged

participants in the transaction/s subject of the suit, or who are averred as owner/s of the assets

involved.

 

The original complaint, CC No. 0033, as later amended to make the allegations more

specific, is described in Republic v. Sandiganbayan[2] (one of several ill-gotten suits of the same

title disposed of by the Court) as revolving around the provisional take over by the PCGG of

COCOFED, Cocomark, and Coconut Investment Company and their assets and the sequestration

of shares of stock in United Coconut Planters Bank (UCPB) allegedly owned by, among others,

over a million coconut farmers, and the six (6) Coconut Industry Investment Fund (CIIF)

corporations,[3] referred to in some pleadings as CIIF oil mills and the fourteen (14) CIIF holding

companies[4] (hereafter collectively called CIIF companies), so-called for having been either

organized, acquired and/or funded as UCPB subsidiaries with the use of the CIIF levy. The basic

complaint also contained allegations about the alleged misuse of the coconut levy funds to buy

out the majority of the outstanding shares of stock of San Miguel Corporation (SMC).

 

More particularly, in G.R. Nos. 177857-58, class action petitioners COCOFED and a

group of purported coconut farmers and COCOFED members (hereinafterCOCOFED et al.

collectively)[5] seek the reversal of the following judgments and resolutions of the anti-graft court

insofar as these issuances are adverse to their interests:

 1) Partial Summary Judgment[6] dated July 11, 2003, as reiterated in a

resolution[7] of December 28, 2004, denying COCOFEDs motion for reconsideration, and the May 11, 2007resolution denying COCOFEDs motion to set case for trial and declaring the partial summary judgment final and appealable,[8] all issued in Civil Case No. 0033-A; and

 2) Partial Summary Judgment[9] dated May 7, 2004, as also reiterated in a

resolution[10] of December 28, 2004, and the May 11, 2007 resolution[11] issued in Civil Case No. 0033-F.The December 28, 2004 resolution denied COCOFEDs Class Action Omnibus Motion therein praying to dismiss CC Case No. 0033-F on jurisdictional ground and alternatively, reconsideration and to set case for trial. The May 11, 2007 resolution declared the judgment final and appealable.

  

For convenience, the partial summary judgment (PSJ) rendered on July 11, 2003 in CC

No. 0033-A shall hereinafter be referred to as PSJ-A, and that issued on May 7, 2004 in CC

0033-F, as PSJ-F. PSJ-A and PSJ-F basically granted the Republics separate motions for

summary judgment.

 

On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-A, which modified

PSJ-A by ruling that no further trial is needed on the issue of ownership of the subject

properties. Likewise, on May 11, 2007, the said court issued a Resolution in CC No. 0033-F

amending PSJ-F in like manner.

On the other hand, petitioner Ursua, in G.R. No. 178193, limits his petition for review on

PSJ-A to the extent that it negates his claims over shares of stock in UCPB.

 

Taada, et al. have intervened[12] in G.R. Nos. 177857-58 in support of the governments

case.

 

Another petition was filed and docketed as G.R. No. 180705. It involves questions

relating to Eduardo M. Cojuangco, Jr.s (Cojuangco, Jr.s) ownership of the UCPB shares, which

he allegedly received as option shares, and which is one of the issues raised in PSJ-A. [13] G.R.

No. 180705 was consolidated with G.R. Nos. 177857-58 and 178193. On September 28, 2011,

respondent Republic filed a Motion to Resolve G.R. Nos. 177857-58 and 178193.[14] On January

17, 2012, the Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and 178193 from

G.R. No. 180705. This Decision is therefore separate and distinct from the decision to be

rendered in G.R. No. 180705.

 The Facts

 

The relevant facts, as culled from the records and as gathered from Decisions of the Court

in a batch of coco levy and illegal wealth cases, are:

 

In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment

Company (CIC) to administer the Coconut Investment Fund (CIF), which, under Section

8[15] thereof, was to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the

PhP 0.55 levy of which the copra seller was, or ought to be, issuedCOCOFUND receipts, PhP

0.02 was placed at the disposition of COCOFED, the national association of coconut producers

declared by the Philippine Coconut Administration(PHILCOA, now PCA[16]) as having the

largest membership.[17]

 

The declaration of martial law in September 1972 saw the issuance of several presidential

decrees (P.Ds.) purportedly designed to improve the coconut industry through the collection and

use of the coconut levy fund. While coming generally from impositions on the first sale of copra,

the coconut levy fund came under various names, the different establishing laws and the stated

ostensible purpose for the exaction explaining the differing denominations. Charged with the

duty of collecting and administering the Fund was PCA.[18] Like COCOFED with which it had a

legal linkage,[19] the PCA, by statutory provisions scattered in different coco levy decrees, had its

share of the coco levy.[20]

 

The following were some of the issuances on the coco levy, its collection and utilization,

how the proceeds of the levy will be managed and by whom, and the purpose it was supposed to

serve:

1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and

declared the proceeds of the CCSF levy as trust fund,[21] to be utilized to subsidize the sale of

coconut-based products, thus stabilizing the price of edible oil.[22]

 

2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the

operation of a hybrid coconut seed farm.

 

3. Then came P.D. No. 755 providing under its Section 1 the following: It is hereby declared that the policy of the State is to provide readily

available credit facilities to the coconut farmers at a preferential rates; that this policy can be expeditiously and efficiently realized by the implementation of the Agreement for the Acquisition of a Commercial Bank for the benefit of Coconut Farmers executed by the [PCA]; and that the [PCA] is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers.

 

Towards achieving the policy thus declared, P.D. No. 755, under its Section 2, authorized

PCA to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the

CCSF levy collections in said bank, interest free, the deposit withdrawable only when the

bank has attained a certain level of sufficiency in its equity capital. The same section also

decreed that all levies PCA is authorized to collect shall not be considered as special and/or

fiduciary funds or form part of the general funds of the government within the contemplation of

P.D. No. 711.[23]

 

4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil

industries.

 

5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468

(Revised Coconut Industry Code), read:

 ARTICLE III

Levies Section 1. Coconut Consumers Stabilization Fund Levy. The [PCA] is

hereby empowered to impose and collect the Coconut Consumers Stabilization Fund Levy .

 .

 Section 5. Exemption. The [CCSF] and the [CIDF] as well as all

disbursements as herein authorized, shall not be construed as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of PD 711; the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their private capacities: . (Emphasis supplied.)

 

 

6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation,

out of other coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468

and entrusted a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers,

in oil mills and other private corporations, with the following equity ownership structure:[24]

 Section 2. Organization of the Cooperative Endeavor. The [UCPB], in its capacity as the investment arm of the coconut farmers thru the [CIIF] is hereby directed to invest, on behalf of the coconut farmers, such portion of the CIIF in private corporations under the following guidelines: 

a) The coconut farmers shall own or control at least (50%) of the outstanding voting capital stock of the private corporation [acquired] thru the CIIF and/or corporation owned or controlled by the farmers thru the CIIF . (Words in bracket added.)

  

Through the years, a part of the coconut levy funds went directly or indirectly to various

projects and/or was converted into different assets or investments.[25] Of particular relevance to

this case was their use to acquire the First United Bank (FUB), later renamed UCPB, and the

acquisition by UCPB, through the CIIF companies, of a large block of SMC shares. [26]

 

Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it

would appear that FUB was the bank of choice which the Pedro Cojuangco group (collectively,

Pedro Cojuangco) had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos

shares in FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to

PCA did not ensue as it was made to appear that Cojuangco, Jr. had the exclusive option to

acquire the formers FUB controlling interests. Emerging from this elaborate, circuitous

arrangement were two deeds; the first, simply denominated as Agreement,[27] dated May 1975,

[28] entered into by and between Cojuangco, Jr., for and in his behalf and in behalf of certain

other buyers, and Pedro Cojuangco, purportedly accorded Cojuangco, Jr. the option to

buy 72.2% of FUBs outstanding capital stock, or 137,866 shares (the option shares, for brevity),

at PhP 200 per share.

 

The second but related contract, dated May 25, 1975, was denominated as Agreement for

the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines.

[29] It had PCA,[30] for itself and for the benefit of the coconut farmers, purchase from Cojuangco,

Jr. the shares of stock subject of the First Agreement for PhP 200 per share. As additional

consideration for PCAs buy-out of what Cojuangco, Jr. would later claim to be his exclusive and

personal option,[31] it was stipulated that, from PCA, Cojuangco, Jr. shall receive equity in FUB

amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares.

 

Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders

6,534 shares.

 

While the 64.98% portion of the option shares (72.2% 7.22% = 64.98%) ostensibly

pertained to the farmers, the corresponding stock certificates supposedly representing the farmers

equity were in the name of and delivered to PCA.[32] There were, however, shares forming part of

the aforesaid 64.98% portion, which ended up in the hands of non-farmers. [33] The remaining

27.8% of the FUB capital stock were not covered by any of the agreements.

 

Under paragraph 8 of the second agreement, PCA agreed to expeditiously distribute the

FUB shares purchased to such coconut farmers holding registered COCOFUND receipts on

equitable basis.

 

As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount

for the purchase of the said 72.2% equity, albeit it would later reimburse itself from the

coconut levy fund.[34]

 

As of June 30, 1975, the list of FUB stockholders shows PCA with 129,955 shares.[35]

 

Shortly after the execution of the PCA Cojuangco, Jr. Agreement, President Marcos

issued, on July 29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and

CIDF to acquire a commercial bank to provide coco farmers with readily available credit

facilities at preferential rate, and PCA to distribute, for free, the bank shares to coconut farmers.

 

Then came the 1986 EDSA event. One of the priorities of then President Corazon C.

Aquinos revolutionary government was the recovery of ill-gotten wealth reportedly amassed by

the Marcos family and close relatives, their nominees and associates. Apropos thereto, she issued

Executive Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986.  E.O. 1

created the PCGG and provided it with the tools and processes it may avail of in the recovery

efforts;[36] E.O. No. 2 asserted that the ill-gotten assets and properties come in the form of shares

of stocks, etc.; while E.O. No. 14 conferred on the Sandiganbayan exclusive and original

jurisdiction over ill-gotten wealth cases, with the proviso that technical rules of procedure and

evidence shall not be applied strictly to the civil cases filed under the E.O. Pursuant to these

issuances, the PCGG issued numerous orders of sequestration, among which were those handed

out, as earlier mentioned, against shares of stock in UCPB purportedly owned by or registered in

the names of (a) more than a million coconut farmers and (b) the CIIF companies, including the

SMC shares held by the CIIF companies. On July 31, 1987, the PCGG instituted before the

Sandiganbayan a recovery suit docketed thereat as CC No. 0033.

 

After the filing and subsequent amendments of the complaint in CC 0033, Lobregat,

COCOFED et al., and Ballares et al., purportedly representing over a million coconut farmers,

sought and were allowed to intervene.[37] Meanwhile, the following incidents/events transpired:

 1. On the postulate, inter alia, that its coco-farmer members own at least

51% of the outstanding capital stock of UCPB, the CIIF companies, etc., COCOFED et al., on November 29, 1989, filed Class Action Omnibus Motion praying for the lifting of the orders of sequestration referred to above and for a chance to present evidence to prove the coconut farmers ownership of the UCPB and CIIF shares. The plea to present evidence was denied;

 2. Later, the Republic moved for and secured approval of a motion for

separate trial which paved the way for the subdivision of the causes of action in CC 0033, each detailing how the assets subject thereof were acquired and the key roles the principal played;

 3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be

subdivided into eight complaints, docketed as CC 0033-A to CC 0033-H.[38]

 Lobregat, Ballares et al., COCOFED, et al., on the strength of their

authority to intervene in CC 0033, continued to participate in CC 0033-A where one of the issues raised was the misuse of the names/identities of the over a million coconut farmers;[39]

 4. On February 23, 2001, Lobregat, COCOFED, Ballares et al., filed

a Class Action Omnibus Motion to enjoin the PCGG from voting the sequestered UCPB shares and the SMC shares registered in the names of the CIIF companies. The Sandiganbayan, by Order of February 28, 2001, granted the motion, sending the Republic to come to this Court on certiorari, docketed as G.R. Nos. 147062-64, to annul said order; and

 5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic

v. COCOFED), [40] the Court declared the coco levy funds as prima facie public funds. And purchased as the sequestered UCPB shares were by such funds, beneficial ownership thereon and the corollary voting rights prima facie pertain, according to the Court, to the government.

 

The instant proceedings revolve around CC 0033-A (Re: Anomalous Purchase and Use

of [FUB] now [UCPB])[41] and CC 0033-F (Re: Acquisition of San Miguel Corporation Shares of

Stock), the first case pivoting mainly on the series of transactions culminating in the alleged

anomalous purchase of 72.2% of FUBs outstanding capital stock and the transfer by PCA of a

portion thereof to private individuals. COCOFED, et al. and Ballares, et al. participated in CC

No. 0033-A as class action movants.

 

Petitioners COCOFED et al.[42] and Ursua[43] narrate in their petitions how the farmers

UCPB shares in question ended up in the possession of those as hereunder indicated: 

1) The farmers UCPB shares were originally registered in the name of PCA for the eventual free distribution thereof to and registration in the individual names of the coconut farmers in accordance with PD 755 and the IRR that PCA shall issue;

 2) Pursuant to the stock distribution procedures set out in PCA

Administrative Order No. 1, s. of 1975, (PCA AO 1),[44] farmers who had paid to the CIF under RA 6260 and registered their COCOFUND (CIF) receipts with PCA were given their corresponding UCPB stock certificates. As of June 1976, the cut-off date for the extended registration, only 16 million worth of COCOFUND receipts were registered, leaving over 50 million shares undistributed;

3) PCA would later pass Res. 074-78, s. of 1978, to allocate the 50 million undistributed shares to (a) farmers who were already recipients thereof and (b) qualified farmers to be identified by COCOFED after a national census.

4) As of May 1981, some 15.6 million shares were still held by and registered in the name of COCOFED in behalf of coconut farmers for distribution immediately after the completion of the national census, to all those determined by the PCA to be bonafide coconut farmers, but who have not received the bank shares;[45] and

 5) Prior to June 1986, a large number of coconut farmers opted to sell

all/part of their UCPB shares below their par value. This prompted the UCPB Board to authorize the CIIF companies to buy these shares. Some 40.34 million common voting shares of UCPB ended up with these CIIF companies albeit initially registered in the name of UCPB.

 

On the other hand, the subject of CC 0033-F are two (2) blocks of SMC shares of stock,

the first referring to shares purchased through and registered in the name of the CIIF holding

companies. The purported ownership of the second block of SMC shares is for the nonce

irrelevant to the disposition of this case. During the time material, the CIIF block of SMC shares

represented 27% of the outstanding capital stock of SMC. 

Civil Case No. 0033-A

 

After the pre-trial, but before the Republic, as plaintiff a quo, could present, as it

committed to, a list of UCPB stockholders as of February 25, 1986,[46] among other evidence,

COCOFED, et al., on the premise that the sequestered farmers UCPB shares are not unlawfully

acquired assets, filed in April 2001 their Class Action Motion for a Separate Summary

Judgment. In it, they prayed for a judgment dismissing the complaint in CC 0033-A, for the

reason that the over than a million unimpleaded coconut farmers own the UCPB shares. In

March 2002, they filed Class Action Motion for Partial Separate Trial on the issue of whether

said UCPB shares have legitimately become the private property of the million coconut farmers.

 

Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic

v. COCOFED[47] and on the argument, among others, that the claim of COCOFED and

Ballares et al. over the subject UCPB shares is based solely on the supposed COCOFUND

receipts issued for payment of the R.A. 6260 CIF levy, filed a Motion for Partial Summary

Judgment [RE: COCOFED, et al. and Ballares, et al.] dated April 22, 2002, praying that a

summary judgment be rendered declaring:

 a.       That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5,

Article III of P.D. No. 1468 are unconstitutional; 

b.      That (CIF) payments under (R.A.) No. 6260 are not valid and legal bases for ownership claims over UCPB shares; and

 c.      That COCOFED, et al., and Ballares, et al. have not legally and validly

obtained title over the subject UCPB shares.  

After an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be

conclusively held to be the true and absolute owner of the coconut levy funds and the UCPB

shares acquired therefrom.[48]

A joint hearing on the separate motions for summary judgment to determine what

material facts exist with or without controversy followed.[49] By Order[50] of March 11, 2003, the

Sandiganbayan detailed, based on this Courts ruling in related cases, the parties manifestations

made in open court and the pleadings and evidence on record, the facts it found to be without

substantial controversy, together with the admissions and/or extent of the admission made by the

parties respecting relevant facts, as follows:  As culled from the exhaustive discussions and manifestations of the parties in open court of their respective pleadings and evidence on record, the facts which exist without any substantial controversy are set forth hereunder, together with the admissions and/or the extent or scope of the admissions made by the parties relating to the relevant facts: 1. The late President Ferdinand E. Marcos was President for two terms . . . and, during the second term, declared Martial Law through Proclamation No. 1081 dated September 21, 1972. 2. On January 17, 1973, [he] issued Proclamation No. 1102 announcing the ratification of the 1973 Constitution. 3. From January 17, 1973 to April 7, 1981, [he] . . .exercised the powers and prerogative of President under the 1935 Constitution and the powers and prerogative of President . . . the 1973 Constitution. [He] promulgated various [P.D.s], among which were P.D. No. 232, P.D. No. 276, P.D. No. 414, P.D. No. 755, P.D. No. 961 and P.D. No. 1468. 4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on June 30, 1981, [he], after being elected President, reassumed the title and exercised the powers of the President until 25 February 1986.5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were [PCA] Directors during the period 1970 to 1986. 6. Plaintiff admits the existence of the following agreements which are attached as Annexes A and B to the Opposition dated October 10, 2002 of defendant Eduardo M. Cojuangco, Jr. to the above-cited Motion for Partial Summary Judgment: 

a) Agreement made and entered into this ______ day of May, 1975 at Makati, Rizal, Philippines, by and between: 

PEDRO COJUANGCO, Filipino, x x x, for and in his own behalf and in behalf of certain other stockholders of First United Bank listed in Annex A attached hereto (hereinafter collectively called the SELLERS); 

and

 EDUARDO COJUANGCO, JR., Filipino, x x x,

represented in this act by his duly authorized attorney-in-fact, EDGARDO J. ANGARA, for and in his own behalf and in behalf of certain other buyers, (hereinafter collectively called the BUYERS); 

WITNESSETH: That 

WHEREAS, the SELLERS own of record and beneficially a total of 137,866 shares of stock, with a par value of P100.00 each, of the common stock of the First United Bank (the Bank), a commercial banking corporation existing under the laws of the Philippines;

 WHEREAS, the BUYERS desire to purchase, and the

SELLERS are willing to sell, the aforementioned shares of stock totaling 137,866 shares (hereinafter called the Contract Shares) owned by the SELLERS due to their special relationship to EDUARDO COJUANGCO, JR.; 

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: 1. Sale   and Purchase of Contract Shares  

Subject to the terms and conditions of this Agreement, the SELLERS hereby sell, assign, transfer and convey unto the BUYERS, and the BUYERS hereby purchase and acquire, the Contract Shares free and clear of all liens and encumbrances thereon. 2. Contract Price 

The purchase price per share of the Contract Shares payable by the BUYERS is P200.00 or an aggregate price of P27,573,200.00 (the Contract Price). 3. Delivery of, and payment for, stock certificates 

Upon the execution of this Agreement, (i) the SELLERS shall deliver to the BUYERS the stock certificates representing the Contract Shares, free and clear of all liens, encumbrances, obligations, liabilities and other burdens in favor of the Bank or third parties, duly endorsed in blank or with stock powers

sufficient to transfer the shares to bearer; and (ii) BUYERS shall deliver to the SELLERS P27,511,295.50 representing the Contract Price less the amount of stock transfer taxes payable by the SELLERS, which the BUYERS undertake to remit to the appropriate authorities. (Emphasis added.) 4. Representation and Warranties of Sellers 

The SELLERS respectively and independently of each other represent and warrant that: 

(a) The SELLERS are the lawful owners of, with good marketable title to, the Contract Shares and that (i) the certificates to be delivered pursuant thereto have been validly issued and are fully paid and no-assessable; (ii) the Contract Shares are free and clear of all liens, encumbrances, obligations, liabilities and other burdens in favor of the Bank or third parties 

This representation shall survive the execution and delivery of this Agreement and the consummation or transfer hereby contemplated. 

(b) The execution, delivery and performance of this Agreement by the SELLERS does not conflict with or constitute any breach of any provision in any agreement to which they are a party or by which they may be bound. 

(c) They have complied with the condition set forth in Article X of the Amended Articles of Incorporation of the Bank. 5. Representation of BUYERS .

 6. Implementation 

The parties hereto hereby agree to execute or cause to be executed such documents and instruments as may be required in order to carry out the intent and purpose of this Agreement. 7. Notices . IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the place and on the date first above written.   PEDRO COJUANGCO EDUARDO COJUANGCO, JR.

(on his own behalf and in (on his own behalf and in behalfbehalf of the other Sellers of the other Buyers)listed in Annex A hereof) (BUYERS)(SELLERS)By: EDGARDO J. ANGARAAttorney-in-Fact  b) Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines, made and entered into this 25th day of May 1975 at Makati, Rizal, Philippines, by and between: 

EDUARDO M. COJUANGCO, JR., x x x, hereinafter referred to as the SELLER; 

and 

PHILIPPINE COCONUT AUTHORITY, a public corporation created by Presidential Decree No. 232, as amended, for itself and for the benefit of the coconut farmers of the Philippines, (hereinafter called the BUYER)

 WITNESSETH: That

 WHEREAS, on May 17, 1975, the Philippine Coconut

Producers Federation (PCPF), through its Board of Directors, expressed the desire of the coconut farmers to own a commercial bank which will be an effective instrument to solve the perennial credit problems and, for that purpose, passed a resolution requesting the PCA to negotiate with the SELLER for the transfer to the coconut farmers of the SELLERs option to buy the First United Bank (the Bank) under such terms and conditions as BUYER may deem to be in the best interest of the coconut farmers and instructed Mrs. Maria Clara Lobregat to convey such request to the BUYER;

 WHEREAS, the PCPF further instructed Mrs. Maria Clara

Lobregat to make representations with the BUYER to utilize its funds to finance the purchase of the Bank;

 WHEREAS, the SELLER has the exclusive and personal

option to buy 144,400 shares (the Option Shares) of the Bank, constituting 72.2% of the present outstanding shares of stock of the

Bank, at the price of P200.00 per share, which option only the SELLER can validly exercise;

 WHEREAS, in response to the representations made by the

coconut farmers, the BUYER has requested the SELLER to exercise his personal option for the benefit of the coconut farmers;

 WHEREAS, the SELLER is willing to transfer the Option

Shares to the BUYER at a price equal to his option price of P200 per share;

 WHEREAS, recognizing that ownership by the coconut

farmers of a commercial bank is a permanent solution to their perennial credit problems, that it will accelerate the growth and development of the coconut industry and that the policy of the state which the BUYER is required to implement is to achieve vertical integration thereof so that coconut farmers will become participants in, and beneficiaries of, the request of PCPF that it acquire a commercial bank to be owned by the coconut farmers and, appropriated, for that purpose, the sum of P150 Million to enable the farmers to buy the Bank and capitalize the Bank to such an extension as to be in a position to adopt a credit policy for the coconut farmers at preferential rates;

WHEREAS, x x x the BUYER is willing to subscribe to additional shares (Subscribed Shares) and place the Bank in a more favorable financial position to extend loans and credit facilities to coconut farmers at preferential rates;

 NOW, THEREFORE, for and in consideration of the

foregoing premises and the other terms and conditions hereinafter contained, the parties hereby declare and affirm that their principal contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding capital stock of the Bank; and (2) that the SELLER shall receive compensation for exercising his personal and exclusive option to acquire the Option Shares, for transferring such shares to the coconut farmers at the option price of P200 per share, and for performing the management services required of him hereunder. 

1. To ensure that the transfer to the coconut farmers of the Option Shares is effected with the least possible delay and to provide for the faithful performance of the obligations of the parties hereunder, the parties hereby appoint the Philippine National Bank as their escrow agent (the Escrow Agent).

 

Upon execution of this Agreement, the BUYER shall deposit with the Escrow Agent such amount as may be necessary to implement the terms of this Agreement.

 2. As promptly as practicable after execution of this

Agreement, the SELLER shall exercise his option to acquire the Option Share and SELLER shall immediately thereafter deliver and turn over to the Escrow Agent such stock certificates as are herein provided to be received from the existing stockholders of the Bank by virtue of the exercise on the aforementioned option.

 3. To ensure the stability of the Bank and continuity of

management and credit policies to be adopted for the benefit of the coconut farmers, the parties undertake to cause the stockholders and the Board of Directors of the Bank to authorize and approve a management contract between the Bank and the SELLER under the following terms: 

(a) The management contract shall be for a period of five (5) years, renewable for another five (5) years by mutual agreement of the SELLER and the Bank;

 (b) The SELLER shall be elected President and shall hold office at the pleasure of the Board of Directors. While serving in such capacity, he shall be entitled to such salaries and emoluments as the Board of Directors may determine; (c) The SELLER shall recruit and develop a professional management team to manage and operate the Bank under the control and supervision of the Board of Directors of the Bank; (d) The BUYER undertakes to cause three (3) persons designated by the SELLER to be elected to the Board of Directors of the Bank; (e) The SELLER shall receive no compensation for managing the Bank, other than such salaries or emoluments to which he may be entitled by virtue of the discharge of his function and duties as President, provided and (f) The management contract may be assigned to a management company owned and controlled by the SELLER.

 

4. As compensation for exercising his personal and exclusive option to acquire the Option Shares and for transferring such shares to the coconut farmers, as well as for performing the management services required of him, SELLER shall receive equity in the Bank amounting, in the aggregate, to 95,304 fully paid shares in accordance with the procedure set forth in paragraph 6 below;

 5. In order to comply with the Central Bank program for

increased capitalization of banks and to ensure that the Bank will be in a more favorable financial position to attain its objective to extend to the coconut farmers loans and credit facilities, the BUYER undertakes to subscribe to shares with an aggregate par value of P80,864,000 (the Subscribed Shares). The obligation of the BUYER with respect to the Subscribed Shares shall be as follows:

 (a) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an aggregate par value of P15,884,000 from the present authorized but unissued shares of the Bank; and (b) The BUYER undertakes to subscribe, for the benefit of the coconut farmers, to shares with an aggregate par value of P64,980,000 from the increased capital stock of the Bank, which subscriptions shall be deemed made upon the approval by the stockholders of the increase of the authorized capital stock of the Bank from P50 Million to P140 Million.

 The parties undertake to declare stock dividends of P8

Million out of the present authorized but unissued capital stock of P30 Million.

 6. To carry into effect the agreement of the parties that the

SELLER shall receive as his compensation 95,304 shares: (a) . (b) With respect to the Subscribed Shares, the BUYER undertakes, in order to prevent the dilution of SELLERs equity position, that it shall cede over to the SELLER 64,980 fully-paid shares out of the Subscribed Shares. Such undertaking shall be complied with in the following manner: . 

 7. The parties further undertake that the Board of Directors

and management of the Bank shall establish and implement a loan policy for the Bank of making available for loans at preferential rates of interest to the coconut farmers .

 8. The BUYER shall expeditiously distribute from time to

time the shares of the Bank, that shall be held by it for the benefit of the coconut farmers of the Philippines under the provisions of this Agreement, to such, coconut farmers holding registered COCOFUND receipts on such equitable basis as may be determine by the BUYER in its sound discretion.

 9. . 10. To ensure that not only existing but future coconut

farmers shall be participants in and beneficiaries of the credit policies, and shall be entitled to the benefit of loans and credit facilities to be extended by the Bank to coconut farmers at preferential rates, the shares held by the coconut farmers shall not be entitled to pre-emptive rights with respect to the unissued portion of the authorized capital stock or any increase thereof.

 11. After the parties shall have acquired two-thirds (2/3) of

the outstanding shares of the Bank, the parties shall call a special stockholders meeting of the Bank: 

(a) To classify the present authorized capital stock of P50,000,000 divided into 500,000 shares, with a par value of P100.00 per share into: 361,000 Class A shares, with an aggregate par value of P36,100,000 and 139,000 Class B shares, with an aggregate par value of P13,900,000. All of the Option Shares constituting 72.2% of the outstanding shares, shall be classified as Class A shares and the balance of the outstanding shares, constituting 27.8% of the outstanding shares, as Class B shares; (b) To amend the articles of incorporation of the Bank to effect the following changes:

 (i) change of corporate name to First United Coconut Bank; (ii) replace the present provision restricting the transferability of the shares with a limitation on

ownership by any individual or entity to not more than 10% of the outstanding shares of the Bank; (iii) provide that the holders of Class A shares shall not be entitled to pre-emptive rights with respect to the unissued portion of the authorized capital stock or any increase thereof; and (iv) provide that the holders of Class B shares shall be absolutely entitled to pre-emptive rights, with respect to the unissued portion of Class B shares comprising part of the authorized capital stock or any increase thereof, to subscribe to Class B shares in proportion t the subscriptions of Class A shares, and to pay for their subscriptions to Class B shares within a period of five (5) years from the call of the Board of Directors.

 (c) To increase the authorized capital stock of the Bank from P50 Million to P140 Million.; (d) To declare a stock dividend of P8 Million payable to the SELLER, the BUYER and other stockholders of the Bank out of the present authorized but unissued capital stock of P30 Million; (e) To amend the by-laws of the Bank accordingly; and 

(f) To authorize and approve the management contract provided in paragraph 2 above. 

The parties agree that they shall vote their shares and take all the necessary corporate action in order to carry into effect the foregoing provisions of this paragraph 11 . 

12. It is the contemplation of the parties that the Bank shall achieve a financial and equity position to be able to lend to the coconut farmers at preferential rates. In order to achieve such objective, the parties shall cause the Bank to adopt a policy of reinvestment, by way of stock dividends, of such percentage of the profits of the Bank as may be necessary. 

13. The parties agree to execute or cause to be executed such documents and instruments as may be required in order to carry out the intent and purpose of this Agreement.

  

IN WITNESS WHEREOF, PHILIPPINE COCONUT AUTHORITY(BUYER) By: EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT(SELLER) 

7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the (PCA) was the other buyers represented by . Cojuangco, Jr. in the May 1975 Agreement entered into between Pedro Cojuangco (on his own behalf and in behalf of other sellers listed in Annex A of the agreement) and Cojuangco, Jr. (on his own behalf and in behalf of the other buyers).Defendant Cojuangco insists he was the only buyer under the aforesaid Agreement. 8. .. 9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al. admit that in addition to the 137,866 FUB shares of Pedro Cojuangco, et al. covered by the Agreement, other FUB stockholders sold their shares to PCA such that the total number of FUB shares purchased by PCA increased from 137,866 shares to 144,400 shares, the OPTION SHARES referred to in the Agreement of May 25, 1975. Defendant Cojuangco did not make said admission as to the said 6,534 shares in excess of the 137,866 shares covered by the Agreement with Pedro Cojuangco. 10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the Agreement, described in Section 1 of Presidential Decree (P.D.) No. 755 dated July 29, 1975 as the Agreement for the Acquisition of a Commercial Bank for the Benefit of Coconut Farmers executed by the Philippine Coconut Authority and incorporated in Section 1 of P.D. No. 755 by reference, refers to the AGREEMENT FOR THE ACQUISITION OF A COMMERCIAL BANK FOR THE BENEFIT OF THE COCONUT FARMERS OF THE PHILIPPINES dated May 25, 1975 between defendant Eduardo M. Cojuangco, Jr. and the [PCA] (Annex B for defendant Cojuangcos OPPOSITION TO PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT [RE: EDUARDO M. COJUANGCO, JR.] dated September 18, 2002). Plaintiff refused to make the same admission. 

11. the Court takes judicial notice that P.D. No. 755 was published [in] volume 71 of the Official Gazette but the text of the agreement was not so published with P.D. No. 755. 12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA used public funds, in the total amount of P150 million, to purchase the FUB shares amounting to 72.2% of the authorized capital stock of the FUB, although the PCA was later reimbursed from the coconut levy funds and that the PCA subscription in the increased capitalization of the FUB, which was later renamed the (UCPB), came from the said coconut levy funds. 

13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the authorized and the increased capital stock of the FUB (later UCPB), entirely paid for by PCA, 64.98% of the shares were placed in the name of the PCA for the benefit of the coconut farmers and 7,22% were given to defendant Cojuangco. The remaining 27.8% shares of stock in the FUB which later became the UCPB were not covered by the two (2) agreements referred to in item no. 6, par. (a) and (b) above.

There were shares forming part of the aforementioned 64.98% which were later sold or transferred to non-coconut farmers.

14. Under the May 27, 1975 Agreement, defendant Cojuangcos equity in the FUB (now UCPB) was ten percent (10%) of the shares of stock acquired by the PCA for the benefit of the coconut farmers.

15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by defendant Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for by the PCA in accordance with the terms and conditions provided in the said Agreement.

16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the affidavits of the coconut farmers (specifically, Exhibit 1-Farmer to 70-Farmer) uniformly state that:

 a. they are coconut farmers who sold coconut products;

b. in the sale thereof, they received COCOFUND receipts pursuant to R.A. No. 6260;

c. they registered the said COCOFUND receipts; andd. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and

1468, they are allegedly entitled to the subject UCPB shares. but subject to the following qualifications: 

a. there were other coconut farmers who received UCPB shares although they did not present said COCOFUND receipt because the PCA distributed the unclaimed UCPB shares not only to those who already received their UCPB shares in exchange for their COCOFUND receipts but also to the coconut farmers determined by a national census conducted pursuant to PCA administrative issuances;

 b. [t]here were other affidavits executed by Lobregat, Eleazar, Ballares

and Aldeguer relative to the said distribution of the unclaimed UCPB shares; and

 c. the coconut farmers claim the UCPB shares by virtue of their

compliance not only with the laws mentioned in item (d) above but also with the relevant issuances of the PCA such as, PCA Administrative Order No. 1, dated August 20, 1975 (Exh. 298-Farmer); PCA Resolution No. 033-78 dated February 16, 1978.

 The plaintiff did not make any admission as to the foregoing qualifications. 17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that the UCPB shares in question have legitimately become the private properties of the 1,405,366 coconut farmers solely on the basis of their having acquired said shares in compliance with R.A. No. 6260, P.D. Nos. 755, 961 and 1468 and the administrative issuances of the PCA cited above. 18. ..

 

On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A finding for the Republic, the

judgment accentuated by (a) the observation that COCOFED has all along manifested as

representing over a million coconut farmers and (b) a declaration on the issue of ownership of

UCPB shares and the unconstitutionality of certain provisions of P.D. No. 755 and its

implementing regulations. On the matter of ownership in particular, the anti-graft court declared

that the 64.98% sequestered Farmers UCPB shares, plus other shares paid by PCA

are conclusively owned by the Republic. In its pertinent parts, PSJ-A, resolving the separate

motions for summary judgment in seriatim with separate dispositive portions for each, reads: 

WHEREFORE, in view of the foregoing, we rule as follows: 

 A.    Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY

JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al. 

The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED for lack of merit. B.     Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE:

COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff. 1.                  a. Section 1 of P.D. No. 755, taken in relation to Section 2 of the

same P.D., is unconstitutional: (i) for having allowed the use of the CCSF to benefit directly private interest by the outright and unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the undefined coconut farmers, which negated or circumvented the national policy or public purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut industry and achieve its vertical integration; and (ii) for having unduly delegated legislative power to the PCA.

 b. The implementing regulations issued by PCA, namely, Administrative

Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise invalid for their failure to see to it that the distribution of shares serve exclusively or at least primarily or directly the aforementioned public purpose or national policy declared by P.D. No. 755.

 2.      Section 2 of P.D. No. 755 which mandated that the coconut levy funds

shall not be considered special and/or fiduciary funds nor part of the general funds of the national government and similar provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).

 3.      Lobregat, COCOFED, et al. and Ballares, et al. have not legally and

validly obtained title of ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement datedMay 25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, Adm. Order No. 1, s. 1975 and Resolution No. 074-78.

 4.      The so-called Farmers UCPB shares covered by 64.98% of the UCPB

shares of stock, which formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB, the entire consideration of which was charged by PCA to the CCSF, are hereby declared conclusively owned by, the Plaintiff Republic of the Philippines.

 C.     Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO

M. COJUANGCO, JR.) dated September 18, 2002 filed by Plaintiff. 

1.      Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 nor did it give the Agreement the binding force of a law because of the non-publication of the said Agreement. 

2.      Regarding the questioned transfer of the shares of stock of FUB (later UCPB) by PCA to defendant Cojuangco or the so-called Cojuangco UCPB shares which cost the PCA more than Ten Million Pesos in CCSF in 1975, we declare, that the transfer of the following FUB/UCPB shares to defendant Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore null and void:

 a.       The 14,400 shares from the Option Shares;

 b.      Additional Bank Shares Subscribed and Paid by PCA, consisting of:

 1.      Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares

out of the authorized but unissued shares of the bank, subscribed and paid by PCA; 

2.      Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the increased capital stock subscribed and paid by PCA; and 

3.      Stock dividends declared pursuant to paragraph 5 and paragraph 11 (iv) (d) of the Agreement.

 3.      The above-mentioned shares of stock of the FUB/UCPB transferred to

defendant Cojuangco are hereby declared conclusively owned by the Republic of the Philippines. 

4.      The UCPB shares of stock of the alleged fronts, nominees and dummies of defendant Eduardo M. Cojuangco, Jr. which form part of the 72.2% shares of the FUB/UCPB paid for by the PCA with public funds later charged to the coconut levy funds, particularly the CCSF, belong to the plaintiff Republic of the Philippines as their true and beneficial owner. Let trial of this Civil Case proceed with respect to the issues which have not been disposed of in this Partial Summary Judgment. For this purpose, the plaintiffs Motion Ad Cautelam to Present Additional Evidence dated March 28, 2001 is hereby GRANTED.

  

 

From PSJ-A, Lobregat moved for reconsideration which COCOFED, et al. and Ballares,

et al. adopted. All these motions were denied in the extended assailed Resolution [51] of December

28, 2004.

 

Civil Case No. 0033-F

 

Here, the Republic, after filing its pre-trial brief, interposed a Motion for Judgment on the

Pleadings and/or for [PSJ] (Re: Defendants CIIF Companies, 14 Holding Companies and

COCOFED, et al.) praying that, in light of the parties submissions and the supervening ruling

in Republic v. COCOFED[52] which left certain facts beyond question, a judgment issue:

 

1)      Declaring Section 5 of Article III of P.D. No. 961 (Coconut Industry Code) and Section 5 of Article III of P.D. No. 1468 (Revised Coconut Industry Code) to be unconstitutional; 

2)      Declaring that CIF payments under RA No. 6260 are not valid and legal bases for ownership claims over the CIIF companies and, ultimately, the CIIF block of SMC shares; and

 3)      Ordering the reconveyance of the CIIF companies, the 14 holding

companies, and the 27% CIIF block of San Miguel Corporation shares of stocks in favor of the government and declaring the ownership thereof to belong to the government in trust for all the coconut farmers.

 

At this juncture, it may be stated that, vis--vis CC 0033-F, Gabay Foundation, Inc. sought

but was denied leave to intervene. But petitioners COCOFED, et al. moved and were allowed to

intervene[53] on the basis of their claim that COCOFED members beneficially own the block of

SMC shares held by the CIIF companies, at least 51% of whose capitol stock such members

own. The claim, as the OSG explained, arose from the interplay of the following: (a) COCOFED

et al.s alleged majority ownership of the CIIF companies under Sections 9[54] and 10[55] of P.D.

No. 1468, and (b) their alleged entitlement to shares in the CIIF companies by virtue of their

supposed registration of COCOFUND receipts allegedly issued to COCOFED members upon

payment of the R.A. 6260 CIF levy.[56]

 

Just as in CC No. 0033-A, the Sandiganbayan also conducted a hearing in CC No. 0033-F

to determine facts that appeared without substantial controversy as culled from the records and,

by Order[57] of February 23, 2004, outlined those facts.

On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No. 0033-A and

disposing of the issue on ownership of the CIIF oil and holding companies and their entire block

of subject SMC shares, issued the assailed PSJ-F also finding for the Republic, the fallo of which

pertinently reading:

 

WHEREFORE, in view of the foregoing, we hold that:

 The Motion for Partial Summary Judgment (Re: Defendants CIIF

Companies, 14 Holding Companies and Cocofed et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF COMPANIES, namely:

 1. Southern Luzon Coconut Oil Mills (SOLCOM);2. Cagayan de Oro Oil Co., Inc. (CAGOIL);3. Iligan Coconut Industries, Inc. (ILICOCO);4. San Pablo Manufacturing Corp. (SPMC);5. Granexport Manufacturing Corp. (GRANEX); and6. Legaspi Oil Co., Inc. (LEGOIL), 

AS WELL AS THE 14 HOLDING COMPANIES, NAMELY: 1. Soriano Shares, Inc.;

2. ACS Investors, Inc.;3. Roxas Shares, Inc.;4. Arc Investors, Inc.;5. Toda Holdings, Inc.;

6. AP Holdings, Inc.;7. Fernandez Holdings, Inc.;8. SMC Officers Corps, Inc.;9. Te Deum Resources, Inc.;

10. Anglo Ventures, Inc.;11. Randy Allied Ventures, Inc.;12. Rock Steel Resources, Inc.;13. Valhalla Properties Ltd., Inc.; and14. First Meridian Development, Inc.  AND THE CIIF BLOCK   OF SAN MIGUEL CORPORATION (SMC)  SHARES OF STOCK TOTALLING 33,133,266 SHARES AS OF 1983 ARE DECLARED OWNED BY THEGOVERNMENT   IN TRUST FOR ALL THE COCONUT FARMERS GOVERNMENT AND ORDERDED RECONVEYED TO THE GOVERNMENT.[58] (Emphasis and capitalization in the original; underscoring added.) Let the trial of this Civil Case proceed with respect to the issues which have not been disposed of in this Partial Summary Judgment, including the determination of whether the CIIF Block of SMC Shares adjudged to be owned by the Government represents 27% of the issued and outstanding capital stock of SMC according to plaintiff or to 31.3% of said capital stock according to COCOFED, et al and Ballares, et al. SO ORDERED.

  

Expressly covered by the declaration and the reconveyance directive are all dividends

declared, paid and issued thereon as well as any increments thereto arising from, but not limited

to, exercise of pre-emptive rights.

 

On May 26, 2004, COCOFED et al., filed an omnibus motion (to dismiss for lack of

subject matter jurisdiction or alternatively for reconsideration and to set case for trial), but this

motion was denied per the Sandiganbayans Resolution[59] of December 28, 2004.

 

On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a Resolution [60] denying

Lobregats and COCOFEDs separate motions to set the case for trial/hearing, noting that there is

no longer any point in proceeding to trial when the issue of their claim of ownership of the

sequestered UCPB shares and related sub-issues have already been resolved in PSJ-A.

 

For ease of reference, PSJ-A and PSJ-F each originally decreed trial or further hearing on

issues yet to be disposed of. However, the Resolution[61] issued on June 5, 2007in CC 0033-A

and the Resolution[62] of May 11, 2007 rendered in CC 0033-F effectively modified the

underlying partial summary judgments by deleting that portions on the necessity of further

trial on the issue of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of

SMC shares and (3) the CIIF companies. As the anti-graft court stressed in both resolutions,

the said issue of ownership has been finally resolved in the corresponding PSJs.[63]

 

Hence, the instant petitions.

 

The Issues

 

COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on the Sandiganbayan for (a)

assuming jurisdiction over CC Nos. 0033-A and 0033-F despite the Republics failure to establish

below the jurisdictional facts, i.e., that the sequestered assets sought to be recovered are ill-gotten

in the context of E.O. Nos. 1, 2, 14 and 14-A; (b) declaring certain provisions of coco levy

issuances unconstitutional; and (c) denying the petitioners plea to prove that the sequestered

assets belong to coconut farmers. Specifically, petitioners aver: I. The Sandiganbayan gravely erred when it refused to acknowledge that it did not have subject matter jurisdiction over the ill-gotten wealth cases because the respondent Republic failed to prove, and did not even attempt to prove, the jurisdictional fact that the sequestered assets constitute ill-gotten wealth of former President Marcos and Cojuangco. Being without subject matter jurisdiction over the ill-gotten wealth cases, a defect previously pointed out and repeatedly assailed by COCOFED, et al., the assailed PSJs and the assailed Resolutions are all null and void. 

A. Insofar as the ill-gotten wealth cases are concerned, the Sandiganbayans subject matter jurisdiction is limited to the recovery of ill-gotten wealth as defined in Eos 1, 2, 14 and 14-A.Consistent with that jurisdiction, the subdivided complaints in the ill-gotten wealth cases expressly alleged that the sequestered assets constitutes ill-gotten wealth

of former President Marcos and Cojuangco, having been filed pursuant to, and in connection with, Eos 1, 2, 14 and 14-A, the Sandiganbayan gravely erred, if not exceeded its jurisdiction, when it refused to require the respondent Republic to prove the aforesaid jurisdictional fact. B. . Having no evidence on record to prove the said jurisdictional fact, the Sandiganbayan gravely erred, if not grossly exceeded its statutory jurisdiction, when it rendered the assailed PSJs instead of dismissing the ill-gotten wealth cases. C. Under Section 1 of Rule 9 of the Rules of Court, lack of jurisdiction over the subject matter may be raised at any stage of the proceedings. In any event, in pursuing its intervention in the ill-gotten wealth cases, COCOFED, et al precisely questioned the Sandiganbayans subject matter jurisdiction, asserted that the jurisdictional fact does not exist, moved to dismiss the ill-gotten wealth cases and even prayed that the writs of sequestration over the sequestered assets be lifted. In concluding that those actions constitute an invocation of its jurisdiction, the Sandiganbayan clearly acted whimsically, capriciously and in grave abuse of its discretion.

 II. Through the assailed PSJs and the assailed Resolutions, the Sandiganbayan declared certain provisions of the coconut levy laws as well as certain administrative issuances of the PCA as unconstitutional. In doing so, the Sandiganbayan erroneously employed, if not grossly abused, its power of judicial review.

 A. the Sandiganbayan gravely erred, if not brazenly exceeded its statutory jurisdiction and abused the judicial powers, when it concluded that the public purpose of certain coconut levy laws was not evident, when it thereupon formulated its own public policies and purposes for the coconut levy laws and at the same time disregarded the national policies specifically prescribed therein. B. In ruling that it is not clear or evident how the means employed by the [coconut levy] laws would serve the avowed purpose of the law or can serve a public purpose, the Sandiganbayan erroneously examined, determined and evaluated the wisdom of such laws, a constitutional power within the exclusive province of the legislative department. C. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of alleged but unproven and unsubstantiated flaws in their implementation.

 

D. The Sandiganbayan gravely erred in concluding that Section 1 of PD 755 constitutes an undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution of the UCPB shares to the coconut farmers. Rather, taken in their proper context, Section 1 of PD 755 was complete in itself, [and] prescribed sufficient standards that circumscribed the discretion of the PCA.

 More importantly, this Honorable Court has, on three (3) separate occasions, rejected respondent Republics motion to declare the coconut levy laws unconstitutional. The Sandiganbayan gravely erred, if not acted in excess of its jurisdiction, when it ignored the settled doctrines of law of the case and/or stare decisis and granted respondent Republics fourth attempt to declare the coconut levy laws unconstitutional, despite fact that such declaration of unconstitutionality was not necessary to resolve the ultimate issue of ownership involved in the ill-gotten wealth cases.

 III. In rendering the assailed PSJs and thereafter refusing to proceed to trial on the merits, on the mere say-so of the respondent Republic, the Sandiganbayan committed gross and irreversible error, gravely abused its judicial discretion and flagrantly exceeded its jurisdiction as it effectively sanctioned the taking of COCOFED, et al.s property by the respondent Republic without due process of law and through retroactive application of the declaration of unconstitutionality of the coconut levy laws, an act that is not only illegal and violative of the settled Operative Fact Doctrine but, more importantly, inequitable to the coconut farmers whose only possible mistake, offense or misfortune was to follow the law. 

A. . 

1. In the course of the almost twenty (20) years that the ill-gotten wealth cases were pending, COCOFED, et al. repeatedly asked to be allowed to present evidence to prove that the true, actual and beneficial owners of the sequestered assets are the coconut farmers and not Cojuangco, an alleged crony of former President Marcos. The Sandiganbayan grievously erred and clearly abused its judicial discretion when it repeatedly and continuously denied COCOFED, et al. the opportunity to present their evidence to disprove the baseless allegations of the Ill-Gotten Wealth Cases that the sequestered assets constitute ill-gotten wealth of Cojuangco and of former President Marcos, an error that undeniably and illegally deprived COCOFED, et al of their constitutional right to be heard.

 2. The Sandiganbayan erroneously concluded that the Assailed PSJs and Assailed Resolutions settled the ultimate issue of ownership of the Sequestered Assets and, more importantly, resolved all factual and

legal issues involved in the ill-gotten wealth cases. Rather, as there are triable issues still to be resolved, it was incumbent upon the Sandiganbayan to receive evidence thereon and conduct trial on the merits.

 3. Having expressly ordered the parties to proceed to trial and thereafter decreeing that trial is unnecessary as the Assailed PSJs were final and appealable judgments, the Sandiganbayan acted whimsically, capriciously and contrary to the Rules of Court, treated the parties in the ill-gotten wealth cases unfairly, disobeyed the dictate of this Honorable Court and, worse, violated COCOFED, et als right to due process and equal protection of the laws.

 B. The Sandiganbayan gravely erred if not grossly abused its discretion when it repeatedly disregarded, and outrightly refused to recognize, the operative facts that existed as well as the rights that vested from the time the coconut levy laws were enacted until their declaration of unconstitutionality in the assailed PSJs. As a result, the assailed PSJs constitute a proscribed retroactive application of the declaration of unconstitutionality, a taking of private property, and an impairment of vested rights of ownership, all without due process of law.[64] Otherwise stated, the assailed PSJs and the assailed Resolutions effectively penalized the coconut farmers whose only possible mistake, offense or misfortune was to follow the laws that were then legal, valid and constitutional. 

IV. The voluminous records of these ill-gotten wealth cases readily reveal the various dilatory tactics respondent Republic resorted to. As a result, despite the lapse of almost twenty (20) years of litigation, the respondent Republic has not been required to, and has not even attempted to prove, the bases of its perjurious claim that the sequestered assets constitute ill-gotten wealth of former President Marcos and his crony, Cojuangco. In tolerating respondent Republics antics for almost twenty (20) years, the Sandiganbayan so glaringly departed from procedure and thereby flagrantly violated COCOFED, et al.s right to speedy trial.

   

In G.R. No. 178193, petitioner Ursua virtually imputes to the Sandiganbayan the same

errors attributed to it by petitioners in G.R. Nos. 177857-58.[65] He replicates as follows: 

I 

The Sandiganbayan decided in a manner not in accord with the Rules of Court and settled jurisprudence in rendering the questioned PSJ as final and appealable

thereafter taking the sequestered assets from their owners or record without presentation of any evidence, thus, the questioned PSJ and the questioned Resolutions are all null and void. 

A. The Sandiganbayans jurisdiction insofar as the ill-gotten wealth cases are concerned, is limited to the recovery of ill-gotten wealth as defined in Executive Orders No. 1, 2, 14 and 14-A. B. The Sandiganbayan should have decided to dismiss the case or continue to receive evidence instead of ruling against the constitutionality of some coconut levy laws and PCA issuances because it could decide on other grounds available to it. 

II 

The Sandiganbayan gravely erred when it declared PD. 755, Section 1 and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 as well as administrative issuances of the PCA as unconstitutional in effect, it abused it power of judicial review. 

A. The Sandiganbayan gravely erred in concluding that the purpose of PD 755 Section 1 and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 is not evident. It then proceeded to formulated its own purpose thereby intruding into the wisdom of the legislature in enacting [t]he law. B. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] No. 1 and PCA Resolution No. 074-78 unconstitutional due to alleged flaws in their implementation. C. The Sandiganbayan gravely erred in concluding that Section 1 of PD No. 755 constitutes an undue delegation of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing the distribution of the UCPB shares to the coconut farmers. Section 1 of PD 755 was complete in itself, prescribed sufficient standards that circumscribed the discretion of the PCA and merely authorized the PCA to fill matters of detail an execution through promulgated rules and regulations. 

III 

The coconut levy laws, insofar as they allowed the PCA to promulgate rules and regulations governing the distribution of the UCPB to the coconut farmers, do not constitute an undue delegation of legislative power as they were complete in themselves and prescribed sufficient standards that circumscribed the discretion of the PCA.

 IV 

Assuming ex-gratia argumenti that the coconut levy laws are unconstitutional, still, the owners thereof cannot be deprived of their property without due process of law considering that they have in good faith acquired vested rights over the sequestered assets.

In sum, the instant petitions seek to question the decisions of the Sandiganbayan in both

CC Nos. 0033-A and 0033-F, along with the preliminary issues of objection. We shall address at

the outset, (1) the common preliminary questions, including jurisdictional issue, followed by (2)

the common primary contentious issues (i.e. constitutional questions), and (3) the issues

particular to each case.

 The Courts Ruling

 

I

 The Sandiganbayan has jurisdiction over the subject

matter ofthe subdivided amended complaints.

 

The primary issue, as petitioners COCOFED, et al. and Ursua put forward, boils down to the

Sandiganbayans alleged lack of jurisdiction over the subject matter of the amended complaints.

Petitioners maintain that the jurisdictional facts necessary to acquire jurisdiction over the subject

matter in CC No. 0033-A have yet to be established. In fine, the Republic, so petitioners claim,

has failed to prove the ill-gotten nature of the sequestered coconut farmers UCPB

shares. Accordingly, the controversy is removed from the subject matter jurisdiction of the

Sandiganbayan and necessarily any decision rendered on the merits, such as PSJ-A and PSJ-F, is

void.

 

To petitioners, it behooves the Republic to prove the jurisdictional facts warranting the

Sandiganbayans continued exercise of jurisdiction over ill-gotten wealth cases. Citing Manila

Electric Company [Meralco] v. Ortaez,[66] petitioners argue that the jurisdiction of an

adjudicatory tribunal exercising limited jurisdiction, like the Sandiganbayan, depends upon the

facts of the case as proved at the trial and not merely upon the allegation in the complaint.

[67] Cited too is PCGG v. Nepumuceno,[68] where the Court held:

 The determinations made by the PCGG at the time of issuing sequestration

orders cannot be considered as final determinations; that the properties or entities sequestered or taken-over in fact constitute ill-gotten wealth according to [E.O.] No. 1 is a question which can be finally determined only by a court the Sandiganbayan. The PCGG has the burden of proving before the Sandiganbayan that the assets it has sequestered or business entity it has provisionally taken-over

constitutes ill-gotten wealth within the meaning of [E.O.] No. 1 and Article No. XVIII (26) of the 1987 Constitution.

 

Petitioners above posture is without merit.

 

Justice Florenz D. Regalado explicates subject matter jurisdiction:

 16. Basic is the doctrine that the jurisdiction of a court over the subject-matter of an action is conferred only by the Constitution or the law and that the Rules of Court yield to substantive law, in this case, the Judiciary Act and B.P. Blg. 129, both as amended, and of which jurisdiction is only a part. Jurisdiction cannot be acquired through, or waived, enlarged or diminished by, any act or omission of the parties; neither can it be conferred by the acquiescence of the court. Jurisdiction must exist as a matter of law. Consequently, questions of jurisdiction may be raised for the first time on appeal even if such issue was not raised in the lower court. 17. Nevertheless, in some case, the principle of estoppel by laches has been availed to bar attacks on jurisdiction.[69]

 

It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn, the

question on whether a given suit comes within the pale of a statutory conferment is determined

by the allegations in the complaint, regardless of whether or not the plaintiff will be entitled at

the end to recover upon all or some of the claims asserted therein.[70]We said as much in Magay

v. Estiandan:[71]

 [J]urisdiction over the subject matter is determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein-a matter that can be resolved only after and as a result of the trial. Nor may the jurisdiction of the court be made to depend upon the defenses set up in the answer or upon the motion to dismiss, for, were we to be governed by such rule, the question of jurisdiction could depend almost entirely upon the defendant.

 

Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v. Villon:

[72]

 Jurisdiction over the subject matter is the power to hear and determine the

general class to which the proceedings in question belong. Jurisdiction over the subject matter is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of the court that it exists. Basic is the rule that jurisdiction over the subject matter is determined by the cause or causes of action as alleged in the complaint.

The material averments in subdivided CC No. 0033-A and CC No. 0033-F included the

following:

 12. Defendant Eduardo Cojuangco, Jr served as a public officer during the Marcos administration.

 13. Defendant Eduardo Cojuangco, Jr., taking advantage of his

association, influence and connection, acting in unlawful concert with the [Marcoses] and the individual defendants, embarked upon devices, schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich themselves as the expense of the Plaintiff and the Filipino people, such as when he

 a) manipulated, beginning the year 1975 with the active collaboration of

Defendants , Marai Clara Lobregat, Danilo Ursua [etc.], the purchase by the (PCA) of 72.2% of the outstanding capital stock of the (FUB) which was subsequently converted into a universal bank named (UCPB) through the use of (CCSF) in a manner contrary to law and to the specific purposes for which said coconut levy funds were imposed and collected under P.D. 276 and under anomalous and sinister designs and circumstances, to wit:

 (i)       Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds

as a cheap, lucrative and risk-free source of funds with which to exercise his private option to buy the controlling interest in FUB.

(ii)     to legitimize a posteriori his highly anomalous and irregular use and diversion of government funds to advance his own private and commercial interests Defendant Eduardo Cojuangco, Jr. caused the issuance of PD 755 (a) declaring that the coconut levy funds shall not be considered special and fiduciary and trust funds conveniently repealing for that purpose a series of previous decrees establishing the character of the coconut levy funds as special, fiduciary, trust and governments; (b) confirming the agreement between Cojuangco and PCA on the purchase of FUB by incorporating by reference said private commercial agreement in PD 755;

(iii)    .(iv)   To perpetuate his opportunity to build his economic empire,

Cojuangco caused the issuance of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB interest free to the prejudice of the government and finally

(v)     Having fully established himself as the undisputed coconut king with unlimited powers to deal with the coconut levy funds, the stage was now set for Defendant Eduardo Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine activity namely . oil mills.

(vi)   In gross violation of their fiduciary positions and in contravention of the goal to create a bank for coconut farmers of the country, the capital stock of UCPB as of February 25, 1986 was actually held by the defendants, their lawyers, factotum and business associates, thereby finally gaining control of the UCPB by misusing the names and identities of the so-called more than one million coconut farmers.

 (b) created and/or funded with the use of coconut levy funds various

corporations, such as (COCOFED) with the active collaboration and participation of Defendants Juan Ponce Enrile, Maria Clara Lobregat most of whom comprised the interlocking officers and directors of said companies; dissipated, misused and/or misappropriated a substantial part of said coco levy funds FINALLY GAIN OWNERSHIP AND CONTROL OF THE UNITED COCONUT

PLANTERS BANK BY MISUSING THE NAMES AND/OR IDENTIFIES OF THE SO-CALLLED MORE THAN ONE MILLION COCONUT FARNMERS;

 (c) misappropriated, misused and dissipated P840 million of the (CIDF)

levy funds deposited with the National Development Corporation (NIDC) as administrator trustee of said funds and later with UCPB, of which Defendant Eduardo Cojuangco, Jr. was the Chief Executive Officer.

 (d) established and caused to be funded with coconut levy fundfs, with the

active collaboration of Defendants Ferdinand E. Marcos through the issuance of LOI 926 and of [other] defendants the United Coconut Oil Mills, Inc., a corporation controlled by Defendant Eduardo Cojuangco, Jr. and bought sixteen (16) certain competing oil mills at exorbitant prices then mothballed them.

  

(i) misused coconut levy funds to buy majority of the outstanding shares of stock of San Miguel Corporation.

  

14. Defendants Eduardo Cojuangco, Jr. of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed, conspired and confederated with each otherin setting up, through the use of the coconut levy funds the financial and corporate structures that led to the establishment of UCPB UNICOM [etc.] and more than twenty other coconut levy funded corporations including the acquisition of [SMC] shares and its institutionalization through presidential directives of the coconut monopoly.

  

16. The acts of Defendants, singly or collectively, and /or in unlawful concert with one another, constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws to the grave and irreparable damage of the Plaintiff and the Filipino people.  

CC No. 0033-F  12. Defendant Eduardo Cojuangco, Jr., served as a public officer during

the Marcos administration. 13. Having fully established himself as the undisputed coconut king with

unlimited powers to deal with the coconut levy funds, the stage was now set for Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine economic activity namely oil mills .

 

14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his association, influence, and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and the individual defendants, embarked upon devices, schemes and stratagems, including the use of defendant corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and the Filipino people.

 (a)    Having control over the coconut levy, Defendant Eduardo M.

Cojuangco invested the funds in diverse activities, such as the various businesses SMC was engaged in.; 

 (c)    Later that year [1983], Cojuangco also acquired the Soriano stocks

through a series of complicated and secret agreements, a key feature of which was a voting trust agreement that stipulated that Andres, Jr. or his heir would proxy over the vote of the shares owned by Soriano and Cojuangco.

  

(g)   All together, Cojuangco purchased 33 million shares of the SMC through the 14 holding companies

  

3.1. The same fourteen companies were in turn owned by the six (6) so-called CIIF Companies.

 (h)   Defendant Corporations are but shell corporations owned by

interlocking shareholders who have previously admitted that they are just nominee stockholders who do not have any proprietary interest over the shares in their names. [L]awyers of the Angara Abello Concepcion Regala & Cruz (ACCRA) Law offices, the previous counsel who incorporated said corporations, prove that they were merely nominee stockholders thereof. 

(l)     These companies, which ACCRA Law Offices organized for Defendant Cojuangco to be able to control more than 60% of SMC shares, were funded by institutions which depended upon the coconut levy such as the UCPB, UNICOM, (COCOLIFE), among others. Cojuangco and his ACCRA lawyers used the funds from 6 large coconut oil mills and 10 copra trading companies to borrow money from the UCPB and purchase these holding companies and the SMC stocks. Cojuangco used $ 150 million from the coconut levy, broken down as follows: 

Amount Source Purpose(in million)

 $ 22.26 Oil Mills equity in holdingCompanies $ 65.6 Oil Mills loan to holdingCompanies $ 61.2 UCPB loan to holdingCompanies [164]

 The entire amount, therefore, came from the coconut levy, some passing through the Unicom Oil mills, others directly from the UCPB. 

(m) With his entry into the said Company, it began to get favors from the Marcos government, significantly the lowering of the excise taxes on beer, one of the main products of SMC.

 15. Defendants plotted, devised, schemed, conspired and confederated

with each other in setting up, through the use of coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, [etc.], and more than twenty other coconut levy-funded corporations, including the acquisition of [SMC] shares and its institutionalization through presidential directives of the coconut monopoly.

 16. The acts of Defendants, singly or collectively, and/or in unlawful

concert with one another, constitute gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the constitution and laws of the Republic of the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino people.[73]

  

Judging from the allegations of the defendants illegal acts thereat made, it is fairly

obvious that both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and

14, series of 1986, the nature of ill-gotten wealth suits. Both deal with the recovery of

sequestered shares, property or business enterprises claimed, as alleged in the corresponding

basic complaints, to be ill-gotten assets of President Marcos, his cronies and nominees and

acquired by taking undue advantage of relationships or influence and/or through or as a result of

improper use, conversion or diversion of government funds or property. Recovery of these

assetsdetermined as shall hereinafter be discussed as prima facie ill-gottenfalls within the

unquestionable jurisdiction of the Sandiganbayan.[74]

 

P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the

Sandiganbayan with, among others, original jurisdiction over civil and criminal cases instituted

pursuant to and in connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules

and Regulations defines the term Ill-Gotten Wealth as any asset, property, business enterprise or

material possession of persons within the purview of [E.O.] Nos. 1 and 2, acquired by them

directly, or indirectly thru dummies, nominees, agents, subordinates and/or business

associates by any of the following means or similar schemes: 

(1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the public treasury; 

(2) .; 

(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government or any of its subdivisions, agencies or instrumentalities or government-owned or controlled corporations;

(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation in any business enterprise or undertaking;

 (5) Through the establishment of agricultural, industrial or commercial

monopolies or other combination and/or by the issuance, promulgation and/or implementation of decrees and orders intended to benefit particular persons or special interests; and 

(6) By taking undue advantage of official position, authority, relationship or influence for personal gain or benefit.[75] (Emphasis supplied)

 

Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in [T]he

recovery of all ill-gotten wealth accumulated by former [President] Marcos, his immediate

family, relatives, subordinates and close associates including the takeover or sequestration of all

business enterprises and entities owned or controlled by them, during his administration, directly

or through nominees, by taking undue advantage of their public office and/or using their

powers, authority, influence, connections or relationship. Complementing the aforesaid Section

2(a) is Section 1 of E.O. No. 2 decreeing the freezing of all assets in which the [Marcoses] their

close relatives, subordinates, business associates, dummies, agents or nominees have any

interest or participation.

 

The Republics averments in the amended complaints, particularly those detailing the alleged

wrongful acts of the defendants, sufficiently reveal that the subject matter thereof comprises the

recovery by the Government of ill-gotten wealth acquired by then President Marcos, his cronies

or their associates and dummies through the unlawful, improper utilization or diversion of

coconut levy funds aided by P.D. No. 755 and other sister decrees. President Marcos himself

issued these decrees in a brazen bid to legalize what amounts to private taking of the said public

funds.

 

Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed to

prove the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as

averred in the amended subdivided complaints.

 

This contention is incorrect.

 

There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show

that the Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on

the averments in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan

over the ill-gotten wealth complaints. As previously discussed, a perusal of the allegations easily

reveals the sufficiency of the statement of matters disclosing the claim of the government against

the coco levy funds and the assets acquired directly or indirectly through said funds as ill-gotten

wealth. Moreover, the Court finds no rule that directs the plaintiff to first prove the subject

matter jurisdiction of the court before which the complaint is filed. Rather, such burden falls on

the shoulders of defendant in the hearing of a motion to dismiss anchored on said ground or a

preliminary hearing thereon when such ground is alleged in the answer.

 

COCOFED et al. and Ursuas reliance on Manila Electric Company [Meralco] v.

Ortanez[76] is misplaced, there being a total factual dissimilarity between that and the case at

bar. Meralco involved a labor dispute before the Court of Industrial Relations (CIR) requiring

the interpretation of a collective bargaining agreement to determine which between a regular

court and CIR has jurisdiction. There, it was held that in case of doubt, the case may not be

dismissed for failure to state a cause of action as jurisdiction of CIR is not merely based on the

allegations of the complaint but must be proved during the trial of the case. The factual milieu

of Meralco shows that the said procedural holding is peculiar to the CIR. Thus, it is not and

could not be a precedent to the cases at bar.

 

Even PCGG v. Nepomuceno[77] is not on all fours with the cases at bench, the issue therein being

whether the regional trial court has jurisdiction over the PCGG and sequestered properties, vis--

vis the present cases, which involve an issue concerning the Sandiganbayans jurisdiction. Like

in Meralco, the holding in Nepomuceno is not determinative of the outcome of the cases at bar.

 

While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Courts ruling in Tijam

v. Sibonhonoy[78] is the leading case on estoppel relating to jurisdiction. InTijam, the Court

expressed displeasure on the undesirable practice of a party submitting his case for decision and

then accepting judgment, only if favorable, and then attacking it for lack of jurisdiction, when

adverse.

 

Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat, Ballares, et

al. and Ursua are already precluded from assailing the jurisdiction of the

Sandiganbayan. Remember that the COCOFED and the Lobregat group were not originally

impleaded as defendants in CC No. 0033. They later asked and were allowed by the

Sandiganbayan to intervene. If they really believe then that the Sandiganbayan is without

jurisdiction over the subject matter of the complaint in question, then why intervene in the first

place? They could have sat idly by and let the proceedings continue and would not have been

affected by the outcome of the case as they can challenge the jurisdiction of the Sandiganbayan

when the time for implementation of the flawed decision comes. More importantly, the decision

in the case will have no effect on them since they were not impleaded as indispensable parties.

After all, the joinder of all indispensable parties to a suit is not only mandatory, but jurisdictional

as well.[79] By their intervention, which the Sandiganbayan allowed per its resolution

dated September 30, 1991, COCOFED and Ursua have clearly manifested their desire to submit

to the jurisdiction of the Sandiganbayan and seek relief from said court. Thereafter, they filed

numerous pleadings in the subdivided complaints seeking relief and actively participated in

numerous proceedings. Among the pleadings thus filed are the Oppositions to the Motion for

Intervention interposed by the Pambansang Koalisyon ng mga Samahang Magsasaka at

Manggagawa sa Niyogan and Gabay ng Mundo sa Kaunlaran Foundation, Inc., a Class Action

Omnibus Motion to enjoin the PCGG from voting the SMC shares dated February 23, 2001

(granted by Sandiganbayan) and the Class Action Motion for a Separate Summary

Judgment dated April 11, 2001. By these acts, COCOFED et al. are now legally estopped from

asserting the Sandiganbayns want of jurisdiction, if that be the case, over the subject matter of

the complaint as they have voluntarily yielded to the jurisdiction of the Sandiganbayan. Estoppel

has now barred the challenge on Sandiganbayans jurisdiction.

 

The ensuing excerpts from Macahilig v. Heirs of Magalit[80] are instructive:

 We cannot allow her to attack its jurisdiction simply because it rendered a Decision prejudicial to her position. Participation in all stages of a case before a trial court effectively estops a party from challenging its jurisdiction. One cannot belatedly reject or repudiate its decision after voluntarily submitting to its jurisdiction, just to secure affirmative relief against ones opponent or after failing to obtain such relief. If, by deed or conduct, a party has induced another to act in a particular manner, estoppel effectively bars the former from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to the latter.

 

Lest it be overlooked, this Court has already decided that the sequestered shares

are prima facie ill-gotten wealth rendering the issue of the validity of their sequestration and of

the jurisdiction of the Sandiganbayan over the case beyond doubt. In the case of COCOFED v.

PCGG,[81] We stated that:

 

It is of course not for this Court to pass upon the factual issues thus raised. That function pertains to the Sandiganbayan in the first instance. For purposes of this proceeding, all that the Court needs to determine is whether or not there is prima facie justification for the sequestration ordered by the PCGG. The Court is satisfied that there is. The cited incidents, given the public character of the coconut levy funds, place petitioners COCOFED and its leaders and officials, at least prima facie, squarely within the purview of Executive Orders Nos. 1, 2 and 14, as construed and applied in BASECO, to wit: 

1. that ill-gotten properties (were) amassed by the leaders and supporters of the previous regime;

 a. more particularly, that (i)ll-gotten wealth was accumulated by Marcos,

his immediate family, relatives, subordinates and close associates, . (and) business enterprises and entities (came to be) owned or controlled by them, during (the Marcos) administration, directly or through nominees, by taking undue advantage of their public office and using their powers, authority, influence, connections or relationships; 

b. otherwise stated, that there are assets and properties purportedly pertaining to [the Marcoses], their close relatives, subordinates, business associates, dummies, agents or nominees which had been or were acquired by them directly or indirectly, through or as a result of the improper or illegal use of funds or properties owned by the Government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their office, authority, influence, connections or relationship, resulting in their unjust enrichment .;  

2. The petitioners claim that the assets acquired with the coconut levy funds are privately owned by the coconut farmers is founded on certain provisions of law, to wit [Sec. 7, RA 6260 and Sec. 5, Art. III, PD 1468] (Words in bracket added; italics in the original).

 

In their attempt to dismiss the amended complaints in question, petitioners asseverate that

(1) the coconut farmers cannot be considered as subordinates, close and/or business associates,

dummies, agents and nominees of Cojuangco, Jr. or the Marcoses, and (2) the sequestered shares

were not illegally acquired nor acquired through or as result of improper or illegal use or

conversion of funds belonging to the Government. While not saying so explicitly, petitioners are

doubtless conveying the idea that wealth, however acquired, would not be considered ill-gotten

in the context of EO 1, 2 and 14, s. of 1986, absent proof that the recipient or end possessor

thereof is outside the Marcos circle of friends, associates, cronies or nominees.

 

We are not convinced.

 

As may be noted, E.O. 1 and 2 advert to President Marcos, or his associates nominees. In

its most common signification, the term nominee refers to one who is designated to act for

another usually in a limited way; [82] a person in whose name a stock or bond certificate is

registered but who is not the actual owner thereof is considered a nominee. [83] Corpus Juris

Secundum describes a nominee as one:

 designated to act for another as his representative in a rather limited sense.

It has no connotation, however, other than that of acting for another, in representation of another or as the grantee of another. In its commonly accepted meaning the term connoted the delegation of authority to the nominee in a representative or nominal capacity only, and does not connote the transfer or assignment to the nominee of any property in, or ownership of, the rights of the person nominating him.[84]

 

So, the next question that comes to the fore is: would the term nominee include the more

than one million coconut farmers alleged to be the recipients of the UCPB shares?

 

Guided by the foregoing definitions, the query must be answered in the affirmative if

only to give life to those executive issuances aimed at ensuring the recovery of ill-gotten

wealth. It is basic, almost elementary, that:Laws must receive a sensible interpretation to promote the ends for which

they are enacted. They should be so given reasonable and practical construction as will give life to them, if it can be done without doing violence to reason. Conversely, a law should not be so construed as to allow the doing of an act which is prohibited by law, not so interpreted as to afford an opportunity to defeat compliance with its terms, create an inconsistency, or contravene the plain words of the law. Interpretatio fienda est ut res magis valeat quam pereat or that interpretation as will give the thing efficacy is to be adopted.[85]

 

E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of

ill-gotten assets amassed by the Marcoses, their associates, subordinates and cronies, or through

their nominees. Be that as it may, it stands to reason that persons listed as associated with the

Marcoses[86] refer to those in possession of such ill-gotten wealth but holding the same in behalf

of the actual, albeit undisclosed owner, to prevent discovery and consequently recovery.

Certainly, it is well-nigh inconceivable that ill-gotten assets would be distributed to and left in

the hands of individuals or entities with obvious traceable connections to Mr. Marcos and his

cronies. The Court can take, as it has in fact taken, judicial notice of schemes and machinations

that have been put in place to keep ill-gotten assets under wraps. These would include the setting

up of layers after layers of shell or dummy, but controlled, corporations [87] or manipulated

instruments calculated to confuse if not altogether mislead would-be investigators from

recovering wealth deceitfully amassed at the expense of the people or simply the fruits thereof.

Transferring the illegal assets to third parties not readily perceived as Marcos cronies would be

another. So it was that in PCGG v. Pena, the Court, describing the rule of Marcos as a well

entrenched plundering regime of twenty years, noted the magnitude of the past regimes

organized pillage and the ingenuity of the plunderers and pillagers with the assistance of experts

and the best legal minds in the market.[88]

 

Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term nominee, as used in the

above issuances, must be taken to mean to include any person or group of persons, natural or

juridical, in whose name government funds or assets were transferred to by Pres. Marcos, his

cronies or his associates. To this characterization must include what the Sandiganbayan

considered the unidentified coconut farmers, more than a million of faceless and nameless

coconut farmers, the alleged beneficiaries of the distributed UCPB shares, who, under the

terms of Sec. 10 of PCA A.O. No. 1, s. of 1975, were required, upon the delivery of their

respective stock certificates, to execute an irrevocable proxy in favor of the Banks

manager. There is thus ample truth to the observations - [That] the PCA provided this condition

only indicates that the PCA had no intention to constitute the coconut farmer UCPB stockholder

as a bona fide stockholder; that the 1.5 million registered farmer-stockholders were mere

nominal stockholders.[89]

 

From the foregoing, the challenge on the Sandiganbayans subject matter jurisdiction at bar must

fail.

 

II 

Petitioners COCOFED et al. were notdeprived of their right to be heard.

 

 

As a procedural issue, COCOFED, et al. and Ursua next contend that in the course of almost 20

years that the cases have been with the anti-graft court, they have repeatedly sought leave to

adduce evidence (prior to respondents complete presentation of evidence) to prove the coco

farmers actual and beneficial ownership of the sequestered shares.The Sandiganbayan, however,

had repeatedly and continuously disallowed such requests, thus depriving them of their

constitutional right to be heard.

 

This contention is untenable, their demand to adduce evidence being disallowable on the ground

of prematurity.

 

The records reveal that the Republic, after adducing its evidence in CC No. 0033-A,

subsequently filed a Motion Ad Cautelam for Leave to Present Additional Evidence datedMarch

28, 2001. This motion remained unresolved at the time the Republic interposed its Motion for

Partial Summary Judgment. The Sandiganbayan granted the later motion and accordingly

rendered the Partial Summary Judgment, effectively preempting the presentation of evidence by

the defendants in said case (herein petitioners COCOFED and Ursua).

 

Section 5, Rule 30 the Rules of Court clearly sets out the order of presenting evidence:

 SEC. 5. Order of trial.Subject to the provisions of section 2 of Rule 31,

and unless the court for special reasons otherwise directs, the trial shall be limited to the issues stated in the pre-trial order and shall proceed as follows:

 (a) The plaintiff shall adduce evidence in support of his complaint; (b) The defendant shall then adduce evidence in support of his

defense, counterclaim, cross-claim and third-party complaint; 

 (g) Upon admission of the evidence, the case shall be deemed

submitted for decision, unless the court directs the parties to argue or to submit their respective memoranda or any further pleadings.

 If several defendants or third-party defendants, and so forth. having

separate defenses appear by different counsel, the court shall determine the relative order of presentation of their evidence. (Emphasis supplied.)

 

 

Evidently, for the orderly administration of justice, the plaintiff shall first adduce evidence in

support of his complaint and after the formal offer of evidence and the ruling thereon, then

comes the turn of defendant under Section 3 (b) to adduce evidence in support of his defense,

counterclaim, cross-claim and third party complaint, if any. Deviation from such order of trial is

purely discretionary upon the trial court, in this case, the Sandiganbayan, which cannot be

questioned by the parties unless the vitiating element of grave abuse of discretion

supervenes. Thus, the right of COCOFED to present evidence on the main case had not yet

ripened. And the rendition of the partial summary judgments overtook their right to present

evidence on their defenses.

 

It cannot be stressed enough that the Republic as well as herein petitioners were well

within their rights to move, as they in fact separately did, for a partial summary judgment.

Summary judgment may be allowed where, save for the amount of damages, there is, as shown

by affidavits and like evidentiary documents, no genuine issue as to any material fact and the

moving party is entitled to a judgment as a matter of law. A genuine issue, as distinguished from

one that is fictitious, contrived and set up in bad faith, means an issue of fact that calls for the

presentation of evidence.[90] Summary or accelerated judgment, therefore, is a procedural

technique aimed at weeding out sham claims or defenses at an early stage of the litigation.

[91] Sections 1, 2 and 4 of Rule 35 of the Rules of Court on Summary Judgment, respectively

provide:

 SECTION 1. Summary judgment for claimant.A party seeking to recover

upon a claim, counterclaim, or cross-claim may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. 

SEC. 2. Summary judgment for defending party.A party against whom a claim, counterclaim or cross-claim is asserted is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his favor as to all or any part thereof. 

SEC. 4. Case not fully adjudicated on motion.If on motion under this Rule, judgment is not rendered upon the whole case or for all the reliefs sought and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel shall ascertain what material facts exist without substantial controversy and what are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. The facts so specified shall be deemed established, and the trial shall be conducted on the controverted facts accordingly.

 

Clearly, petitioner COCOFEDs right to be heard had not been violated by the mere issuance of

PSJ-A and PSJ-F before they can adduce their evidence.

 

As it were, petitioners COCOFED et al. were able to present documentary evidence in

conjunction with its Class Action Omnibus Motion dated February 23, 2001 where they

appended around four hundred (400) documents including affidavits of alleged farmers. These

petitioners manifested that said documents comprise their evidence to prove the farmers

ownership of the UCPB shares, which were distributed in accordance with valid and existing

laws.[92]

 

Lastly, COCOFED et al. even filed their own Motion for Separate Summary Judgment, an event

reflective of their admission that there are no more factual issues left to be determined at the

level of the Sandiganbayan. This act of filing a motion for summary judgment is a judicial

admission against COCOFED under Section 26, Rule 130 which declares that the act,

declaration or omission of a party as to a relevant fact may be given in evidence against him.

 

Viewed in this light, the Court has to reject petitioners self-serving allegations about being

deprived the right to adduce evidence.

 

III

 

The right to speedy trial was not violated.

 

This brings to the fore the alleged violation of petitioners right to a speedy trial and speedy

disposition of the case. In support of their contention, petitioners cite Licaros v. Sandiganbayan,

[93] where the Court dismissed the case pending before the Sandiganbayan for violation of the

accuseds right to a speedy trial.

 

It must be clarified right off that the right to a speedy disposition of case and the accuseds

right to a speedy trial are distinct, albeit kindred, guarantees, the most obvious difference being

that a speedy disposition of cases, as provided in Article III, Section 16 of the Constitution,

obtains regardless of the nature of the case: Section 16. All persons shall have the right to a speedy disposition of their

cases before all judicial, quasi-judicial, or administrative bodies.

 

In fine, the right to a speedy trial is available only to an accused and is a peculiarly criminal law

concept, while the broader right to a speedy disposition of cases may be tapped in any

proceedings conducted by state agencies. Thus, in Licaros the Court dismissed the criminal case

against the accused due to the palpable transgression of his right to a speedy trial.

 

In the instant case, the appropriate right involved is the right to a speedy disposition of cases, the

recovery of ill-gotten wealth being a civil suit.

 

Nonetheless, the Court has had the occasion to dismiss several cases owing to the

infringement of a partys right to a speedy disposition of cases.[94] Dismissal of the case for

violation of this right is the general rule. Bernat v. The Honorable Sandiganbayan (5th Division)

[95] expounds on the extent of the right to a speedy disposition of cases as follows:

 Section 16 of Article III of the Constitution guarantees the right of all

persons to a speedy disposition of their cases. Nevertheless, this right is deemed violated only when the proceedings are attended by vexatious, capricious and oppressive delays. Moreover, the determination of whether the delays are of said nature is relative and cannot be based on a mere mathematical reckoning of time. Particular regard must be taken of the facts and circumstances peculiar to each case. As a guideline, the Court in Dela Pea v. Sandiganbayan mentioned certain factors that should be considered and balanced, namely: 1) length of delay; 2) reasons for the delay; 3) assertion or failure to assert such right by the accused; and 4) prejudice caused by the delay.

  

While this Court recognizes the right to speedy disposition quite distinctly from the right to a speedy trial, and although this Court has always zealously espoused protection from oppressive and vexatious delays not attributable to the

party involved, at the same time, we hold that a partys individual rights should not work against and preclude the peoples equally important right to public justice. In the instant case, three people died as a result of the crash of the airplane that the accused was flying. It appears to us that the delay in the disposition of the case prejudiced not just the accused but the people as well. Since the accused has completely failed to assert his right seasonably and inasmuch as the respondent judge was not in a position to dispose of the case on the merits we hold it proper and equitable to give the parties fair opportunity to obtain substantial justice in the premises.

 

The more recent case of Tello v. People[96] laid stress to the restrictive dimension to the right to

speedy disposition of cases, i.e., it is lost unless seasonably invoked: In Bernat , the Court denied petitioners claim of denial of his right to a

speedy disposition of cases considering that [he] chose to remain silent for eight years before complaining of the delay in the disposition of his case. The Court ruled that petitioner failed to seasonably assert his right and he merely sat and waited from the time his case was submitted for resolution. In this case, petitioner similarly failed to assert his right to a speedy disposition of his case. He only invoked his right to a speedy disposition of cases after [his conviction]. Petitioners silence may be considered as a waiver of his right.

 

An examination of the petitioners arguments and the cited indicia of delay would reveal the

absence of any allegation that petitioners moved before the Sandiganbayan for the dismissal of

the case on account of vexatious, capricious and oppressive delays that attended the proceedings.

Following Tello, petitioners are deemed to have waived their right to a speedy disposition of the

case. Moreover, delays, if any, prejudiced the Republic as well. What is more, the alleged breach

of the right in question was not raised below. As a matter of settled jurisprudence, but subject to

equally settled exception, an issue not raised before the trial court cannot be raised for the first

time on appeal.[97] The sporting idea forbidding one from pulling surprises underpins this rule.

For these reasons, the instant case cannot be dismissed for the alleged violation of petitioners

right to a speedy disposition of the case. 

IVSections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III,

Section 5 of P.D. No. 1468, are unconstitutional.

 The Court may pass upon the constitutionality of P.D. Nos. 755, 961 and 1468.

 

Petitioners COCOFED et al. and Ursua uniformly scored the Sandiganbayan for abusing

its power of judicial review and wrongly encroaching into the exclusive domain of

Congress when it declared certain provisions of the coconut levy laws and PCA administrative

issuances as unconstitutional.

 

We are not persuaded.

 

It is basic that courts will not delve into matters of constitutionality unless unavoidable,

when the question of constitutionality is the very lis mota of the case, meaning,that the case

cannot be legally resolved unless the constitutional issue raised is determined. This rule finds

anchorage on the presumptive constitutionality of every enactment. Withal, to justify the

nullification of a statute, there must be a clear and unequivocal breach of the Constitution. A

doubtful or speculative infringement would simply not suffice.[98]

 

Just as basic is the precept that lower courts are not precluded from resolving, whenever

warranted, constitutional questions, subject only to review by this Court.

 

To Us, the present controversy cannot be peremptorily resolved without going into the

constitutionality of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFEDet al.

and Ballares et al. predicate their claim over the sequestered shares and necessarily their cause on

laws and martial law issuances assailed by the Republic on constitutional grounds. Indeed, as

aptly observed by the Solicitor General, this case is for the recovery of shares grounded on the

invalidity of certain enactments, which in turn is rooted in the shares being public in character,

purchased as they were by funds raised by the taxing and/or a mix of taxing and police powers of

the state.[99] As may be recalled, P.D. No. 755, under the policy-declaring provision, authorized

the distribution of UCPB shares of stock free to coconut farmers. On the other hand, Section 2 of

P.D. No. 755, hereunder quoted below, effectively authorized the PCA to utilize portions of the

CCSF to pay the financial commitment of the farmers to acquire UCPB and to deposit portions

of the CCSF levies with UCPB interest free. And as there also provided, the CCSF, CIDF and

like levies that PCA is authorized to collect shall be considered as non-special or fiduciary funds

to be transferred to the general fund of the Government, meaning they shall be deemed private

funds.

 

Section 2 of P.D. No. 755 reads:

 Section 2. Financial Assistance. To enable the coconut farmers to comply

with their contractual obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the collections under the [CCSF] authorized to be levied by [PD] No. 232, as amended, to pay for the financial commitments of the coconut farmers under the said agreementand, except for [PCAs] budgetary requirements , all collections under the [CCSF] Levy and (50%) of the collections under the [CIDF] shall be deposited, interest free, with the said bank of the coconut farmers and such deposits shall not be withdrawn until the the bank has sufficient equity capital ; and since the operations, and activities of the [PCA] are all in accord with the present social economic plans and programs of the Government, all collections and levies which the [PCA] is authorized to levy and collect such as but not limited to the [CCS Levy] and

the [CIDF] shall not be considered or construed, under any law or regulation, special and/or fiduciary funds and do not form part of the general funds of the national government within the contemplation of [P.D.] No. 711. (Emphasis supplied)

 

A similar provision can also be found in Article III, Section 5 of P.D. No. 961 and Article III,

Section 5 of P.D. No. 1468, which We shall later discuss in turn:

 

 

 

P.D. No. 961 

Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry Development Fund as well as all disbursements of said funds for the benefit of the coconut farmers as herein authorized shall not be construed or interpreted, under any law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment, or government share within the contemplation of P.D. 898,the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their own private capacities.[100] (Emphasis Ours)

 P.D. No. 1468

 Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all disbursement as herein authorized, shall not be construed or interpreted, under nay law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of PD 711; nor as subsidy, donation, levy government funded investment, or government share within the contemplation of PD 898, the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut

farmers shall be owned by them in their private capacities.[101] (Emphasis Ours.)

  

In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos.

961 and 1468, could have been the only plausible means by which close to a purported million

and a half coconut farmers could have acquired the said shares of stock. It has, therefore, become

necessary to determine the validity of the authorizing law, which made the stock transfer and

acquisitions possible.

 

To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and 1468

in light of the constitutional proscription against the use of special funds save for the purpose it

was established. Otherwise, petitioners claim of legitimate private ownership over UCPB

shares and indirectly over SMC shares held by UCPBs subsidiaries will have no leg to stand on,

P.D. No. 755 being the only law authorizing the distribution of the SMC and UCPB shares of

stock to coconut farmers, and with the aforementioned provisions actually stating and holding

that the coco levy fund shall not be considered as a special not even general fund, but shall be

owned by the farmers in their private capacities.[102]

 

The Sandiganbayans ensuing ratiocination on the need to pass upon constitutional issues the

Republic raised below commends itself for concurrence:

 This Court is convinced of the imperative need to pass upon the issues of constitutionality raised by Plaintiff. The issue of constitutionality of the provisions of P.D. No. 755 and the laws related thereto goes to the very core of Plaintiffs causes of action and defenses thereto. It will serve the best interest of justice to define this early the legal framework within which this case shall be heard and tried, taking into account the admission of the parties and the established facts, particularly those relating to the main substance of the defense of Lobregat, COCOFED, et al. and Ballares, et al., which is anchored on the laws being assailed by Plaintiff on constitutional grounds.  

The Court is also mindful that lower courts are admonished to observe a becoming modesty in examining constitutional questions, but that they are nonetheless not prevented from resolving the same whenever warranted, subject only to review by the highest tribunal (Ynot v. Intermediate Appellate Court).

  

It is true that, as a general rule, the question of constitutionality must be raised at the earliest opportunity. The Honorable Supreme Court has clearly stated that the general rule admits of exceptions, thus: 

 For courts will pass upon a constitutional question only when presented before it in bona fide cases for determination, and the fact that the question has not been raised before is not a valid reason for refusing to allow it to be raised later. It has been held that the determination of a constitutional question is necessary whenever it is essential to the decision of the case as where the right of a party is founded solely on a statute, the validity of which is attacked. 

In the case now before us, the allegations of the Subdivided Complaint are consistent with those in the subject Motion, and they sufficiently raise the issue of constitutionality of the provisions of laws in question. The Third Amended Complaint (Subdivided) states: 

(ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of government funds to advance his own private and commercial interests, Cojuangco, Jr. caused the issuance of PD 755 (a) declaring that the coconut levy funds shall not be considered special and fiduciary and trusts funds and do not form part of the general funds of the National Government, conveniently repealing for that purpose a series of coconut levy funds as special, fiduciary, trust and government funds.  (iv) To perpetuate his opportunity to deal with and make use the coconut levy funds to build his economic empire, Cojuangco, Jr. caused the issuance by Defendant Ferdinand E. Marcos of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with UCPB, interest free, to the prejudice of the government. 

The above-quoted allegations in the Third Amended Complaint (Subdivided) already question the legitimacy of the exercise by former President Marcos of his legislative authority when he issued P.D. Nos. 755 and 1468. The provision of Sec. 5, Art. III of P.D. 961 is substantially similar to the provisions of the aforesaid two [PDs]. P.D. No. 755 allegedly legitimized the highly anomalous and irregular use and diversion of government funds to advance his [defendant Cojuangcos] own private and commercial interest. The issuance of the said [PD] which has the force and effect of a law can only be assailed on constitutional grounds. The merits of the grounds adverted to in the allegations of the Third Amended Complaint (Subdivided) can only be resolved by this Court by testing the questioned [PDs], which are considered part of the laws of the land. As early as June 20, 1989, this Court in its Resolution expressed this Courts understanding of the import of the allegations of the complaint, as follows: 

It is likewise alleged in the Complaint that in order to legitimize the diversion of funds, defendant Ferdinand E. Marcos issued the Presidential Decrees referred to by the movants. This is then the core of Plaintiffs complaint: that, insofar as the coconut levy is concerned, these decrees had been enacted as tools for the acquisition of ill-gotten wealth for specific favored individuals. Even if Plaintiff may not have said so effectively, the complaint in fact disputes the legitimacy, and, if one pleases, the constitutionality of such enactments. The issue is validly raised on the face of the complaint and defendants must respond to it. 

Since the question of constitutionality may be raised even on appeal if the determination of such a question is essential to the decision of the case, we find more reason to resolve this constitutional question at this stage of the proceedings, where the defense is grounded solely on the very laws the constitutionality of which are being questioned and where the evidence of the defendants would seek mainly to prove their faithful and good faith compliance with the said laws and their implementing rules and regulations.[103] (Emphasis added.)

 

 The Courts rulings in COCOFED v. PCGG and Republic v. Sandiganbayan, as law of the case, are speciously invoked .  

 

To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners would

sneak in the argument that the Court has, in three separate instances, upheld the validity, and

thumbed down the Republics challenge to the constitutionality, of said laws imposing the

different coconut levies and prescribing the uses of the fund collected. The separate actions of

the Court, petitioners add, would conclude the Sandiganbayan on the issue of constitutionality of

said issuances, following the law-of-the-case principle. Petitioners allege:

 Otherwise stated, the decision of this Honorable Court in the COCOFED Case overruling the strict public fund theory espoused by the Respondent Republic, upholding the propriety of the laws imposing the collections of the different Coconut Levies and expressly allowing COCOFED, et al., to prove that the Sequestered Assets have legitimately become their private properties had become final and immutable.[104]

 

Petitioners are mistaken.

 

Yu v. Yu,[105] as effectively reiterated in Vios v. Pantangco,[106] defines and explains the

ramifications of the law of the case principle as follows:

 Law of the case has been defined as the opinion delivered on a former

appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.

 

Otherwise put, the principle means that questions of law that have been previously raised and

disposed of in the proceedings shall be controlling in succeeding instances where the same legal

question is raised, provided that the facts on which the legal issue was predicated continue to be

the facts of the case before the court. Guided by this definition, the law of the case principle

cannot provide petitioners any comfort. We shall explain why.

 

In the first instance, petitioners cite COCOFED v. PCGG.[107] There, respondent PCGG

questioned the validity of the coconut levy laws based on the limits of the states taxing and

police power, as may be deduced from the ensuing observations of the Court:

 . Indeed, the Solicitor General suggests quite strongly that the laws

operating or purporting to convert the coconut levy funds into private funds, are a transgression of the basic limitations for the licit exercise of the state's taxing and police powers, and that certain provisions of said laws are merely clever stratagems to keep away government audit in order to facilitate misappropriation of the funds in question.

 The utilization and proper management of the coconut levy funds, [to

acquire shares of stocks for coconut farmers and workers] raised as they were by the States police and taxing power are certainly the concern of the Government. The coconut levy funds are clearly affected with public interest. Until it is demonstrated satisfactorily that they have legitimately become private funds, they must prima facie be accounted subject to measures prescribed in EO Nos. 1, 2, and 14 to prevent their concealment, dissipation, etc.[108] [Words in bracket added.]

 

The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the shares of

stock bought with the coconut levy funds to coconut farmers. This must be distinguished with the

issues in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of Article VI

of the 1987 Constitution as well as to whether P.D. No. 755 constitutes undue delegation of

legislative power. Clearly, the issues in both sets of cases are so different as to preclude the

application of the law of the case rule.

The second and third instances that petitioners draw attention to refer to the rulings

in Republic v. Sandiganbayan, where the Court by Resolution of December 13, 1994, as

reiterated in another resolution dated March 26, 1996, resolved to deny the separate motions of

the Republic to resolve legal questions on the character of the coconut levy funds, more

particularly to declare as unconstitutional (a) coconut levies collected pursuant to various

issuances as public funds and (b) Article III, Section 5 of P.D. No. 1468.

 

Prescinding from the foregoing considerations, petitioners would state: Having filed at least three

(3) motions seeking, among others, to declare certain provisions of the Coconut Levy Laws

unconstitutional and having been rebuffed all three times by this Court, the Republic - and

necessarily Sandiganbayan should have followed as [they were] legally bound by this Courts

prior determination on that above issue of constitutionality under the doctrine of Law of the

Case.

 

Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the

coconut levy laws or some of their provisions. It did not declare that the UCPB shares acquired

with the use of coconut levy funds have legitimately become private.

 The coconut levy funds are in the nature of taxes and can only be used for public purpose.   Consequently, they cannot be used to purchase shares of stocks to be given for free to private individuals.

Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the States

inherent power of taxation. As We wrote in Republic v. COCOFED:[109]

 Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs. Based on its definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into these elements for the following reasons: (a) They were generated by virtue of statutory enactments imposed on the coconut farmers requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut Consumer[s] Stabilization Fund (CCSF), mandated the following: 

a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut products, shall be imposed on every first sale, in accordance with the mechanics established under RA 6260, effective at the start of business hours on August 10, 1973.

 

The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government. The coco levies were further clarified in amendatory laws, specifically PD

No. 961 and PD No. 1468 in this wise: 

The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products. The levy shall be paid by such copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products under such rules and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority, the current levy being collected shall be continued. Like other tax measures, they were not voluntary payments or donations by

the people. They were enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:

 3. Any person or firm who violates any provision of this

Decree or the rules and regulations promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or suffer cancellation of licenses to operate, or both, at the discretion of the Court. Such penalties were later amended thus: .  (b) The coconut levies were imposed pursuant to the laws enacted by the

proper legislative authorities of the State. Indeed, the CCSF was collected under PD No. 276.

 (c) They were clearly imposed for a public purpose. There is absolutely

no question that they were collected to advance the governments avowed policy of protecting thecoconut industry. This Court takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our nation, and coconuts and their byproducts occupy a leading position among the countrys export products.

 

Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State.

 Even if the money is allocated for a special purpose and raised by special

means, it is still public in character. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises were organized and financed with revenues derived from coconut levies imposed under a succession of law of the late dictatorship with deposed Ferdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resulting coconut industry monopoly. The Court continued: . It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the States concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability.[110] (Emphasis Ours)

 

 

We have ruled time and again that taxes are imposed only for a public purpose.[111] They

cannot be used for purely private purposes or for the exclusive benefit of private persons.

[112] When a law imposes taxes or levies from the public, with the intent to give undue benefit or

advantage to private persons, or the promotion of private enterprises, that law cannot be said to

satisfy the requirement of public purpose.[113] In Gaston v. Republic Planters Bank, the

petitioning sugar producers, sugarcane planters and millers sought the distribution of the shares

of stock of the Republic Planters Bank, alleging that they are the true beneficial owners thereof.

[114] In that case, the investment, i.e., the purchase of the said bank, was funded by the deduction

of PhP 1.00 per picul from the sugar proceeds of the sugar producers pursuant to P.D. No. 388.

[115] In ruling against the petitioners, the Court held that to rule in their favor would contravene

the general principle that revenues received from the imposition of taxes or levies cannot be used

for purely private purposes or for the exclusive benefit of private persons. [116] The Court amply

reasoned that the Stabilization Fund must be utilized for the benefit of the entire sugar industry,

and all its components, stabilization of the domestic market including foreign market, the

industry being of vital importance to the countrys economy and to national interest.[117]

 

Similarly in this case, the coconut levy funds were sourced from forced exactions decreed

under P.D. Nos. 232, 276 and 582, among others,[118] with the end-goal of developing the entire

coconut industry.[119] Clearly, to hold therefore, even by law, that the revenues received from the

imposition of the coconut levies be used purely for private purposes to be owned by private

individuals in their private capacity and for their benefit, would contravene the rationale

behind the imposition of taxes or levies.

 

Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of

special funds into a private fund for the benefit of private individuals. In the same vein, We

cannot subscribe to the idea of what appears to be an indirect if not exactly direct conversion of

special funds into private funds, i.e., by using special funds to purchase shares of stocks, which

in turn would be distributed for free to private individuals. Even if these private individuals

belong to, or are a part of the coconut industry, the free distribution of shares of stocks purchased

with special public funds to them, nevertheless cannot be justified. The ratio in Gaston,[120] as

expressed below, applies mutatis mutandis to this case:

 The stabilization fees in question are levied by the State for a special

purpose that of financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market. The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them as state funds even though they are held for a special purpose.

  

That the fees were collected from sugar producers,[etc.], and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their benefit nor make them the beneficial owners of the shares so purchased.   It is but rational that the fees be collected from them since it is also they who are benefited from the expenditure of the funds derived from it.   .[121] (Emphasis Ours.)

 

In this case, the coconut levy funds were being exacted from copra exporters, oil millers,

desiccators and other end-users of copra or its equivalent in other coconut products. [122] Likewise

so, the funds here were channeled to the purchase of the shares of stock in UCPB. Drawing a

clear parallelism between Gaston and this case, the fact that the coconut levy funds were

collected from the persons or entities in the coconut industry, among others, does not and cannot

entitle them to be beneficial owners of the subject funds or more bluntly, owners thereof in their

private capacity. Parenthetically, the said private individuals cannot own the UCPB shares of

stocks so purchased using the said special funds of the government.[123]

 Coconut levy funds are special public funds of the government.  

Plainly enough, the coconut levy funds are public funds. We have ruled in Republic v.

COCOFED that the coconut levy funds are not only affected with public interest; they are prima

facie public funds.[124] In fact, this pronouncement that the levies are government funds was

admitted and recognized by respondents, COCOFED, et al., in G.R. No. 147062-64.[125] And

more importantly, in the same decision, We clearly explained exactly what kind of government

fund the coconut levies are. We were categorical in saying that coconut levies are treated as

special funds by the very laws which created them:

 Finally and tellingly, the very laws governing the coconut levies recognize

their public character. Thus, the third Whereas clause of PD No. 276 treats them as special funds for a specific public purpose. Furthermore, PD No. 711 transferred to the general funds of the State all existing special and fiduciary funds including the CCSF. On the other hand, PD No. 1234 specifically declared the CCSF as a special fund for a special purpose, which should be treated as a special account   in the National Treasury.[126] (Emphasis Ours.)  

If only to stress the point, P.D. No. 1234 expressly stated that coconut levies are special

funds to be remitted to the Treasury in the General Fund of the State, but treated as Special

Accounts:

 Section 1. All income and collections for Special or Fiduciary

Funds authorized by law shall be remitted to the Treasury and treated as Special Accounts in the General Fund,including the following:

 (a) [PCA] Development Fund, including all income derived therefrom

under Sections 13 and 14 of [RA] No. 1145; Coconut Investments Fund under Section 8 of [RA] No. 6260, including earnings, profits, proceeds and interests derived therefrom; Coconut Consumers Stabilization Funds under Section 3-A of PD No. 232, as inserted by Section 3 of P.D. No. 232, as inserted by Section 2 of P.D. No. 583; and all other fees accruing to the [PCA] under the provisions of Section 19 of [RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and all other income accruing to the [PCA] under existing laws.[127] (Emphasis Ours)

  

Moreover, the Court, in Gaston, stated the observation that the character of a stabilization fund

as a special fund is emphasized by the fact that the funds are deposited in the Philippine National

Bank [PNB] and not in the Philippine Treasury, moneys from which may be paid out only in

pursuance of an appropriation made by law.[128] Similarly in this case, Sec.1 (a) of P.D. No. 276

states that the proceeds from the coconut levy shall be deposited with the PNB, then a

government bank, or any other government bank under the account of the CCSF, as a separate

trust fund, which shall not form part of the governments general fund.[129] And even

assuming arguendo that the coconut levy funds were transferred to the general fund pursuant to

P.D. No. 1234, it was with the specific directive that the same be treated as special accounts in

the general fund.[130]

 

 

 The coconut levy funds can only be used for the special purpose and the balance thereof should revert back to the general fund. Consequently, their subsequent reclassification as a private fund to be owned by private individuals in their private capacities under P.D. Nos. 755, 961 and 1468 are unconstitutional.  

To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution, restating a general

principle on taxation, enjoins the disbursement of a special fund in accordance with the special

purpose for which it was collected, the balance, if there be any, after the purpose has been

fulfilled or is no longer forthcoming, to be transferred to the general funds of the government,

thus:

 

Section 29(3).

 (3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Emphasis Ours)

 

Correlatively, Section 2 of P.D. No. 755 clearly states that:

 Section 2. Financial Assistance. To enable the coconut farmers to comply

with their contractual obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the collections under the Coconut Consumers Stabilization Fund [CCSF] authorized to be levied by [P.D.] 232, as amended, to pay for the financial commitments of the coconut farmers under the said agreement. and the Coconut Industry Development Fund as prescribed by Presidential Decree No. 582 shall not be considered or construed, under any law or regulation, special and/or fiduciary funds and do not form part of the general funds of the national government within the contemplation of Presidential Decree No. 711. (Emphasis Ours)

 

 

Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos. 961 and 1468 provides that

the CCSF shall not be construed by any law as a special and/or trust fund, the stated intention

being that actual ownership of the said fund shall pertain to coconut farmers in their private

capacities.[131] Thus, in order to determine whether the relevant provisions of P.D. Nos. 755, 961

and 1468 complied with Article VI, Section 29 (3) of the 1987 Constitution, a look at the public

policy or the purpose for which the CCSF levy was imposed is necessary.

 

The CCSF was established by virtue of P.D. No. 276 wherein it is stated that:

 WHEREAS, an escalating crisis brought about by an abnormal situation in

the world market for fats and oils has resulted in supply and price dislocations in the domestic market for coconut-based goods, and has created hardships for consumers thereof;

 WHEREAS, the representatives of the coconut industry have proposed

the implementation of an industry-financed stabilization scheme which will permit socialized pricing of coconut-based commodities;

 WHEREAS, it is the policy of the State to promote the welfare and

economic well-being of the consuming public; 

. 

1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is hereby authorized to formulate and immediately implement a stabilization scheme for coconut-based consumer goods, along the following general guidelines:

 

(a) .The proceeds of the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the CCSF as a separate trust fund. 

(b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by the Price Control Council.:

 . 

As couched, P.D. No. 276 created and exacted the CCSF to advance the governments

avowed policy of protecting the coconut industry.[132] Evidently, the CCSF was originally set up

as a special fund to support consumer purchases of coconut products. To put it a bit differently,

the protection of the entire coconut industry, and even more importantly, for the consuming

public provides the rationale for the creation of the coconut levy fund. There can be no quibbling

then that the foregoing provisions of P.D. No. 276 intended the fund created and set up

therein not especially for the coconut farmers but for the entire coconut industry, albeit the

improvement of the industry would doubtlessredound to the benefit of the farmers. Upon the

foregoing perspective, the following provisions of P.D. Nos. 755, 961 and 1468 insofar as they

declared, as the case may be, that:[the coconut levy] fund and the disbursements thereof [shall

be] authorized for the benefit of the coconut farmers and shall be owned by them in their private

capacities;[133] or the coconut levy fund shall not be construed by any law to be a special and/or

fiduciary fund, and do not therefore form part of the general fund of the national government

later on;[134] or the UCPB shares acquired using the coconut levy fund shall be distributed to the

coconut farmers for free,[135] violated the special public purpose for which the CCSF was

established.

 

In sum, not only were the challenged presidential issuances unconstitutional for decreeing

the distribution of the shares of stock for free to the coconut farmers and, therefore, negating the

public purpose declared by P.D. No. 276, i.e., to stabilize the price of edible oil[136] and to protect

the coconut industry.[137] They likewise reclassified, nay treated, the coconut levy fund as private

fund to be disbursed and/or invested for the benefit of private individuals in their private

capacities, contrary to the original purpose for which the fund was created. To compound the

situation, the offending provisions effectively removed the coconut levy fund away from the

cavil of public funds which normally can be paid out only pursuant to an appropriation made by

law.[138] The conversion of public funds into private assets was illegally allowed, in fact

mandated, by these provisions. Clearly therefore, the pertinent provisions of P.D. Nos. 755, 961

and 1468 are unconstitutional for violating Article VI, Section 29 (3) of the Constitution. In this

context, the distribution by PCA of the UCPB shares purchased by means of the coconut levy

fund a special fund of the government to the coconut farmers, is therefore void.

 

We quote with approval the Sandiganbayans reasons for declaring the provisions of P.D. Nos.

755, 961 and 1468 as unconstitutional:

 It is now settled, in view of the ruling in Republic v. COCOFED, et al., supra, that Coconut levy funds are raised with the use of the police and taxing powers of the State; that they are levies imposed by the State for the benefit of the coconut industry and its farmers and that they were clearly imposed for a public purpose. This public purpose is explained in the said case, as follows: 

. c) They were clearly imposed for a public purpose. There is absolutely no question that they were colleted to advance the governments avowed policy of protecting the coconut industry. Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State, as held in Caltex Philippines v. COA and Osmea v. Orbos.  

The avowed public purpose for the disbursement of the CCSF is contained in the perambulatory clauses and Section 1 of P.D. No. 755. The imperativeness of enunciating the public purpose of the expenditure of funds raised through taxation is underscored in the case of Pascual v. The Secretary of Public Works and Communications, et al, supra, which held: 

As regards the legal feasibility of appropriating public funds for a private purpose the principle according to Ruling Case Law, is this: 

It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose it is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interests to be affected nor the degree to which the general advantage of the community, and thus the public welfare may be ultimately benefited by their promotion. Incidental advantage to the public or to the state, which results from the promotion of private interests and the prosperity of private enterprises or business, does not justify their aid by the use of public money. 25 R.L.C. pp. 398-400) The rule is set forth in Corpus Juris Secundum in the following language: 

 The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interests, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. (81 C.J.S. p. 1147) 

Needless to say, this Court is fully in accord with the foregoing views. Besides, reflecting as they do, the established jurisprudence in the United States, after whose constitutional system ours has been patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law. 

The gift of funds raised by the exercise of the taxing powers of the State which were converted into shares of stock in a private corporation, slated for free distribution to the coconut farmers, can only be accorded constitutional sanction if it will directly serve the public purpose declared by law.[139]

  Section 1 of P.D. No. 755, as well as PCA Administrative Order No. 1, Series of 1975 (PCA AO 1), and Resolution No. 074-75, are invalid delegations of legislative power.

 

Petitioners argue that the anti-graft court erred in declaring Section 1 of PD 755, PCA

Administrative Order No. 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of

alleged but unproven and unsubstantiated flaws in their implementation. Additionally, they

explain that said court erred in concluding that Section 1 of PD No. 755 constitutes an undue

delegation of legislative power insofar as it authorizes the PCA to promulgate rules and

regulations governing the distribution of the UCPB shares to the farmers.

 

These propositions are meritless.

 

The assailed PSJ-A noted the operational distribution nightmare faced by PCA and the mode of

distribution of UCPB shares set in motion by that agency left much room for diversion. Wrote

the Sandiganbayan:

 The actual distribution of the bank shares was admittedly an enormous operational problem which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75, quoted hereunder discloses how the undistributed shares of stocks due to anonymous

coconut farmers or payors of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank:

 Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain undistributed shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be apportioned among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated.

 The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same problem of distribution of the bank shares.:

  Thus, when 51,200,806 shares in the bank remained undistributed, the

PCA deemed it proper to give a bonanza to coconut farmers who already got their bank shares, by giving them an additional share for each share owned by them and by converting their fractional shares into full shares. The rest of the shares were then transferred to a private organization, the COCOFED, for distribution to those determined to be bona fide coconut farmers who had not received shares of stock of the Bank. .

 The PCA thus assumed, due to lack of adequate guidelines set by P.D.

No. 755, that it had complete authority to define who are the coconut farmers and to decide as to who among the coconut farmers shall be given the gift of bank shares; how many shares shall be given to them, and what basis it shall use to determine the amount of shares to be distributed for free to the coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm.

 Regarding the second requisite of standard, it is settled that legislative standard need not be expressed. We observed, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations 074-78, did not take into consideration the accomplishment of the public purpose or the national standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the coconut industry and as a consequence thereof, to make the coconut farmers participants in and beneficiaries of such growth and development. The said PCA issuances did nothing more than provide guidelines as to whom the UCPB shares were to be distributed and how many bank shares shall be allotted to the beneficiaries. There was no mention of how the distributed shares shall be used to achieve exclusively or at least directly or primarily the aim or public purpose enunciated by P.D. No.

755. The numerical or quantitative distribution of shares contemplated by the PCA regulations which is a condition for the validly of said administrative issuances. There was a reversal of priorities. The narrow private interests prevailed over the laudable objectives of the law. However, under the May 25, 1975 agreement implemented by the PCA issuances, the PCA acquired only 64.98% of the shares of the bank and even the shares covering the said 64.98% were later on transferred to non-coconut farmers.

 The distribution for free of the shares of stock of the CIIF Companies is

tainted with the above-mentioned constitutional infirmities of the PCA administrative issuances. In view of the foregoing, we cannot consider the provision of P.D. No. 961 and P.D. No. 1468 and the implementing regulations issued by the PCA as valid legal basis to hold that assets acquired with public funds have legitimately become private properties. [140] (Emphasis added.)

 

P.D. No. 755 involves an invalid delegation of legislative power, a concept discussed

in Soriano v. Laguardia,[141] citing the following excerpts from Edu v. Ericta:It is a fundamental that Congress may not delegate its legislative

power. What cannot be delegated is the authority to make laws and to alter and repeal them; the test is the completeness of the statute in all its term and provisions when it leaves the hands of the legislature. To determine whether or not there is an undue delegation of legislative power, the inquiry must be directed to the scope and definiteness of the measure enacted. The legislature does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his authority.

 To avoid the taint of unlawful delegation, there must be a standard, which

implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations.[142] (Emphasis supplied)

 

Jurisprudence is consistent as regards the two tests, which must be complied with to determine

the existence of a valid delegation of legislative power. In Abakada Guro Party List, et al. v.

Purisima,[143] We reiterated the discussion, to wit:

 Two tests determine the validity of delegation of legislative power: (1) the

completeness test and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried out or implemented by the delegate. It lays down a sufficient standard when it provides adequate guidelines or limitations in the law to map out the boundaries of the delegates authority and prevent the delegation from running riot. To be sufficient, the standard must specify the limits of the delegates authority, announce the legislative policy and identify the conditions under which it is to be implemented.

 

In the instant case, the requisite standards or criteria are absent in P.D. No. 755. As may

be noted, the decree authorizes the PCA to distribute to coconut farmers, for free, the shares of

stocks of UCPB and to pay from the CCSF levy the financial commitments of the coconut

farmers under the Agreement for the acquisition of such bank. Yet, the decree does not even state

who are to be considered as coconut farmers. Would, say, one who plants a single coconut tree

be already considered a coconut farmer and, therefore, entitled to own UCPB shares? If so, how

many shares shall be given to him? The definition of a coconut farmer and the basis as to the

number of shares a farmer is entitled to receive for free are important variables to be determined

by law and cannot be left to the discretion of the implementing agency.

 

Moreover, P.D. No. 755 did not identify or delineate any clear condition as to how the

disposition of the UCPB shares or their conversion into private ownership will redound to the

advancement of the national policy declared under it. To recall, P.D. No. 755 seeks to accelerate

the growth and development of the coconut industry and achieve a vertical integration thereof so

that coconut farmers will become participants in, and beneficiaries of, such growth and

development.[144] The Sandiganbayan is correct in its observation and ruling that the said law

gratuitously gave away public funds to private individuals, and converted them exclusively into

private property without any restriction as to its use that would reflect the avowed national policy

or public purpose. Conversely, the private individuals to whom the UCPB shares were

transferred are free to dispose of them by sale or any other mode from the moment of their

acquisition. In fact and true enough, the Sandiganbayan categorically stated in its Order dated

March 11, 2003,[145]that out of the 72.2% shares and increased capital stock of the FUB

(later UCPB) allegedly covered by the May 25, 1975 Agreement,[146] entirely paid for by PCA,

7.22% were given to Cojuangco and the remaining 64.98%, which were originally held by PCA

for the benefit of the coconut farmers, were later sold or transferred to non-coconut farmers.

[147] Even the proposed rewording of the factual allegations of Lobregat, COCOFED, et al. and

Ballares, et al., reveals that indeed, P.D. No. 755 did not provide for any guideline, standard,

condition or restriction by which the said shares shall be distributed to the coconut farmers that

would ensure that the same will be undertaken to accelerate the growth and development of the

coconut industry pursuant to its national policy. The proposed rewording of admissions reads:

 There were shares forming part of the aforementioned 64.98% which

were, after their distribution, for free, to the coconut farmers as required by P.D. No. 755, sold or transferredrespectively by individual coconut farmers who were then the registered stockholders of those UCPB shares to non-coconut farmers.[148]

 

Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte blanche to distribute to coconut

farmers UCPB shares at the level it may determine, as well as the full disposition of such shares

to private individuals in their private capacity without any conditions or restrictions that would

advance the laws national policy or public purpose, present a case of undue delegation of

legislative power. As such, there is even no need to discuss the validity of the administrative

orders and resolutions of PCA implementing P.D. No. 755. Water cannot rise higher than its

source. 

Even so, PCA AO 1 and PCA Resolution No. 078-74, are in themselves, infirm under the

undue delegation of legislative powers. Particularly, Section 9 of PCA AO I provides:

 SECTION 9. Fractional and Undistributed Shares Fractional shares and

shares which remain undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of COCOFUND receipts in the name of an unqualified individual, after the final distribution is made on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be appointed among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated.

 

The foregoing provision directs and authorizes the distribution of fractional and

undistributed shares as a consequence of the failure of the coconut farmers with Coco Fund

receipts to register them, even without a clear mandate or instruction on the same in any

pertinent existing law. PCA Resolution No. 078-74 had a similar provision, albeit providing

more detailed information. The said Resolution identified 51,200,806 shares of the bank that

remained undistributed and PCA devised its own rules as to how these undistributed and

fractional shares shall be disposed of, notwithstanding the dearth as to the standards or

parameters in the laws which it sought to implement.

 

Eventually, what happened was that, as correctly pointed out by the Sandiganbayan, the

PCA gave a bonanza to supposed coconut farmers who already got their bank shares, by giving

them extra shares according to the rules established on its own by the PCA under PCA AO 1 and

Resolution No. 078-74. Because of the lack of adequate guidelines under P.D. No. 755 as to how

the shares were supposed to be distributed to the coconut farmers, the PCA thus assumed that it

could decide for itself how these shares will be distributed. This obviously paved the way to

playing favorites, if not allowing outright shenanigans. In this regard, this poser raised in the

Courts February 16, 1993 Resolution in G.R. No. 96073 is as relevant then as it is now:  How is it

that shares of stocks in such entities which was organized and financed by revenues derived from

coconut levy funds which were imbued with public interest ended up in private hands who are

not farmers or beneficiaries; and whether or not the holders of said stock, who in one way or

another had had some part in the collection, administration, disbursement or other disposition of

the coconut levy funds were qualified to acquire stock in the corporations formed and operated

from these funds. [149]

 

Likewise, the said PCA issuances did not take note of the national policy or public

purpose for which the coconut levy funds were imposed under P.D. No. 755, i.e. the acceleration

of the growth and development of the entire coconut industry, and the achievement of a vertical

integration thereof that could make the coconut farmers participants in, and beneficiaries of, such

growth and development.[150] Instead, the PCA prioritized the coconut farmers themselves by

fully disposing of the bank shares, totally disregarding the national policy for which the funds

were created. This is clearly an undue delegation of legislative powers. 

With this pronouncement, there is hardly any need to establish that the sequestered assets are ill-

gotten wealth. The documentary evidence, the P.D.s and Agreements, prove that the transfer of

the shares to the more than one million of supposed coconut farmers was tainted with illegality.

 Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468 violate Article IX (D) (2) of the 1987 Constitution.  

Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut levy funds from the

coffer of the public funds, or, to be precise, privatized revenues derived from the coco

levy. Particularly, the aforesaid Section 5 provides:

 

Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry Development fund as well as all disbursements of said funds for the benefit of the coconut farmers as herein authorized shall not be construed or interpreted, under any law or regulation, as special and/or fiduciary funds, or as part of the general funds of the national government within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded investment, or government share within the contemplation of P.D. 898 the intention being that said Fund and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned in their own private capacity.[151] (Emphasis Ours)

  

The same provision is carried over in Article III, Section 5 of P.D. No. 1468, the  Revised

Coconut Industry Code: 

These identical provisions of P.D. Nos. 961 and 1468 likewise violate Article IX (D),

Section 2(1) of the Constitution, defining the powers and functions of the Commission on Audit

(COA) as a constitutional commission:

 Sec. 2. (1) The Commission on Audit shall have the power, authority,

and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled

corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries;.[152] (Emphasis Ours)

 

A similar provision was likewise previously found in Article XII (D), Section 2 (1) of the 1973

Constitution, thus:

 Section 2. The Commission on Audit shall have the following powers and functions: 

(1) Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the revenues and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations; keep the general accounts of the government and, for such period as may be provided by law, preserve the vouchers pertaining thereto; and promulgate accounting and auditing rules and regulations including those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or use of funds and property.[153] (Emphasis Ours)

 

The Constitution, by express provision, vests the COA with the responsibility for State audit.

[154] As an independent supreme State auditor, its audit jurisdiction cannot be undermined by any

law. Indeed, under Article IX (D), Section 3 of the 1987 Constitution, [n]o law shall be passed

exempting any entity of the Government or its subsidiary in any guise whatever, or any

investment of public funds, from the jurisdiction of the Commission on Audit.[155] Following the

mandate of the COA and the parameters set forth by the foregoing provisions, it is clear that it

has jurisdiction over the coconut levy funds, being special public funds. Conversely, the COA

has the power, authority and duty to examine, audit and settle all accounts pertaining to the

coconut levy funds and, consequently, to the UCPB shares purchased using the said

funds. However, declaring the said funds as partaking the nature of private funds, ergo subject to

private appropriation, removes them from the coffer of the public funds of the government, and

consequently renders them impervious to the COA audit jurisdiction. Clearly, the pertinent

provisions of P.D. Nos. 961 and 1468 divest the COA of its constitutionally-mandated function

and undermine its constitutional independence.

 

The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a classic

example of an investment of public funds. The conversion of these special public funds into

private funds by allowing private individuals to own them in their private capacities is something

else. It effectively deprives the COA of its constitutionally-invested power to audit and settle

such accounts. The conversion of the said shares purchased using special public funds into pure

and exclusive private ownership has taken, or will completely take away the said funds from the

boundaries with which the COA has jurisdiction. Obviously, the COA is without audit

jurisdiction over the receipt or disbursement of private property. Accordingly, Article III, Section

5 of both P.D. Nos. 961 and 1468 must be struck down for being unconstitutional, be they

assayed against Section 2(1), Article XII (D) of the 1973 Constitution or its counterpart

provision in the 1987 Constitution.

 

The Court, however, takes note of the dispositive portion of PSJ-A, which states that:[156]

 

 2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be considered special and/or fiduciary funds nor part of the general funds of the national government and similar provisions of Sec. 3, Art. III, P.D. 961 and Sec. 5, Art. III, P.D. 1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). (Emphasis Ours) 

 

However, a careful reading of the discussion in PSJ-A reveals that it is Section 5 of

Article III of P.D. No. 961 and not Section 3 of said decree, which is at issue, and which was

therefore held to be contrary to the Constitution. The dispositive portion of the said PSJ should

therefore be corrected to reflect the proper provision that was declared as unconstitutional, which

is Section 5 of Article III of P.D. No. 961 and not Section 3 thereof.

 

V

 The CIIF Companies and the CIIF Block

of SMC shares are public funds/assets

 

From the foregoing discussions, it is fairly established that the coconut levy funds are

special public funds. Consequently, any property purchased by means of the coconut levy funds

should likewise be treated as public funds or public property, subject to burdens and restrictions

attached by law to such property.

 

In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds.

[157] On the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF

Oil Mills.[158] Conversely, these companies were acquired using or whose capitalization comes

from the coconut levy funds. However, as in the case of UCPB, UCPB itself distributed a part of

its investments in the CIIF oil mills to coconut farmers, and retained a part thereof as

administrator.[159] The portion distributed to the supposed coconut farmers followed the

procedure outlined in PCA Resolution No. 033-78.[160] And as the administrator of the CIIF

holding companies, the UCPB authorized the acquisition of the SMC shares.[161] In fact, these

companies were formed or organized solely for the purpose of holding the SMC shares. [162] As

found by the Sandiganbayan, the 14 CIIF holding companies used borrowed funds from

the UCPB to acquire the SMC shares in the aggregate amount of P1.656 Billion.[163]

 

Since the CIIF companies and the CIIF block of SMC shares were acquired using

coconut levy funds funds, which have been established to be public in character it goes without

saying that these acquired corporations and assets ought to be regarded and treated as

government assets. Being government properties, they are accordingly owned by the

Government, for the coconut industry pursuant to currently existing laws.[164]

 

It may be conceded hypothetically, as COCOFED et al. urge, that the 14 CIIF holding

companies acquired the SMC shares in question using advances from the CIIF companies and

from UCPB loans. But there can be no gainsaying that the same advances and UCPB loans are

public in character, constituting as they do assets of the 14 holding companies, which in turn are

wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized,

capitalized and/or financed using coconut levy funds. In net effect, the CIIF block of SMC shares

are simply the fruits of the coconut levy funds acquired at the expense of the coconut industry.

In Republic v. COCOFED,[165] the en bancCourt, speaking through Justice (later Chief Justice)

Artemio Panganiban, stated: Because the subject UCPB shares were acquired with government

funds, the government becomes their prima facie beneficial and true owner. By parity of

reasoning, the adverted block of SMC shares, acquired as they were with government funds,

belong to the government as, at the very least, their beneficial and true owner.

 

We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier

discussed, reiterating our holding in Republic v. COCOFED, the States avowed policy or

purpose in creating the coconut levy fund is for the development of the entire coconut industry,

which is one of the major industries that promotes sustained economic stability, and not merely

the livelihood of a significant segment of the population.[166] Accordingly, We sustain the ruling

of the Sandiganbayan in CC No. 0033-F that the CIIF companies and the CIIF block of SMC

shares are public funds necessary owned by the Government. We, however, modify the same in

the following wise: These shares shall belong to the Government, which shall be used only for

the benefit of the coconut farmers and for the development of the coconut industry.

 

 

 Sandiganbayan did not err in ruling thatPCA   (AO)   No.   1,   Series   of   1975   and PCA   rules   and   regulations   074-78   did not comply with   the   national   standard or policy of P.D. No. 755. 

 

According to the petitioners, the Sandiganbayan has identified the national policy sought

to be enhanced by and expressed under Section 1 in relation to Section 2 of P.D. No. 755. Yet, so

petitioners argue, that court, with grave abuse of discretion, disregarded such policy and

thereafter, ruled that Section 1 in relation to Section 2 of P.D. No. 755 is unconstitutional as the

decree failed to promote the purpose for which it was enacted in the first place.

 

We are not persuaded. The relevant assailed portion of PSJ-A states:

 We observe, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations 074-78, did not take into consideration the accomplishment of the public purpose or the national standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of the coconut industry and as a consequence thereof, to make the coconut farmers participants in and beneficiaries of such growth and development.

 

It is a basic legal precept that courts do not look into the wisdom of the laws passed. The

principle of separation of powers demands this hands-off attitude from the judiciary. Saguiguit v.

People[167] teaches why:

 [W]hat the petitioner asks is for the Court to delve into the policy behind

or wisdom of a statute, which, under the doctrine of separation of powers, it cannot do,. Even with the best of motives, the Court can only interpret and apply the law and cannot, despite doubts about its wisdom, amend or repeal it. Courts of justice have no right to encroach on the prerogatives of lawmakers, as long as it has not been shown that they have acted with grave abuse of discretion. And while the judiciary may interpret laws and evaluate them for constitutional soundness and to strike them down if they are proven to be infirm, this solemn power and duty do not include the discretion to correct by reading into the law what is not written therein.

 

We reproduce the policy-declaring provision of P.D. No. 755, thus:

 Section 1. Declaration of National Policy. It is hereby declared that the

policy of the State is to provide readily available credit facilities to the coconut

farmers at preferential rates; that this policy can be efficiently realized by the implementation of the Agreement for the Acquisition of a Commercial Bank for the benefit of the Coconut Farmers executed by the [PCA],the terms of which Agreement are hereby incorporated by reference; and that the [PCA] is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under such rules and regulations it may promulgate.

 

 

P.D. No. 755 having stated in no uncertain terms that the national policy of providing cheap

credit facilities to coconut farmers shall be achieved with the acquisition of a commercial bank,

the Court is without discretion to rule on the wisdom of such an undertaking. It is abundantly

clear, however, that the Sandiganbayan did not look into the policy behind, or the wisdom of,

P.D. No. 755. In context, it did no more than to inquire whether the purpose defined in P.D. No.

755 and for which the coco levy fund was established would be carried out, obviously having in

mind the (a) dictum that the power to tax should only be exercised for a public purpose and (b)

command of Section 29, paragraph 3 of Article VI of the 1987 Constitution that:(3) All money collected on any tax levied for a special purpose shall be

treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Emphasis supplied)

 

For the above reason, the above-assailed action of the Sandiganbayan was well within the

scope of its sound discretion and mandate.

Moreover, petitioners impute on the anti-graft court the commission of grave abuse of discretion

for going into the validity of and in declaring the coco levy laws as unconstitutional, when there

were still factual issues to be resolved in a full blown trial as directed by this Court.[168]

 

Petitioners COCOFED and the farmer representatives miss the point. They acknowledged that

their alleged ownership of the sequestered shares in UCPB and SMC is predicated on the coco

levy decrees. Thus, the legality and propriety of their ownership of these valuable assets are

directly related to and must be assayed against the constitutionality of those presidential decrees.

This is a primordial issue, which must be determined to address the validity of the rest of

petitioners claims of ownership. Verily, the Sandiganbayan did not commit grave abuse of

discretion, a phrase which, in the abstract, denotes the idea of capricious or whimsical exercise of

judgment or the exercise of power in an arbitrary or despotic manner by reason of passion or

personal hostility as to be equivalent to having acted without jurisdiction.[169]

 The Operative Fact Doctrine does not apply 

 

Petitioners assert that the Sandiganbayans refusal to recognize the vested rights purportedly

created under the coconut levy laws constitutes taking of private property without due process of

law. They reason out that to accord retroactive application to a declaration of unconstitutionality

would be unfair inasmuch as such approach would penalize the farmers who merely obeyed then

valid laws.

 

This contention is specious.

 

In Yap v. Thenamaris Ships Management,[170] the Operative Fact Doctrine was discussed

in that:

 As a general rule, an unconstitutional act is not a law; it confers no rights; it

imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is supported by Article 7 of the Civil Code, which provides:  

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary.

  

The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products, Inc. v. Fertiphil Corporation, we held:  

The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play.   It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration.  The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it.[171]

 

In that case, this Court further held that the Operative Fact Doctrine will not be applied as an

exception when to rule otherwise would be iniquitous and would send a wrong signal that an act

may be justified when based on an unconstitutional provision of law.[172]

 

The Court had the following disquisition on the concept of the Operative Fact Doctrine in

the case of Chavez v. National Housing Authority:[173]

 The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:

 As the new Civil Code puts it: When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It is understandable why it should be so,

the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive. Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official. This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v.Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (Emphasis supplied.)

  

The principle was further explicated in the case of Rieta v. People of the Philippines, thus:

 In similar situations in the past this Court had taken the

pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit:

 

The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.

 

Moreover, the Court ruled in Chavez that:

 Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI.  The respondents had no reason to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the executive department lent validity to the implementation of the Project.  The SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and investors who made investments in the project or who bought SMPPCs.  These properties and rights cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation.

Evidently, the operative fact principle has set in.  The titles to the lands in the hands of the buyers can no longer be invalidated.[174]

 

In the case at bar, the Court rules that the dictates of justice, fairness and equity do not support

the claim of the alleged farmer-owners that their ownership of the UCPB shares should be

respected. Our reasons:

 

1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares

distributed to them. It was not successfully refuted that said claimants were issued receipts under

R.A. 6260 for the payment of the levy that went into the Coconut Investment Fund (CIF) upon

which shares in the Coconut Investment Company will be issued.The Court upholds the finding

of the Sandiganbayan that said investment company is a different corporate entity from the

United Coconut Planters Bank. This was in fact admitted by petitioners during the April 17, 2001

oral arguments in G.R. Nos. 147062-64.[175]

 

The payments under R.A. 6260 cannot be equated with the payments under P.D. No. 276, the

first having been made as contributions to the Coconut Investment Fund while the payments

under P.D. No. 276 constituted the Coconut Consumers Stabilization Fund (CCSF). R.A. 6260

reads:

 Section 2. Declaration of Policy. It is hereby declared to be the national policy to accelerate the development of the coconut industry through the provision of adequate medium and long-term financing for capital investment in the industry, by instituting a Coconut Investment fund capitalized and administered by coconut farmers through a Coconut Investment Company.[176]

  

P.D. No. 276 provides:

 1. In addition to its powers granted under Presidential Decree No. 232, the Philippine Coconut Authority is hereby authorized to formulate and immediately implement a stabilization scheme for coconut-based consumer goods, along the following general guidelines: 

 (a) . The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government. (b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by the Price Control Council, under rules and regulations to be promulgated by the Philippine Consumers Stabilization Committee.[177]

 

 

The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the distinction between the

CIF levy payments under R.A. 6260 and the CCSF levy paid pursuant to P.D. 276, thusly:

 It must be remembered that the receipts issued under R.A. No. 6260 were to be registered in exchange for shares of stock in the Coconut Investment Company (CIC), which obviously is a different corporate entity from UCPB. This fact was admitted by petitioners during the April 17, 2001 oral arguments in G.R. Nos. 147062-64. In fact, while the CIF levy payments claimed to have been paid by petitioners were meant for the CIC, the distribution of UCPB stock certificates to the coconut farmers, if at all, were meant for the payors of the CCSF in proportion to the coconut farmers CCSF contributions pursuant to PCA Resolution No. 045-75 dated May 21, 1975: 

RESOLVED, FURTHER, That the amount of ONE HUNDRED FIFTY MILLION (P150,000,000.00) PESOS be appropriated and set aside from available funds of the PCA to be utilized in payment for the shares of stock of such existing commercial bank and that the Treasurer be instructed to disburse the said amount accordingly.  RESOLVED, FINALLY, That be directed to organize a team which shall prepare a list of coconut farmers who have paid the levy and contributed to the [CCSF] and to prepare a stock distribution plan to the end that the aforesaid coconut farmers shall receive certificates of stock of such commercial bank in proportion to their contributions to the Fund. 

Unfortunately, the said resolution was never complied with in the distribution of the so-called farmers UCPB shares.

 

 

The payments therefore under R.A. 6260 are not the same as those under P.D. No. 276. The

amounts of CIF contributions under R.A. 6260 which were collected starting 1971 are

undeniably different from the CCSF levy under P.D. No. 276, which were collected starting

1973. The two (2) groups of claimants differ not only in identity but also in the levy paid, the

amount of produce and the time the government started the collection.

 

Thus, petitioners and the alleged farmers claiming them pursuant to R.A. 6260 do not have any

legal basis to own the UCPB shares distributed to them, assuming for a momentthe legal

feasibility of transferring these shares paid from the R.A. 6260 levy to private individuals.

 

2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous and

prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when

in fact they also made payments to either the CIF or the CCSF but did not receive any receipt or

who was not able to register their receipts or misplaced them.

 

Section 1 of P.D. No. 755 which was declared unconstitutional cannot be considered to be the

legal basis for the transfer of the supposed private ownership of the UCPB shares to petitioners

who allegedly paid the same under R.A. 6260. The Solicitor General is correct in concluding that

such unauthorized grant to petitioners constitutes illegal deprivation of property without due

process of law. Due process of law would mean that the distribution of the UCPB shares should

be made only to farmers who have paid the contribution to the CCSF pursuant to P.D. No. 276,

and not to those who paid pursuant to R.A. 6260. What would have been the appropriate

distribution scheme was violated by Section 1 of P.D. No. 755 when it required that the UCPB

shares should be distributed to coconut farmers without distinction in fact, giving the PCA

limitless power and free hand, to determine who these farmers are, or would be.

 

We cannot sanction the award of the UCPB shares to petitioners who appear to represent only

1.4 million members without any legal basis to the extreme prejudice of the other 4.6 million

coconut farmers (Executive Order No. 747 fixed the number of coconut farmers at 6 million in

1981). Indeed, petitioners constitute only a small percentage of the coconut farmers in

the Philippines. Thus, the Sandiganbayan correctly declared that the UCPB shares are

government assets in trust for the coconut farmers, which would be more beneficial to all the

coconut farmers instead of a very few dubious claimants;

 

3. The Sandiganbayan made the finding that due to enormous operational problems and

administrative complications, the intended beneficiaries of the UCPB shares were not able to

receive the shares due to them. To reiterate what the anti-graft court said:The actual distribution of the bank shares was admittedly an

enormous operational problem which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines being provided to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), Rules and Regulations Governing the Distribution of Shares of Stock of the Bank Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75, quoted hereunder discloses how the undistributed shares of stocks due to anonymous coconut farmers or payors of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank: 

Section 9. Fractional and Undistributed Shares Fractional shares and shares which remain undistributed as a consequence of the failure of the coconut farmers to register their COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of the COCOFUND receipts in the name of an unqualified individual, after the final distribution is made on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be distributed to all the coconut farmers who have qualified and received equity in the Bank and shall be apportioned among them, as far as practicable, in proportion to their equity in relation to the number of undistributed equity and such further rules and regulations as may hereafter be promulgated.

 

The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the same problem of distribution of the bank shares. This latter Resolution is quoted as follows: 

RESOLUTION NO. 074-78 

AMENDMENT OF ADMINISTRATIVE ORDERNO. 1, SERIES OF 1975, GOVERNING THE

DISTRIBUTION OF SHARES 

WHEREAS, pursuant to PCA Board Resolution No. 246-75, the total par value of the shares of stock of the Bank purchased by the PCA for the benefit of the coconut farmers is P85,773,600.00 with a par value of P1.00 per share or equivalent to 85,773.600 shares; WHEREAS, out of the 85,773,600 shares, a total of 34,572,794 shares have already been distributed in accordance with Administrative Order No. 1, Series of 1975, to wit: First Distribution - 12,573,059Second Distribution - 10,841,409Third Distribution - 11,158,32634,572,794 WHEREAS, there is, therefore, a total of 51,200,806 shares still available for distribution among the coconut farmers; WHEREAS, it was determined by the PCA Board, in consonance with the policy of the state on the integration of the coconut industry, that the Bank shares must be widely distributed as possible among the coconut farmers, for which purpose a national census of coconut farmers was made through the Philippine Coconut Producers Federation (COCOFED); WHEREAS, to implement such determination of the PCA Board, there is a need to accordingly amend Administrative Order No. 1, Series of 1975; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the remaining 51,200,806 shares of stock of the Bank authorized to be acquired pursuant to the PCA Board Resolution No. 246-75 dated July 25, 1975 be distributed as follows: 

(1) All the coconut farmers who have received their shares in the equity of the Bank on the basis of Section 8 of

Administrative Order No. 1, Series of 1975, shall receive additional share for each share presently owned by them; (2) Fractional shares shall be completed into full shares, and such full shares shall be distributed among the coconut farmers who qualified for the corresponding fractional shares; (3) The balance of the shares, after deducting those to be distributed in accordance with (1) and (2) above, shall be transferred to COCOFED for distribution, immediately after completion of the national census of coconut farmers prescribed under Resolution No. 033-78 of the PCA Board, to all those who are determined by the PCA Board to be bona fide coconut farmers and have not received shares of stock of the Bank. The shares shall be equally determined among them on the basis of per capita. 

RESOLVED, FURTHER, That the rules and regulations under Administrative Order No. 1, Series of 1975, which are inconsistent with this Administrative Order be, as they are hereby, repealed and/or amended accordingly. Thus, when 51,200,806 shares in the bank remained undistributed, the

PCA deemed it proper to give a bonanza to coconut farmers who already got their bank shares, by giving them an additional share for each share owned by them and by converting their fractional shares into full shares. The rest of the shares were then transferred to a private organization, the COCOFED, for distribution to those determined to be bona fide coconut farmers who had not received shares of stock of the Bank. The distribution to the latter was made on the basis of per capita, meaning without regard to the COCOFUND receipts. The PCA considered itself free to disregard the said receipts in the distribution of the shares although they were considered by the May 25, 1975 Agreement between the PCA and defendant Cojuangco (par. [8] of said Agreement) and by Sections 1, 3, 4, 6 and 9, PCA Administrative Order No. 1, Series of 1975 as the basis for the distribution of shares.

 The PCA thus assumed, due to lack of adequate guidelines set by P.D. No.

755, that it had complete authority to define who are the coconut farmers and to decide as to who among the coconut farmers shall be given the gift of bank shares; how many shares shall be given to them, and what basis it shall use to determine the amount of shares to be distributed for free to the coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it constitutionally infirm.   

Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best for the

interest of all coconut farmers to revert the ownership of the UCBP shares to the government for

the entire coconut industry, which includes the farmers;

 

4. The Court also takes judicial cognizance of the fact that a number, if not all, of the coconut

farmers who sold copra did not get the receipts for the payment of the coconut levy for the

reason that the copra they produced were bought by traders or middlemen who in turn sold the

same to the coconut mills. The reality on the ground is that it was these traders who got the

receipts and the corresponding UCPB shares. In addition, some uninformed coconut farmers who

actually got the COCOFUND receipts, not appreciating the importance and value of said

receipts, have already sold said receipts to non-coconut farmers, thereby depriving them of the

benefits under the coconut levy laws. Ergo, the coconut farmers are the ones who will not be

benefited by the distribution of the UCPB shares contrary to the policy behind the coconut levy

laws. The nullification of the distribution of the UCPB shares and their transfer to the

government for the coconut industry will, therefore, ensure that the benefits to be deprived from

the UCPB shares will actually accrue to the intended beneficiaries the genuine coconut farmers.

 

From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the UCPB

shares. Public funds, which were supposedly given utmost safeguard, were haphazardly

distributed to private individuals based on statutory provisions that are found to be

constitutionally infirm on not only one but on a variety of grounds. Worse still, the recipients of

the UCPB shares may not actually be the intended beneficiaries of said benefit. Clearly, applying

the Operative Fact Doctrine would not only be iniquitous but would also serve injustice to the

Government, to the coconut industry, and to the people, who, whether willingly or unwillingly,

contributed to the public funds, and therefore expect that their Government would take utmost

care of them and that they would be used no less, than for public purpose.

 

We clarify that PSJ-A is subject of another petition for review interposed by Eduardo Cojuangco,

Jr., in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the Philippines,

which shall be decided separately by this Court. Said petition should accordingly not be affected

by this Decision save for determinatively legal issues directly addressed herein.

 

WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are

hereby DENIED. The Partial Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A

as reiterated with modification in Resolution dated June 5, 2007, as well as the Partial Summary

Judgment dated May 7, 2004 in Civil Case No. 0033-F, which was effectively amended in

Resolution dated May 11, 2007, are AFFIRMED with MODIFICATION, only with respect to

those issues subject of the petitions in G.R. Nos. 177857-58 and 178193. However, the issues

raised in G.R. No. 180705 in relation to Partial Summary Judgment dated July 11, 2003 and

Resolution dated June 5, 2007 in Civil Case No. 0033-A, shall be decided by this Court in a

separate decision.

 

The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is

hereby MODIFIED, and shall read as follows:

 WHEREFORE, in view of the foregoing, We rule as follows:

 

SUMMARY OF THE COURTS RULING.

 

A.    Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY

JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L.

Lobregat, COCOFED, et al., and Ballares, et al.

 

The Class Action Motion for Separate Summary Judgment dated April 11,

2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares,

et al., is hereby DENIED for lack of merit.

 

B.     Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE:

COCOFED, ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by

Plaintiff.

 

1.      a. The portion of Section 1 of P.D. No. 755, which reads:

 and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under such rules and regulations it may promulgate.

 

taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for

having allowed the use of the CCSF to benefit directly private interest by

the outright and unconditional grant of absolute ownership of the

FUB/UCPB shares paid for by PCA entirely with the CCSF to the

undefined coconut farmers, which negated or circumvented the national

policy or public purpose declared by P.D. No. 755 to accelerate the growth

and development of the coconut industry and achieve its vertical

integration; and (ii) for having unduly delegated legislative power to the

PCA.

 

b. The implementing regulations issued by PCA, namely, Administrative

Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise

invalid for their failure to see to it that the distribution of shares serve

exclusively or at least primarily or directly the aforementioned public

purpose or national policy declared by P.D. No. 755.

 

2.      Section 2 of P.D. No. 755 which mandated that the coconut levy funds

shall not be considered special and/or fiduciary funds nor part of the

general funds of the national government and similar provisions of Sec. 5,

Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the

provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article

VI, Sec. 29 (3).

 

3.      Lobregat, COCOFED, et al. and Ballares, et al. have not legally and

validly obtained title of ownership over the subject UCPB shares by virtue

of P.D. No. 755, the Agreement dated May 25, 1975 between the PCA and

defendant Cojuangco, and PCA implementing rules, namely, Adm. Order

No. 1, s. 1975 and Resolution No. 074-78. 

4.      The so-called Farmers UCPB shares covered by 64.98% of the UCPB

shares of stock, which formed part of the 72.2% of the shares of stock of

the former FUB and now of the UCPB, the entire consideration of which

was charged by PCA to the CCSF, are hereby declared conclusively

owned by, the Plaintiff Republic of the Philippines.

 

 

SO ORDERED.

 

The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is

hereby MODIFIED, and shall read as follows:

 

WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL

SUMMARY JUDGMENT (RE: CIIF BLOCK OF SMC SHARES OF

STOCK) dated August 8, 2005 of the plaintiff is hereby denied for lack of

merit. However, this Court orders the severance of this particular claim of

Plaintiff. The Partial Summary Judgment dated May 7, 2004 is now considered a

separate final and appealable judgment with respect to the said CIIF Block of

SMC shares of stock.

 

The Partial Summary Judgment rendered on May 7, 2004 is modified by

deleting the last paragraph of the dispositive portion, which will now read, as

follows:

 

WHEREFORE, in view of the foregoing, we hold that:

 

The Motion for Partial Summary Judgment (Re:

Defendants CIIF Companies, 14 Holding Companies and Cocofed,

et al) filed by Plaintiff is hereby GRANTED. ACCORDINGLY,

THE CIIF COMPANIES, NAMELY:

 1.       Southern Luzon Coconut Oil Mills (SOLCOM);2.       Cagayan de Oro Oil Co., Inc. (CAGOIL);3.       Iligan Coconut Industries, Inc. (ILICOCO);4.       San Pablo Manufacturing Corp. (SPMC);5.       Granexport Manufacturing Corp. (GRANEX); and6.       Legaspi Oil Co., Inc. (LEGOIL),

 

AS WELL AS THE 14 HOLDING COMPANIES,

NAMELY:

 1.       Soriano Shares, Inc.;2.       ACS Investors, Inc.;3.       Roxas Shares, Inc.;4.       Arc Investors; Inc.;5.       Toda Holdings, Inc.;6.       AP Holdings, Inc.;7.       Fernandez Holdings, Inc.;8.       SMC Officers Corps, Inc.;9.       Te Deum Resources, Inc.;10.    Anglo Ventures, Inc.;11.    Randy Allied Ventures, Inc.;12.    Rock Steel Resources, Inc.;13.    Valhalla Properties Ltd., Inc.; and14.    First Meridian Development, Inc.

 

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION

(SMC) SHARES OF STOCK TOTALING 33,133,266

SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS

DECLARED, PAID AND ISSUED THEREON AS WELL AS

ANY INCREMENTS THERETO ARISING FROM, BUT

NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE

RIGHTS ARE DECLARED OWNED BY THE

GOVERNMENT TO BE USED ONLY FOR THE BENEFIT

OF ALL COCONUT FARMERS AND FOR THE

DEVELOPMENT OF THE COCONUT INDUSTRY, AND

ORDERED RECONVEYED TO THE GOVERNMENT.

 

THE COURT AFFIRMS THE RESOLUTIONS ISSUED BY

THE SANDIGANBAYAN ON JUNE 5, 2007 IN CIVIL CASE

NO. 0033-A AND ON MAY 11, 2007 IN CIVIL CASE NO.

0033-F, THAT THERE IS NO MORE NECESSITY OF

FURTHER TRIAL WITH RESPECT TO THE ISSUE OF

OWNERSHIP OF (1) THE SEQUESTERED UCPB SHARES,

(2) THE CIIF BLOCK OF SMC SHARES, AND (3) THE CIIF

COMPANIES. AS THEY HAVE FINALLY BEEN

ADJUDICATED IN THE AFOREMENTIONED PARTIAL

SUMMARY JUDGMENTS DATED JULY 11, 2003 AND

MAY 7, 2004.

 

SO ORDERED.

 

Costs against petitioners COCOFED, et al. in G.R. Nos. 177857-58 and Danila S. Ursua in G.R.

No. 178193.

 

 

 PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

Republic of the PhilippinesSupreme Court

Manila  

FIRST DIVISION  

CITY OF DUMAGUETE, herein Represented by City Mayor, Agustin R. Perdices,

Petitioner,

 

 

 

- versus -

 

 

 

PHILIPPINE PORTS AUTHORITY,

Respondent.

  G.R. No. 168973 Present:

 CORONA, C.J.,

Chairperson,

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

 

Promulgated:

 

August 24, 2011

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

 

 

D E C I S I O N 

 

LEONARDO-DE CASTRO, J.:

 

 

Before Us is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision[1] dated March 4, 2005 and Resolution[2] dated June 6, 2005 of the Court Appeals in CA-G.R. SP No. 64379, which granted the Petition for Certiorari and Prohibition of respondent Philippine Ports Authority and set aside the Orders dated December 7, 2000 and February 20, 2001 of the Regional Trial Court (RTC), Branch 44 of the City of Dumaguete in LRC Case No. N-201.

 The antecedent facts are as follows: On October 14, 1998, petitioner City of Dumaguete, through Mayor Felipe Antonio B.

Remollo (Remollo), filed before the RTC an Application for Original Registration of Title over a parcel of land with improvements, located at Barangay Looc, City of Dumaguete (subject property), under the Property Registration Decree. The application was docketed as LRC Case No. N-201.

 Petitioner alleged in support of its application:

 1.                  That the applicant, City of Dumaguete through its Honorable

Mayor Felipe Antonio B. Remollo, is the owner of the land subject of this application with all improvements and buildings comprising the Engineers Compound where it is now situated and has been in continuous occupation and possession of the same for more than 30 years or from the year 1960 (Affidavit of Ownership executed by Felipe Antonio G. Remollo, the City Mayor, dated August 21, 1998 herein attached as ANNEX A). The said land consist of 5,410 square meters and is situated and bounded and described as shown on the plan (true and photostatic copies of the original plan marked Psu-07-006805 approved by the Regional Technical Director of the [Department of Environment and Natural Resources] DENR, Regional Office, Cebu City herein attached as ANNEX B) and technical descriptions attached hereto (technical description attached as ANNEX C) and made a part hereof;

 2.                  That said land at the last assessment for taxation was

assessed at P676,250, Philippine currency, with market value of P1,352,500.00, Philippine currency. (Declaration of Real Property with the assessed and market values attached as ANNEX D);

 3.                  That to the best of my knowledge and belief, there is no

mortgage or encumbrance of any kind whatsoever affecting said land, nor another person having any estate or interest therein, legal or equitable, in possession, remainder, reversion or expectancy;

 4.                  That the land was acquired by possessory title in open,

continuous, adverse occupation and possession in the concept of owner for more than thirty years since 1960 (please refer to ANNEX A);

 5.                  That the land is adjoined by the following: NorthWestNorthEastSouthEast All along line 1-2-3-4-5-6-7-8-9-10 by Flores Avenue, City Road and the

Dumaguete Port RoadSouthWest along line 10-1 by Plan Msi-V-20453 x x x x 8. That the land included is bounded on the West by Flores Avenue and on

the North by the City Road, all public highways and on the East by the Dumaguete Port Road, a private road made part of the Port Zone.[3]

  

In an Order[4] dated October 23, 1998, the RTC noted that: A perusal of the records of the case shows that the annexes lack the

following copies: a)                  two blue print copies of the approved plan;

 b)                  two copies of the technical description of the lot sought to be

registered; 

c)                  two copies of the Surveyors certificate; 

d)                 a certificate in quadruplicate of the City Assessor of the assessed value of the land;

 e)                  all original muniments of title in the possession of the

applicant which prove ownership of the land; 

f)                   two copies of the petition/application. 

Further, the application did not state the number of the lot sought to be registered, the number of parcels applied for, the improvements found thereon, and indicate whether it claims a portion of the road which serves as a boundary line.

 All these must be alleged in the petition so that the Court will know the

nature of the property. 

 The RTC explained that the extra copies submitted by petitioner shall be forwarded by

the RTC Clerk of Court to the Land Registration Commission (LRC) in Manila for comment. Only thereafter would the RTC set the application for hearing.

 Petitioner filed its Compliance[5] with the above-mentioned Order, submitting additional

copies of the required documents and clarifying thus: 1.                  The approved plan does not state the number of lot sought to be

registered because it is a public land, thus, only PSU-07-006805 appears on the plan which is being applied for registration;

2.                  Only one (1) parcel of land is applied for by petitioners which consist of five thousand four hundred ten (5,410) square meters, more or less;

3.                  The City Engineers Building within the City Engineers compound are the only improvement found thereon; and

4.                  Petitioners do not claim any portion of the road which serves as a boundary line.

  

The RTC accordingly set the initial hearing of LRC Case No. N-201 on April 12, 1999, and sent notices to the parties.

 The Republic of the Philippines, represented by the Director of Lands, and respondent,

represented by the Office of the Government Corporate Counsel, filed separate Oppositions  [6] to the application for registration of petitioner. Both the Republic and respondent averred that petitioner may not register the subject property in its name since petitioner had never been in open, continuous, exclusive, and notorious possession of the said property for at least 30 years immediately preceding the filing of the application; and the subject property remains to be a portion of the public domain which belongs to the Republic.

 After several postponements of the scheduled hearings, petitioner presented the testimony

of its first witness, Engineer Rilthe P. Dorado (Engr. Dorado), on January 14, 2000. Engr. Dorados examination on the witness stand was terminated on April 7, 2000. The presentation of the other witnesses of petitioner was then scheduled to continue onJune 2, 2000.[7]

 However, before the next hearing, respondent filed a Motion to Dismiss,[8] seeking the

dismissal of LRC Case No. N-201 on the ground that the RTC lacked jurisdiction to hear and decide the case. Respondent argued that Section 14(1) of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, refers only to alienable and disposable lands of the public domain under a bona fide claim of ownership. The subject property in LRC Case No. N-201 is not alienable and disposable, since it is a foreshore land, as explicitly testified to by petitioners own witness, Engr. Dorado. A foreshore land is not registerable. This was precisely the reason why, respondent points out, that the subject property was included in Presidential Proclamation No. 1232 (delineating the territorial boundaries of the Dumaguete Port

Zone), so that the same would be administered and managed by the State, through respondent, for the benefit of the people.

 In its Terse Opposition to Oppositors Motion to Dismiss, petitioner claimed that the

subject property was a swamp reclaimed about 40 years ago, which it occupied openly, continuously, exclusively, and notoriously under a bona fide claim of ownership. The technical description and approved plan of the subject property showed that the said property was not bounded by any part of the sea. Petitioner invoked Republic Act No. 1899,[9] which authorizes chartered cities and municipalities to undertake and carry out, at their own expense, the reclamation of foreshore lands bordering them; and grants said chartered cities and municipalities ownership over the reclaimed lands. Presidential Proclamation No. 1232 is immaterial to the present application for registration because it merely authorizes respondent to administer and manage the Dumaguete Port Zone and does not confer upon respondent ownership of the subject property.[10]

 Respondent filed a Reply/Rejoinder (To Applicants Opposition to Oppositors Motion to

Dismiss), [11] asserting that there are no factual or legal basis for the claim of petitioner that the subject property is reclaimed land. Petitioner sought the original registration of its title over the subject property acquired through alleged continuous possession for 30 years under Section 14(1) of the Property Registration Decree, and not through the reclamation of the said property at its own expense under Republic Act No. 1899. The present claim of petitioner that the subject property is reclaimed land should not be allowed for it would improperly change the earlier theory in support of the application for registration. Respondent reiterated that the subject property is foreshore land which cannot be registered; and that Presidential Proclamation No. 1232 is very material to LRC Case No. N-201 because it confirms that areas within the Dumaguete Port Zone, including the subject property, are not alienable and disposable lands of the public domain.

 On September 7, 2000, the RTC issued an Order[12] granting the Motion to Dismiss of

respondent based on the following ratiocination: The Court agrees with [herein respondent] Philippine Ports Authority that

the basis of the [herein petitioners] application for original registration of the subject lot is Section 14 of the Presidential Decree No. 1529, otherwise known as the Property Registration Decree. A circumspect scrutiny of said Section readily shows that it refers to alienable and disposable lands of the public domain as proper subjects of registration, provided the applicant has met the other requirements such as open, continuous, exclusive and notorious possession for at least thirty (30) years under a bona fide claim of ownership.

  It having been shown by [petitioners] own evidence that the lot subject of

the application for original registration is a foreshore land, and therefore not registerable (Dizon, et al. vs. Bayona, et al., 98 SCRA 942, 944), the application must be denied.

 Again as correctly argued by [respondent], [petitioners] reliance on

Republic Act 1899 which authorizes all municipalities and chartered cities to undertake and carry out the reclamation by dredging, filling or other means of any foreshore lands bordering them and which confers ownership on them of the lands so reclaimed, is misplaced, as such has never been alleged in the application. It is fundamental that a party cannot prove what it has not alleged in his complaint or application, as in this case.

 The admission by Engr. Dorado that there is no formal declaration from

the executive branch of government or law passed by Congress that the land in question is no longer needed for public use or special industries x x x further militates against the application.

 Moreover, the authority granted to municipalities and chartered cities to

undertake and carry out at their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them is for the purpose of establishing, providing, constructing, maintaining, and repairing proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in consultation with the Secretary of Finance and the Secretary of Public Works and Communications.

 By its own evidence, [petitioner] has utilized the subject property

allegedly reclaimed by it as Office of the City Engineer and not as docking and harboring facilities. [Petitioner] has failed to show that such reclamation was undertaken by it in consultation with the Secretary of Finance and the Secretary of Public Works and Communications.[13]

  

The RTC decreed in the end that the instant application for original registration is dismissed for lack of merit.[14]

 

In its Motion for Reconsideration[15] and Supplemental Motion for Reconsideration,[16] petitioner contended that the dismissal of its application was premature and tantamount to a denial of its right to due process. It has yet to present evidence to prove factual matters in support of its application, such as the subject property already being alienable and disposable at the time it was occupied and possessed by petitioner.

 

Petitioner also pointed out that its witness, Engr. Dorado, testified only as to the physical status of the land in question at the time when the cadastral survey of Dumaguete was made sometime in 1916.[17] In fact, Engr. Dorado expressly testified that the subject property was part of the shore or foreshore a long time ago[;][18] and he did not testify at all that the subject property was a foreshore lot at the time petitioner occupied and possessed the same. The physical

state of the subject property had already changed since 1916. It is now within the alienable and disposable area as per the Land Classification Map No. 674, Project No. 1-D, BL C-6, certified on July 3, 1927, of the Bureau of Lands, now Land Management Sector of the Department of Environment and Natural Resources[,][19] as verified and certified by the Chief of the Map Projection Section, Land Management Sector, DENR Regional Office in Cebu City, who has yet to take the witness stand before the RTC.

 

Petitioner insisted that the RTC should continue with the hearing of LRC Case No. N-201 and allow petitioner to present evidence that the subject property is reclaimed land. Petitioner sufficiently alleged in its application for registration that it has been in open, continuous, exclusive, and notorious possession of the [subject property] for more than thirty (30) years under a bona fide claim of ownership.[20] In support of such allegation, petitioner must necessarily prove that the subject property was previously a swampy area, which had to be filled or reclaimed before the construction of the City Engineers Office building thereon.

 

Respondent based its Opposition (To Applicants Motion for Reconsideration dated September 28, 2000)[21] and Opposition (To Applicants Supplemental Motion for Reconsideration)[22] on technical and substantive grounds.

 

According to respondent, the Motion for Reconsideration of petitioner violated Sections 4 (Hearing of motion), 5 (Notice of hearing), and 6 (Proof of service necessary), Rule 15 of the Rules of Court. Petitioner did not set its Motion for Reconsideration for hearing even when the said Motion could not be considered as non-litigable. The RTC could not hear the motion for reconsideration ex parte as they are prejudicial to the rights of respondent. Petitioner also failed to comply with Section 11, Rule 13 of the Rules of Court when it did not attach to the Motion for Reconsideration a written explanation why it did not resort to personal service of the said Motion. Thus, respondent averred that the Motion for Reconsideration of petitioner should be treated as a mere scrap of paper with no legal effect. It did not interrupt the reglementary period to appeal and the RTC Order dated September 7, 2000, dismissing LRC Case No. N-201, had already attained finality. Respondent also pointed out that the Supplemental Motion for Reconsideration of petitioner suffered from the same fatal defects as the original Motion for Reconsideration.

Respondent again posited that the subject property was foreshore land belonging to the State and not subject to private appropriation, unless the same had already been declared by the executive or legislative department of the national government as no longer needed for coast guard service, public use, or special industries, and classified as alienable and disposable.  Full- blown trial in LRC Case No. N-201 was no longer necessary as the evidence so far presented by petitioner had already established that the RTC lacked jurisdiction over the subject matter of the case.

 

In its Order[23] dated November 16, 2000, the RTC initially agreed with respondent that the Motion for Reconsideration of petitioner violated Sections 4, 5, and 6, Rule 15 and Section 11, Rule 13 of the Rules of Court. Resultantly, the Motion for Reconsideration of petitioner was considered as not filed and did not toll the running of the period to file an appeal, rendering final and executory the order of dismissal of LRC Case No. N-201.

 

However, after taking into consideration the Supplemental Motion for Reconsideration of petitioner, the RTC issued another Order[24] dated December 7, 2000, setting aside its Order dated September 7, 2000 in the interest of justice and resolving to have a full-blown proceeding to determine factual issues in LRC Case No. N-201.

 

It was then the turn of respondent to file with the RTC a Motion for Reconsideration [25] of the Order dated December 7, 2000. In an Order[26] dated February 20, 2001, the RTC denied the motion of respondent and admitted the following:

 

A thorough review and perusal of the disputed order dated September 7, 2000 and December 7, 2000, whereby this Court dismissed [petitioners] petition for registration of Lot No. 1, Dumaguete Cadastre, and later set aside the Order of September 7, 2000, shows that there was honest mistake in declaring said lot 1, as a shoreline. Indeed, the adjoining lots are already titled and bounded by a City Road. It is not bounded by a sea. The Court wants to correct this error in its findings on the September 7, 2000 Order, that Lot No. 1 is situated on the shoreline ofDumaguete City. The Court simply committed an oversight on the petitioners evidence that the lot in question is a foreshore land x x x when in fact it is not. And it is for this reason that the court reconsidered and set aside said September 7, 2000 Order, to correct the same while it is true that said September 7, 2000 Order had attained its finality, yet this Court cannot in conscience allow injustice to perpetuate in this case and that hearing on the merits must proceed to determine the legality and truthfulness of its application for registration of title.

 

 

Respondent sought recourse from the Court of Appeals by filing a Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 64379. Respondent challenged the RTC Orders dated December 7, 2000 and February 20, 2001 for having been issued by the RTC in grave abuse of discretion amounting to lack or excess of

jurisdiction. Respondent reiterated that the RTC Order dated September 7, 2000, dismissing LRC Case No. N-201 had already attained finality. The defects of the Motion for Reconsideration of petitioner rendered the same as a mere scrap of paper, which did not toll the running of the prescriptive period to appeal the RTC Order datedSeptember 7, 2000.

 

The Court of Appeals, in its Decision dated March 4, 2005, found merit in the Petition of respondent and set aside the RTC Orders dated December 7, 2000 and February 20, 2001. The appellate court, in its Resolution dated June 6, 2005, denied the Motion for Reconsideration of petitioner.

 

Hence, petitioner comes before us via the instant Petition for Review with the following assignment of error:

 

 

 

GROUND FOR THE APPEAL

 

Error of law: The March 4, 2005 decision of the Court of Appeals and its June 6, 2005 Resolution, erred on question of law in setting aside the Orders of the Regional Trial Court, Branch 44, dated December 7, 2000 and February 20, 2001. The said Orders of the trial court were made in order to determine factual issues and to correct its error in its findings on theSeptember 7, 2000 Order. Thus, the Court of Appeals decision is contrary to law, justice, equity and existing jurisprudence.[27]

 

 

Respondent insists on the strict application of Sections 4, 5, and 6, Rule 15 and Section 11, Rule 13 of the Rules of Court. Violations of the said rules were fatal to the Motion for Reconsideration and Supplemental Motion for Reconsideration of the petitioner, and as a result, the RTC Order dated September 7, 2000, dismissing LRC Case No. N-201, had already become final and executory and, thus, beyond the jurisdiction of the RTC to set aside. Respondent urges us to reject the plea of petitioner for a liberal application of the rules in the absence of a compelling reason to do so.

 

We grant the Petition.

 

The grant of a petition for certiorari under Rule 65 of the Rules of Court requires grave abuse of discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion exists where an act is performed with a capricious or whimsical exercise of judgment equivalent to lack of jurisdiction. The abuse of discretion must be patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion or personal hostility.[28]

 

The Court of Appeals erred in granting the writ of certiorari in favor of respondent. The RTC did not commit grave abuse of discretion when, in its Orders dated December 7, 2000 and February 20, 2001, it set aside the order of dismissal of LRC Case No. N-201 and resolved to have a full-blown proceeding to determine factual issues in said case.

 

Procedural rules were conceived to aid the attainment of justice. If a stringent application of the rules would hinder rather than serve the demands of substantial justice, the former must yield to the latter.[29] In Basco v. Court of Appeals,[30] we allowed a liberal application of technical rules of procedure, pertaining to the requisites of a proper notice of hearing, upon consideration of the importance of the subject matter of the controversy, as illustrated in well-settled cases, to wit:

 

The liberal construction of the rules on notice of hearing is exemplified in Goldloop Properties, Inc. v. CA:

 

Admittedly, the filing of respondent-spouses' motion for reconsideration did not stop the running of the period of appeal because of the absence of a notice of hearing required in Secs. 3, 4 and 5, Rule 15, of the Rules of Court. As we have repeatedly held, a motion that does not contain a notice of hearing is a mere scrap of paper; it presents no question which merits the attention of the court. Being a mere scrap of paper, the trial court had no alternative but to disregard it. Such being the case, it was as if no motion for reconsideration was filed and, therefore, the reglementary period within which respondent-spouses should have filed an appeal expired on 23 November 1989.

 

But, where a rigid application of that rule will result in a manifest failure or miscarriage of justice, then the rule may be relaxed, especially if a party successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face or from the recitals contained therein. Technicalities may thus be disregarded in order to resolve the case. After all, no party can even claim a vested right in technicalities. Litigations should, as much as possible, be decided on the merits and not on technicalities.

 

Hence, this Court should not easily allow a party to lose title and ownership over a party worth P4,000,000.00 for a measly P650,000.00 without affording him ample opportunity to prove his claim that the transaction entered into was not in fact an absolute sale but one of mortgage. Such grave injustice must not be permitted to prevail on the anvil of technicalities.

 

Likewise, in Samoso v. CA, the Court ruled:

 

But time and again, the Court has stressed that the rules of procedure are not to be applied in a very strict and technical sense. The rules of procedure are used only to help secure not override substantial justice (National Waterworks & Sewerage System vs. Municipality of Libmanan, 97 SCRA 138 [1980]; Gregorio v. Court of Appeals, 72 SCRA 120 [1976]). The right to appeal should not be lightly disregarded by a stringent application of rules of procedure especially where the appeal is on its face meritorious and the interests of substantial justice would be served by permitting the appeal (Siguenza v. Court of Appeals, 137 SCRA 570 [1985]; Pacific Asia Overseas Shipping Corporation v. National Labor Relations Commission, et al., G.R. No. 76595, May 6, 1998). . . .

 

In the instant case, it is petitioner's life and liberty that is at stake. The trial court has sentenced him to suffer the penalty of reclusion perpetua and his conviction attained finality on the basis of mere technicality. It is but just, therefore, that petitioner be given the opportunity to defend himself and pursue his appeal. To do otherwise would be tantamount to grave injustice. A relaxation of the procedural rules, considering the particular circumstances herein, is justified.[31] (Emphasis ours.)

 

 

In the case at bar, the Motion for Reconsideration and Supplemental Motion for Reconsideration of petitioner, which sought the reversal of RTC Order dated September 7, 2000 dismissing LRC Case No. N-201, cite meritorious grounds that justify a liberal application of procedural rules.

 

The dismissal by the RTC of LRC Case No. N-201 for lack of jurisdiction is patently erroneous.

 

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. The averments in the complaint and the character of the relief sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.[32]

 

As a necessary consequence, the jurisdiction of the court cannot be made to depend upon the defenses set up in the answer or upon the motion to dismiss; for otherwise, the question of jurisdiction would almost entirely depend upon the defendant. What determines the jurisdiction of the court is the nature of the action pleaded as appearing from the allegations in the complaint. The averments therein and the character of the relief sought are the ones to be consulted.[33]

 

Under Act No. 496, otherwise known as the Land Registration Act, as amended by Act No. 2347, jurisdiction over all applications for registration of title to land was conferred upon the

Courts of First Instance (CFI) of the respective provinces in which the land sought to be registered was situated. Jurisdiction over land registration cases, as in ordinary actions, is acquired upon the filing in court of the application for registration, and is retained up to the end of the litigation.[34]

 

The land registration laws were updated and codified by the Property Registration Decree, and under Section 17 thereof, jurisdiction over an application for land registration was still vested on the CFI of the province or city where the land was situated, viz:

 

SEC. 17. What and where to file. The application for land registration shall be filed with the Court of First Instance of the province or city where the land is situated. The applicant shall file together with the application all original muniments of titles or copies thereof and a survey plan of the land approved by the Bureau of Lands.

 

The Clerk of Court shall not accept any application unless it is shown that the applicant has furnished the Director of Lands with a copy of the application and all annexes.

 

 

Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of 1980, created the RTC[35] in place of the CFI. Presently, jurisdiction over an application for land registration remains with the RTC where the land is situated, except when such jurisdiction is delegated by the Supreme Court to the Metropolitan Trial Court, Municipal Trial Courts, and Municipal Circuit Trial Courts under certain circumstances.[36]

 

It is not disputed that the Application for Original Registration of Title filed by petitioner before the RTC of the City of Dumaguete conformed to Section 15 of the Property Registration Decree, which prescribes the form and contents of such applications. In its Application, petitioner prayed that its title to the subject property, which it repeatedly alleged to have acquired through continuous and adverse possession and occupation of the said property for more than 30 years or since 1960, be placed under the land registration laws. The allegations and prayer in the Application of petitioner were sufficient to vest jurisdiction on the RTC over the said Application upon the filing thereof.

 

Respondent sought the dismissal of LRC Case No. N-201 on the ground of lack of jurisdiction, not because of the insufficiency of the allegations and prayer therein, but because the evidence presented by petitioner itself during the trial supposedly showed that the subject property is a foreshore land, which is not alienable and disposable. The RTC granted the Motion to Dismiss of respondent in its Order dated September 7, 2000. The RTC went beyond the allegations and prayer for relief in the Application for Original Registration of petitioner, and already scrutinized and weighed the testimony of Engr. Dorado, the only witness petitioner was able to present.

 

As to whether or not the subject property is indeed foreshore land is a factual issue which the RTC should resolve in the exercise of its jurisdiction, after giving both parties the opportunity to present their respective evidence at a full-blown trial. As we have explained in the Estate of the Late Jesus S. Yujuico v. Republic[37]:

 

The plain import of Municipality of Antipolo is that a land registration court, the RTC at present, has no jurisdiction over the subject matter of the application which respondent Republic claims is public land. This ruling needs elucidation.

 

Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by law. Consequently, the proper CFI (now the RTC) under Section 14 of PD 1529 (Property Registration Decree) has jurisdiction over applications for registration of title to land.

 

x x x x

 

Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land registration case filed by Fermina Castro, petitioners predecessor-in-interest, since jurisdiction over the subject matter is determined by the allegations of the initiatory pleading the application. Settled is the rule that the authority to decide a case and not the decision rendered therein is what makes up jurisdiction. When there is jurisdiction, the decision of all questions arising in the case is but an exercise of jurisdiction.

 

In our view, it was imprecise to state in Municipality of Antipolo that the Land Registration Court [has] no jurisdiction to entertain the application for registration of public property x x x for such court precisely has the jurisdiction to entertain land registration applications since that is conferred by PD 1529. The applicant in a land registration case usually claims the land subject matter of the application as his/her private property, as in the case of the application of Castro. Thus, the conclusion of the CA that the Pasig-Rizal CFI has no jurisdiction over the subject matter of the application of Castro has no mooring. The land registration court initially has jurisdiction over the land applied for at the time of the filing of the application. After trial, the court, in the exercise of its jurisdiction, can determine whether the title to the land applied for is registerable and can be confirmed. In the event that the subject matter of the application turns out to be inalienable public land, then it has no jurisdiction to order the registration of the land and perforce must dismiss the application. [38] (Emphasis ours.)

 

 

It is true that petitioner, as the applicant, has the burden of proving that the subject property is alienable and disposable and its title to the same is capable of registration.However, we stress that the RTC, when it issued its Order dated September 7, 2000, had so far heard only the testimony of Engr. Dorado, the first witness for the petitioner.Petitioner was no longer afforded the opportunity to present other witnesses and pieces of evidence in support of its Application. The RTC Order dated September 7, 2000already declaring the subject property as inalienable public land, over which the RTC has no jurisdiction to order registration was evidently premature.

 

The RTC Order dated September 7, 2000 has not yet become final and executory as petitioner was able to duly file a Motion for Reconsideration and Supplemental Motion for Reconsideration of the same, which the RTC eventually granted in its Order dated December 7, 2000. Admittedly, said motions filed by petitioner did not comply with certain rules of procedure. Ordinarily, such non-compliance would have rendered said motions as mere scraps of paper, considered as not having been filed at all, and unable to toll the reglementary period for an appeal. However, we find that the exceptional circumstances extant in the present case warrant the liberal application of the rules.

 

Also, the Motion for Reconsideration and Supplemental Motion for Reconsideration of the Order dated September 7, 2000 filed by petitioner did not comply with Section 11, Rule 13 of the Rules of Court, for these did not include a written explanation why service or filing thereof

was not done personally. Nonetheless, in Maceda v. Encarnacion de Guzman Vda. de Magpantay,[39] citing Solar Team Entertainment, Inc. v. Ricafort,[40] and Musa v. Amor,[41] we explained the rationale behind said rule and the mandatory nature of the same, vis--vis the exercise of discretion by the court in case of non-compliance therewith:

 

In Solar Team Entertainment, Inc. v. Ricafort, this Court, passing upon Section 11 of Rule 13 of the Rules of Court, held that a court has the discretion to consider a pleading or paper as not filed if said rule is not complied with.

 

Personal service and filing are preferred for obvious reasons.  Plainly, such should expedite action or resolution on a pleading, motion or other paper; and conversely, minimize, if not eliminate, delays likely to be incurred if service or filing is done by mail, considering the inefficiency of the postal service.  Likewise, personal service will do away with the practice of some lawyers who, wanting to appear clever, resort to the following less than ethical practices: (1) serving or filing pleadings by mail to catch opposing counsel off-guard, thus leaving the latter with little or no time to prepare, for instance, responsive pleadings or an opposition; or (2) upon receiving notice from the post office that the registered containing the pleading of or other paper from the adverse party may be claimed, unduly procrastinating before claiming the parcel, or, worse, not claiming it at all, thereby causing undue delay in the disposition of such pleading or other papers.

 

If only to underscore the mandatory nature of this innovation to our set of adjective rules requiring personal service whenever practicable, Section 11 of Rule 13 then gives the court the discretion to consider a pleading or paper as not filed if the other modes of service or filing were not resorted to and no written explanation was made as to why personal service was not done in the first place.  The exercise of discretion must, necessarily consider the practicability of personal service, for Section 11 itself begins with the clause whenever practicable. 

 

We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of Civil Procedure, personal service and filing is the general rule, and resort to other modes of service and filing, the exception.  Henceforth, whenever personal service or filing is practicable, in the light of the circumstances of time, place and person, personal service or filing is mandatory.  Only when personal service or filing is not practicable may resort to other modes be had, which must then be accompanied by a written explanation as to why personal service or filing was not practicable to begin with.  In adjudging the plausibility of an explanation, a court shall likewise consider the importance of the subject matter of the case or the issues involved therein, and the prima facie merit of the pleading sought to be expunged for violation of Section 11.

In Musa v. Amor, this Court, on noting the impracticality of personal service, exercised its discretion and liberally applied Section 11 of Rule 13:

 

As [Section 11, Rule 13 of the Rules of Court] requires, service and filing of pleadings must be done personally whenever practicable.  The court notes that in the present case, personal service would not be practicable.  Considering the distance between the Court of Appeals and Donsol, Sorsogon where the petition was posted, clearly, service by registered mail [sic] would have entailed considerable time, effort and expense.  A written explanation why service was not done personally might have been superfluous.  In any case, as the rule is so worded with the use of may, signifying permissiveness, a violation thereof gives the court discretion whether or not to consider the paper as not filed.  While it is true that procedural rules are necessary to secure an orderly and speedy administration of justice, rigid application of Section 11, Rule 13 may be relaxed in this case in the interest of substantial justice.

 

In the case at bar, the address of respondents counsel is Lopez, Quezon, while petitioner Sonias counsels is Lucena City.  Lopez, Quezon is 83 kilometers away from Lucena City.  Such distance makes personal service impracticable.  As in Musa v. Amor, a written explanation why service was not done personally might have been superfluous.[42] (Emphases supplied and citations omitted.)

 

 

Our ruling in the above-cited cases is relevant to the instant case. Counsel for petitioner holds office in Dumaguete City, Negros Oriental, in the Visayas; while counsel for respondent holds office in Quezon City, Metro Manila, in Luzon. Given the considerable distance between the offices of these two counsels, personal service of pleadings and motions by one upon the other was clearly not practicable and a written explanation as to why personal service was not done would only be superfluous.[43] In addition, we refer once more to the merits of the Motion for Reconsideration and Supplemental Motion for Reconsideration of the RTC Order dated September 7, 2000 filed by petitioner, which justify the liberal interpretation of Section 11, Rule 13 of the Rules of Court in this case.

 

Jurisprudence confirms that the requirements laid down in Sections 4, 5, and 6, Rule 15 of the Rules of Court that the notice of hearing shall be directed to the parties concerned, and shall state the time and place for the hearing of the motion, are mandatory. If not religiously complied with, they render the motion pro forma. As such, the motion is a useless piece of paper that will not toll the running of the prescriptive period.[44]

 

Yet, again, there were previous cases with peculiar circumstances that had compelled us to liberally apply the rules on notice of hearing and recognize substantial compliance with the same. Once such case is Philippine National Bank v. Paneda,[45] where we adjudged:

Thus, even if the Motion may be defective for failure to address the notice of hearing of said motion to the parties concerned, the defect was cured by the court's taking cognizance thereof and the fact that the adverse party was otherwise notified of the existence of said pleading. There is substantial compliance with the foregoing rules if a copy of the said motion for reconsideration was furnished to the counsel of herein private respondents.

 

In the present case, records reveal that the notices in the Motion were addressed to the respective counsels of the private respondents and they were duly furnished with copies of the same as shown by the receipts signed by their staff or agents.

 

Consequently, the Court finds that the petitioner substantially complied with the pertinent provisions of the Rules of Court and existing

jurisprudence on the requirements of motions and pleadings.[46] (Emphasis supplied.)

 

 

It was not refuted that petitioner furnished respondent and respondent actually received copies of the Motion for Reconsideration, as well as the Supplemental Motion for Reconsideration of the RTC Order dated September 7, 2000 filed by petitioner.  As a result, respondent was able to file its Oppositions to the said Motions. The RTC, in issuing its Order dated December 7, 2000, was able to consider the arguments presented by both sides. Hence, there was substantial compliance by petitioner with the rules on notice of hearing for its Motion for Reconsideration and Supplemental Motion for Reconsideration of the RTC Order dated September 7, 2000. Respondent cannot claim that it was deprived of the opportunity to be heard on its opposition to said Motions.

 In view of the foregoing circumstances, the RTC judiciously, rather than abusively or

arbitrarily, exercised its discretion when it subsequently issued the Order dated December 7, 2000, setting aside its Order dated September 7, 2000 and proceeding with the trial in LRC Case No. N-201.

 WHEREFORE, the instant Petition for Review of petitioner City of Dumaguete is

hereby GRANTED. The Decision dated March 4, 2005 and Resolution dated June 6, 2005 of the Court Appeals in CA-G.R. SP No. 64379 are SET ASIDE, and the Orders dated December 7, 2000 and February 20, 2001 of Branch 44 of the Regional Trial Court of the City of Dumaguete in LRC Case No. N-201 are REINSTATED. The said trial court is DIRECTED to proceed with the hearing of LRC Case No. N-201 with dispatch.

 SO ORDERED.

 

 

FIRST DIVISION

G.R. Nos. 197592 & 202623, November 27, 2013

THE PROVINCE OF AKLAN, Petitioners, v. JODY KING CONSTRUCTION AND DEVELOPMENT CORP., Respondent.

D E C I S I O N

VILLARAMA, JR., J.:

These consolidated petitions for review on certiorari seek to reverse and set aside the following: (1) Decision1 dated October 18, 2010 and Resolution2 dated July 5, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 111754; and (2) Decision3 dated August 31, 2011 and Resolution4 dated June 27, 2012 in CA-G.R. SP No. 114073.

The Facts

On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and Development Corp. (respondent) entered into a contract for the design and construction of the Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total project cost is P38,900,000: P18,700,000 for the design and construction of passenger terminal, and P20,200,000 for the design and construction of the jetty port facility.5  In the course of construction, petitioner issued variation/change orders for additional works.  The scope of work under these change orders were agreed upon by petitioner and respondent.6

On January 5, 2001, petitioner entered into a negotiated contract with respondent for the construction of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in Malay, Aklan.  The contract price for Phase II is P2,475,345.54.7

On October 22, 2001, respondent made a demand for the total amount of P22,419,112.96 covering the following items which petitioner allegedly failed to settle:chanRoblesvirtualLawlibrary

1. Unpaid accomplishments on additional works undertaken------------------------------------------

Php 12,396,143.09

2. Refund of taxes levied despite it not being covered by original contract----------------------

Php 884,098.59

3. Price escalation (Consistent with Section 7.5, Original Contract)---------------------------------

Php 1,291,714.98

4. Additional Labor Cost resulting [from] numerous change orders issued sporadically--

Php 3,303,486.60

5. Additional Overhead Cost resulting [from] numerous Orders issued sporadically----------

Php 1,101,162.60

6. Interest resulting [from] payment delays consistent with Section 7.3.b of the Original Contract---------------------------------------------

Php 3,442,507.50.8

On July 13, 2006, respondent sued petitioner in the Regional Trial Court (RTC) of Marikina City (Civil Case No. 06-1122-MK) to collect the aforesaid amounts.9  On August 17, 2006, the trial court issued a writ of preliminary attachment.10

Petitioner denied any unpaid balance and interest due to respondent.  It asserted that the sums being claimed by respondent were not indicated in Change Order No. 3 as approved by the Office of Provincial Governor. Also cited was respondent’s June 10, 2003 letter absolving petitioner from liability for any cost in connection with the Caticlan Passenger Terminal

Project.11

After trial, the trial court rendered its Decision12 on August 14, 2009, the dispositive portion of which reads:chanRoblesvirtualLawlibrary

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of plaintiff Jody King Construction And Development Corporation and against defendant Province of Aklan, as follows:

1. ordering the defendant to pay to the plaintiff the amount of Php7,396,143.09 representing the unpaid accomplishment on additional works undertaken by the plaintiff;

2. ordering the defendant to refund to the plaintiff the amount of Php884,098.59  representing additional 2% tax levied upon against the plaintiff;

3. ordering the defendant to pay to the plaintiff price escalation in the amount of Php1,291,714.98 pursuant to Section 7.5 of the original contract;

4. ordering the defendant to pay to the plaintiff the amount of Php3,303,486.60 representing additional labor cost resulting from change orders issued by the defendant;

5. ordering the defendant to pay to the plaintiff the sum of Php1,101,162.00 overhead cost resulting from change orders issued by the defendant;

6. ordering the defendant to pay the sum of Php3,442,507.50 representing interest resulting from payment delays up to October 15, 2001 pursuant to Section 7.3.b of the original contract;

7. ordering the defendant to pay interest of 3% per month from unpaid claims as of October 16, 2001 to date of actual payment pursuant to Section 7.3.b[;]

8. ordering the [defendant] to pay to the plaintiff the sum of Php500,000.00 as moral damages;

9. ordering the defendant to pay to the plaintiff the sum of Php300,000.00 as exemplary damages;

10. ordering the defendant to pay the plaintiff the sum of Php200,000.00, as and for attorney’s fees; and

11. ordering the defendant to pay the cost of suit.

SO ORDERED.13

Petitioner filed its motion for reconsideration14 on October 9, 2009 stating that it received a copy of the decision on September 25, 2009.  In its Order15 dated October 27, 2009, the trial court denied the motion for reconsideration upon verification from the records that as shown by the return card, copy of the decision was actually received by both Assistant Provincial Prosecutor

Ronaldo B. Ingente and Atty. Lee T. Manares on September 23, 2009.  Since petitioner only had until October 8, 2009 within which to file a motion for reconsideration, its motion filed on October 9, 2009 was filed one day after the finality of the decision.  The trial court further noted that there was a deliberate attempt on both Atty. Manares and Prosecutor Ingente to mislead the court and make it appear that their motion for reconsideration was filed on time.

Petitioner filed a Manifestation16 reiterating the explanation set forth in its Rejoinder to respondent’s comment/opposition and motion to dismiss that the wrong date of receipt of the decision stated in the motion for reconsideration was due to pure inadvertence attributable to the staff of petitioner’s counsel.  It stressed that there was no intention to mislead the trial court nor cause undue prejudice to the case, as in fact its counsel immediately corrected the error upon discovery by explaining the attendant circumstances in the Rejoinder dated October 29, 2009.

On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV Antonio E. Gamboa, Jr. to demand from petitioner the immediate payment of P67,027,378.34 and tender the same to the respondent.  Consequently, Sheriff Gamboa served notices of garnishment on Land Bank of the Philippines, Philippine National Bank and Development Bank of the Philippines at their branches in Kalibo, Aklan for the satisfaction of the judgment debt from the funds deposited under the account of petitioner.  Said banks, however, refused to give due course to the court order, citing the relevant provisions of statutes, circulars and jurisprudence on the determination of government monetary liabilities, their enforcement and satisfaction.17

Petitioner filed in the CA a petition for certiorari with application for temporary restraining order (TRO) and preliminary injunction assailing the Writ of Execution dated November 24, 2009, docketed as CA-G.R. SP No. 111754.

On December 7, 2009, the trial court denied petitioner’s notice of appeal filed on December 1, 2009.  Petitioner’s motion for reconsideration of the December 7, 2009 Order was likewise denied.18  On May 20, 2010, petitioner filed another petition for certiorari in the CA questioning the aforesaid orders denying due course to its notice of appeal, docketed as CA-G.R. SP No. 114073.

By Decision dated October 18, 2010, the CA’s First Division dismissed the petition in CA-G.R. SP No. 111754 as it found no grave abuse of discretion in the lower court’s issuance of the writ of execution.  Petitioner filed a motion for reconsideration which was likewise denied by the CA.  The CA  stressed that even assuming as true the alleged errors committed by the trial court, these were insufficient for a ruling that grave abuse of discretion had been committed.  On the matter of execution of the trial court’s decision, the appellate court said that it was rendered moot by respondent’s filing of a petition before the Commission on Audit (COA).

On August 31, 2011, the CA’s Sixteenth Division rendered its Decision dismissing the petition in CA-G.R. SP No. 114073.  The CA said that petitioner failed to provide valid justification for its failure to file a timely motion for reconsideration; counsel’s explanation that he believed in good faith that the August 14, 2009 Decision of the trial court was received on September 25, 2009 because it was handed to him by his personnel only on that day is not a justifiable excuse that would warrant the relaxation of the rule on reglementary period of appeal.  The CA also held that

petitioner is estopped from invoking the doctrine of primary jurisdiction as it only raised the issue of COA’s primary jurisdiction after its notice of appeal was denied and a writ of execution was issued against it.

The Cases

In G.R. No. 197592, petitioner submits the following issues:chanRoblesvirtualLawlibrary

I.

WHETHER OR NOT THE DECISION DATED 14 AUGUST 2009 RENDERED BY THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY AND THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 SHOULD BE RENDERED VOID FOR LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.

II.

WHETHER OR NOT THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RENDERING THE DECISION DATED 14 AUGUST 2009 AND ISSUING THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 EVEN IT FAILED TO DISPOSE ALL THE ISSUES OF THE CASE BY NOT RESOLVING PETITIONER’S “URGENT MOTION TO DISCHARGE EX-PARTE WRIT OF PRELIMINARY ATTACHMENT” DATED 31 AUGUST 2006.

III.

WHETHER OR NOT THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 WHICH WAS HASTILY ISSUED IN VIOLATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 10-2000 SHOULD BE RENDERED VOID.19

The petition in G.R. No. 202623 sets forth the following arguments:

Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court, Branch 273, Marikina City over the subject matter of the case.20

The petition for certiorari filed before the CA due to the RTC’s denial of petitioner’s Notice of Appeal was in accord with jurisprudence.21chanroblesvirtualawlibrary

The Issues

The controversy boils down to the following issues: (1) the applicability of the doctrine of primary jurisdiction to this case; and (2) the propriety of the issuance of the writ of execution.

Our Ruling

The petitions are meritorious.

COA has primary jurisdiction overprivate respondent’s money claims

Petitioner is not estopped fromraising the issue of jurisdiction

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of the proper administrative bodies, relief must first be obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter may well be within their proper jurisdiction.22  It applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative agency.  In such a case, the court in which the claim is sought to be enforced may suspend the judicial process pending referral of such issues to the administrative body for its view or, if the parties would not be unfairly disadvantaged, dismiss the case without prejudice.23

The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.24

As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly owed by petitioner, a local government unit.

Under Commonwealth Act No. 327,25 as amended by Section 26 of Presidential Decree No. 1445,26 it is the COA which has primary jurisdiction over money claims against government agencies and instrumentalities.

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as the examination, audit, andsettlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed, including non-governmental entities subsidized by the government, those funded by donations through the government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or those partly funded by the government.  (Emphasis supplied.)

Pursuant to its rule-making authority conferred by the 1987 Constitution27 and existing laws, the

COA promulgated the 2009 Revised Rules of Procedure of the Commission on Audit.  Rule II, Section 1 specifically enumerated those matters falling under COA’s exclusive jurisdiction, which include “[m]oney claims due from or owing to any government agency.”  Rule VIII, Section 1 further provides:chanRoblesvirtualLawlibrary

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction over: a) money claim against the Government; b) request for concurrence in the hiring of legal retainers by government agency; c) write off of unliquidated cash advances and dormant accounts receivable in amounts exceeding one million pesos (P1,000,000.00); d) request for relief from accountability for loses due to acts of man, i.e. theft, robbery, arson, etc, in amounts in excess of Five Million pesos (P5,000,000.00).

In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,28 we ruled that it is the COA and not the RTC which has primary jurisdiction to pass upon petitioner’s money claim against respondent local government unit.  Such jurisdiction may not be waived by the parties’ failure to argue the issue nor active participation in the proceedings.  Thus:chanRoblesvirtualLawlibrary

This case is one over which the doctrine of primary jurisdiction clearly held sway for although petitioner’s collection suit for P487,662.80 was within the jurisdiction of the RTC, the circumstances surrounding petitioner’s claim brought it clearly within the ambit of the COA’s jurisdiction.

First, petitioner was seeking the enforcement of a claim for a certain amount of money against a local government unit.  This brought the case within the COA’s domain to pass upon money claims against the government or any subdivision thereof under Section 26 of the Government Auditing Code of the Philippines:The authority and powers of the Commission [on Audit] shall extend to and comprehend all matters relating to x x x  the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities. x x x.The scope of the COA’s authority to take cognizance of claims is circumscribed, however, by an unbroken line of cases holding statutes of similar import to mean onlyliquidated claims, or those determined or readily determinable from vouchers, invoices, and such other papers within reach of accounting officers. Petitioner’s claim was for a fixed amount and although respondent took issue with the accuracy of petitioner’s summation of its accountabilities, the amount thereof was readily determinable from the receipts, invoices and other documents. Thus, the claim was well within the COA’s jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioner’s money claim was founded on a series of purchases for the medical supplies of respondent’s public hospitals.  Both parties agreed that these transactions were governed by the Local Government Code provisions on supply and property management and their implementing rules and regulations promulgated by the COA pursuant to Section 383 of said Code. Petitioner’s claim therefore involved compliance with applicable auditing laws and rules on procurement.  Such matters are not within the usual area of knowledge, experience and expertise of most judges but within the special competence of COA auditors and accountants.  Thus, it was but proper, out of fidelity to the doctrine of primary jurisdiction, for the RTC to dismiss petitioner’s complaint.

Petitioner argues, however, that respondent could no longer question the RTC’s jurisdiction over the matter after it had filed its answer and participated in the subsequent proceedings. To this, we need only state that the court may raise the issue of primary jurisdiction sua sponte and its invocation cannot be waived by the failure of the parties to argue it as the doctrine exists for the proper distribution of power between judicial and administrative bodies and not for the convenience of the parties.29  (Emphasis supplied.)

Respondent’s collection suit being directed against a local government unit, such money claim should have been first brought to the COA.30 Hence, the RTC should have suspended the proceedings and refer the filing of the claim before the COA.  Moreover, petitioner is not estopped from raising the issue of jurisdiction even after the denial of its notice of appeal and before the CA.

There are established exceptions to the doctrine of primary jurisdiction, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been rendered moot; (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings.31  However, none of the foregoing circumstances is applicable in the present case.

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence.32  All the proceedings of the court in violation of the doctrine and all orders and decisions rendered thereby are null and void.33ChanRoblesVirtualawlibrary

Writ of Execution issued in violationof COA’s primary jurisdiction is void  

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject matter of the case is no judgment at all, it cannot be the source of any right or the creator of any obligation.34  All acts pursuant to it and all claims emanating from it have no legal effect and the void judgment can never be final and any writ of execution based on it is likewise void.35

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion when it ordered the execution of its judgment against petitioner and garnishment of the latter’s funds.

In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA and not the RTC which has original jurisdiction over money claim against government agencies and subdivisions.  The CA, in denying petitioner’s motion for reconsideration, simply stated that the

issue had become moot by respondent’s filing of the proper petition with the COA. However, respondent’s belated compliance with the formal requirements of presenting its money claim before the COA did not cure the serious errors committed by the RTC in implementing its void decision.  The RTC’s orders implementing its judgment rendered without jurisdiction must be set aside because a void judgment can never be validly executed.

Finally, the RTC should have exercised utmost caution, prudence and judiciousness in issuing the writ of execution and notices of garnishment against petitioner. The RTC had no authority to direct the immediate withdrawal of any portion of the garnished funds from petitioner’s depositary banks.36  Such act violated the express directives of this Court under Administrative Circular No. 10-2000,37which was issued “precisely in order to prevent the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the COA.”38ChanRoblesVirtualawlibrary

WHEREFORE, both petitions in G.R. Nos. 197592 and 202623 are GRANTED.  The Decision dated October 18, 2010 and Resolution dated July 5, 2011 of the Court of Appeals  in CA-G.R. SP No. 111754, and Decision dated August 31, 2011 and Resolution dated June 27, 2012 in CA-G.R. SP No. 114073 are hereby REVERSED and SET ASIDE.  The Decision dated August 14, 2009, Writ of Execution and subsequent issuances implementing the said decision of the Regional Trial Court of Marikina City in Civil Case No. 06-1122-MK are all SET ASIDE.

No pronouncement as to costs.chanRoblesvirtualLawlibrary

SO ORDERED.

Leonardo-De Castro, Acting Chairperson, Peralta,* Bersamin, and Reyes, JJ., concur.SECOND DIVISION

 

 

LUCIA BARRAMEDA VDA. DE BALLESTEROS,

Petitioner,

 

 

 

- versus -

 

  G.R. No. 176260

 

Present:

 

CARPIO, J., Chairperson,

NACHURA,

PERALTA,

ABAD, and

 

RURAL BANK OF CANAMAN INC., represented by its Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION,

Respondent.

MENDOZA, JJ.

 

 

 

Promulgated:

 

November 24, 2010

 

X -------------------------------------------------------------------------------------- X

 

D E C I S I O N

 

 

MENDOZA, J.:

 

 

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Civil Procedure assailing the August 15, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. No. 82711, modifying the decision of the Regional Trial Court of Iriga City, Branch 36 (RTC-Iriga), in Civil Case No. IR-3128, by ordering the consolidation of the said civil case with Special Proceeding Case No. M-5290 (liquidation case) before the Regional Trial Court of Makati City, Branch 59 (RTC-Makati).

 

 

It appears from the records that on March 17, 2000, petitioner Lucia Barrameda Vda. De Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and Damages with prayer for Preliminary Injunction against her children, Roy, Rito, Amy, Arabel, Rico, Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of Canaman, Inc., Baao Branch (RBCI) before the RTC-Iriga. The case was docketed as Civil Case No. IR-3128.

 

In her complaint, Lucia alleged that her deceased husband, Eugenio, left two (2) parcels of land located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters; that on March 6, 1995, without her knowledge and consent, her children executed a deed of extrajudicial partition and waiver of the estate of her husband wherein all the heirs, including Lucia, agreed to allot the two parcels to Rico Ballesteros (Rico); that, still, without her knowledge and consent, Rico mortgaged Parcel B of the estate in favor of RBCI which mortgage was being foreclosed for failure to settle the loan secured by the lot; and that Lucia was occupying Parcel B and had no other place to live. She prayed that the deed of extrajudicial partition and waiver, and the subsequent mortgage in favor of RBCI be declared null and void having been executed without her knowledge and consent.She also prayed for damages.

 

In its Answer, RBCI claimed that in 1979, Lucia sold one of the two parcels to Rico which represented her share in the estate of her husband. The extrajudicial partition, waiver and mortgage were all executed with the knowledge and consent of Lucia although she was not able to sign the document. RBCI further claimed that Parcel B had already been foreclosed way back in 1999 which fact was known to Lucia through the auctioning notary public. Attorneys fees were pleaded as counterclaim.

 

The case was then set for pre-trial conference. During the pre-trial, RBCIs counsel filed a motion to withdraw after being informed that Philippine Deposit Insurance Corporation(PDIC) would handle the case as RBCI had already been closed and placed under the receivership of the PDIC. Consequently, on February 4, 2002, the lawyers of PDIC took over the case of RBCI.

 

On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has no jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30, Republic Act No. 7653 (RA No. 7653), otherwise known as the New Central Bank Act, the RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the liquidation court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR-3128 fell within the exclusive jurisdiction of such liquidation court.  Lucia opposed the motion.

 

On July 29, 2003, the RTC-Iriga issued an order[2] granting the Motion to Dismiss, to wit:

 

This resolves the Motion to Dismiss filed by the defendant Rural Bank of Canaman, Inc., premised on the ground that this court has no jurisdiction over the

subject matter of the action. This issue of jurisdiction was raised in view of the pronouncement of the Supreme Court in Ong v. C.A. 253 SCRA 105 and in the case of Hernandez v. Rural Bank of Lucena, Inc., G.R. No. L-29791 dated January 10, 1978, wherein it was held that the liquidation court shall have jurisdiction to adjudicate all claims against the bank whether they be against assets of the insolvent bank, for Specific Performance, Breach of Contract, Damages or whatever.

 

 

 

It is in view of this jurisprudential pronouncement made by no less than the Supreme Court, that this case is, as far as defendant Rural Bank of Canaman Inc., is concerned, hereby ordered DISMISSED without prejudice on the part of the plaintiff to ventilate their claim before the Liquidation Court now, RTC Branch 59, Makati City.

 

SO ORDERED.

 

Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga erred in dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the rule on adherence of jurisdiction.

 

On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil Case No. IR-3128 and the liquidation case pending before RTC-Makati. The appellate court ratiocinated thus:

 

The consolidation is desirable in order to prevent confusion, to avoid multiplicity of suits and to save unnecessary cost and expense. Needless to add, this procedure is well in accord with the principle that the rules of procedure shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding (Vallacar Transit, Inc. v. Yap, 126 SCRA 500 [1983]; Suntay v. Aguiluz, 209 SCRA 500 [1992] citing Ramos v. Ebarle, 182 SCRA 245 [1990]). It would be more in keeping with the demands of equity if the cases are simply ordered

consolidated. Pursuant to Section 2, Rule 1, Revised Rules of Court, the rules on consolidation should be liberally construed to achieve the object of the parties in obtaining just, speedy and inexpensive determination of their cases (Allied Banking Corporation v. Court of Appeals, 259 SCRA 371 [1996]).

 

The dispositive portion of the decision reads:

 

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED, in such a way that the dismissal of this case (Civil Case No. IR-3128) is set aside and in lieu thereof another one is entered ordering the consolidation of said case with the liquidation case docketed as Special Proceeding No. M-5290 before Branch 59 of the Regional Trial Court of Makati City, entitled In Re: Assistance in the Judicial Liquidation of Rural Bank of Canaman, Camarines Sur, Inc., Philippine Deposit Corporation, Petitioner. No pronouncement as to cost.

 

SO ORDERED.[3]

 

 

Lucia filed a motion for reconsideration[4] but it was denied by the CA in its Resolution dated December 14, 2006.[5]

Hence, the present petition for review on certiorari anchored on the following

 

GROUNDS

 

(I)

 

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE REGIONAL TRIAL COURT OF IRIGA CITY, BRANCH 36 IS VESTED WITH JURISDICTION TO CONTINUE TRYING AND ULTIMATELY DECIDE CIVIL CASE NO. IR-3128.

 

(II)

 

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN ORDERING THE CONSOLIDATION OF CIVIL CASE NO. IR-3128 WITH THE LIQUIDATION CASE DOCKETED AS SPECIAL PROCEEDINGS NO. M-5290 BEFORE BRANCH 59 OF THE REGIONAL TRIAL COURT OF MAKATI CITY.[6]

 

Given the foregoing arguments, the Court finds that the core issue to be resolved in this petition involves a determination of whether a liquidation court can take cognizance of a case wherein the main cause of action is not a simple money claim against a bank ordered closed, placed under receivership of the PDIC, and undergoing a liquidation proceeding.

 

Lucia contends that the RTC-Iriga is vested with jurisdiction over Civil Case No. 3128, the constitution of the liquidation court notwithstanding. According to her, the case was filed before the RTC-Iriga on March 17, 2000 at the time RBCI was still doing business or before the defendant bank was placed under receivership of PDIC in January 2001.

 

She further argues that the consolidation of the two cases is improper. Her case, which is for annulment of deed of partition and waiver, deed of mortgage and damages, cannot be legally brought before the RTC-Makati with the liquidation case considering that her cause of action against RBCI is not a simple claim arising out of a creditor-debtor relationship, but one which involves her rights and interest over a certain property irregularly acquired by RBCI. Neither is she a creditor of the bank, as only the creditors of the insolvent bank are allowed to file and ventilate claims before the liquidator, pursuant to the August 10, 2001 Order of the RTC-Makati which granted the petition for assistance in the liquidation of RBCI.

 

In its Comment,[7] PDIC, as liquidator of RBCI, counters that the consolidation of Civil Case No. 3128 with the liquidation proceeding is proper. It posits that the liquidation court of RBCI, having been established, shall have exclusive jurisdiction over all claims against the said bank.

 

After due consideration, the Court finds the petition devoid of merit.

 

Lucias argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil Case No. IR-3128 until its final disposition, evidently falls out from a strained interpretation of the law and jurisprudence. She contends that:

 

 

Since the RTC-Iriga has already obtained jurisdiction over the case it should continue exercising such jurisdiction until the final termination of the case. The jurisdiction of a court once attached cannot be ousted by subsequent happenings or events, although of a character which would have prevented jurisdiction from attaching in the first instance, and the Court retains jurisdiction until it finally disposes of the case (Aruego Jr. v. Court of Appeals, 254 SCRA 711).

 

When a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to final determination of the case is not affected by a new legislation transferring jurisdiction over such proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once jurisdiction is vested, the same is retained up to the end of the litigation (Bernate v. Court of Appeals, 263 SCRA 323).[8]

 

The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case, find no application in the case at bench.

 

Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however, must be reminded that such principle is not without exceptions. It is well to quote the ruling of the CA on this matter, thus:

This Court is not unmindful nor unaware of the doctrine on the adherence of jurisdiction. However, the rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is that when the change in jurisdiction is curative in character (Garcia v. Martinez, 90 SCRA 331 [1979]; Calderon, Sr. v. Court of Appeals, 100 SCRA 459 [1980]; Atlas Fertilizer Corporation v. Navarro, 149 SCRA 432 [1987]; Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).

 

For sure, Section 30, R.A. 7653 is curative in character when it declared that the liquidation court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more obvious in the light of its intent. InManalo v. Court of Appeals (366 SCRA 752, [2001]), the Supreme Court says:

 

xxx The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness (citing Ong v. CA, 253 SCRA 105 [1996]). The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate his operations (citing Central Bank of the Philippines, et al. v. CA, et al., 163 SCRA 482 [1988]).[9]

 

As regards Lucias contention that jurisdiction already attached when Civil Case No. IR-3128 was filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case before the RTC-Makati, her stance fails to persuade this Court. In refuting this assertion, respondent PDIC cited the case of Lipana v. Development Bank of Rizal[10] where it was held that the time of the filing of the complaint is immaterial, viz:

It is the contention of petitioners, however, that the placing under receivership of Respondent Bank long after the filing of the complaint removed it from the doctrine in the said Morfe Case.

 

This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution that will obviously prejudice the other depositors and creditors.Moreover, as stated in the said Morfe case, the effect of the judgment is only to fix the amount of the debt, and not to give priority over other depositors and creditors.

 

The cited Morfe case[11] held that after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise.

 

Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility of favorable judgment and execution thereof against the assets of RBCI would not only prejudice the other creditors and depositors but would defeat the very purpose for which a liquidation court was constituted as well.

 

Anent the second issue, Lucia faults the CA in directing the consolidation of Civil Case No. IR-3128 with Special Proceedings No. M-5290. The CA committed no error.Lucias complaint involving annulment of deed of mortgage and damages falls within the purview of a disputed claim in contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The jurisdiction should be lodged with the liquidation court. Section 30 provides:

Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has wilfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designated as receiver.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and

exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board.

If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The receiver shall:

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claimsagainst the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution.

(2) convert the assets of the institution to money, dispose of the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. [Emphasis supplied]

x x x

 

Disputed claims refers to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever.[12]Lucias action being a claim against RBCI can properly be consolidated with the liquidation proceedings before the RTC-Makati. A liquidation proceeding has been explained in the case of In Re: Petition For

Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal Revenue[13] as follows:

 

A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as "claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and disapproval of claims. Upon the approval of the petition seeking the assistance of the proper court in the liquidation of a closed entity, all money claims against the bank are required to be filed with the liquidation court. This phase may end with the declaration by the liquidation court that the claim is not proper or without basis. On the other hand, it may also end with the liquidation court allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred, and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim is final order, and may be appealed by the party aggrieved thereby.

 

The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed liquidator. The distribution plan specifies in detail the total amount available for distribution to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding - payment of all allowed claims in accordance with the order of legal priority and the approved distribution plan.

 

x x x

 

A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court of competent jurisdiction entitled, "Petition for Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims against the insolvent are required to be filed with the liquidation court. Although the claims are litigated in the same proceeding, the treatment is individual. Each claim is heard separately. And the Order issued relative to a particular claim applies only to said claim, leaving the other claims unaffected, as each claim is considered separate and distinct from the others. x x x [Emphasis supplied.]

 

It is clear, therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance Corporation,[14] regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board, in the closure of financial institutions was in excess of jurisdiction, or with grave abuse of discretion. The same is not obtaining in this present case.

 

The power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the State.Police power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due process and equal protection clauses of the Constitution.[15]

 

In sum, this Court holds that the consolidation is proper considering that the liquidation court has jurisdiction over Lucias action. It would be more in keeping with law and equity if Lucias case is consolidated with the liquidation case in order to expeditiously determine whether she is entitled to recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive from the remaining assets of the bank.

 

WHEREFORE, the petition is DENIED.

 

SO ORDERED.Republic of the Philippines

Supreme CourtBaguio City

 FIRST DIVISION

 PACIFIC ACE FINANCE LTD. (PAFIN),

  G.R. No. 175303

Petitioner,   Present:         CORONA, C.J., Chairperson,

    LEONARDO-DE CASTRO,- versus -   BERSAMIN,

    DEL CASTILLO, and    VILLARAMA, JR., JJ.

     EIJI* YANAGISAWA,   Promulgated:

Respondent.   April 11, 2012x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

 D E C I S I O N

 DEL CASTILLO, J.: An undertaking not to dispose of a property pending litigation, made in open court and embodied in a court order, and duly annotated on the title of the said property, creates a right in favor of the person relying thereon. The latter may seek the annulment of actions that are done in violation of such undertaking. Before us is a Petition for Review[1] of the August 1, 2006 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 78944, which held: 

WHEREFORE, the Decision dated April 20, 2003 of the RTC, Branch 258, Paraaque City, is hereby ANNULLED and SET ASIDE and a new one entered annulling the Real Estate Mortgage executed on August 25, 1998 in favor of defendant Pacific Ace Finance Ltd. SO ORDERED.[3]

 Factual Antecedents Respondent Eiji Yanagisawa (Eiji), a Japanese national, and Evelyn F. Castaeda (Evelyn), a Filipina, contracted marriage on July 12, 1989 in the City Hall of Manila.[4]

 On August 23, 1995, Evelyn purchased a 152 square-meter townhouse unit located at Bo. Sto.

Nio, Paraaque, Metro Manila (Paraaque townhouse unit).[5] The Registry of Deeds for Paraaque issued Transfer Certificate of Title (TCT) No. 99791 to Evelyn P. Castaeda, Filipino, married to Ejie Yanagisawa, Japanese citizen[,] both of legal age.[6]

 In 1996, Eiji filed a complaint for the declaration of nullity of his marriage with Evelyn on the ground of bigamy (nullity of marriage case). The complaint, docketed as Civil Case No. 96-776, was raffled to Branch 149 of the Regional Trial Court of Makati (Makati RTC). During the pendency of the case, Eiji filed a Motion for the Issuance of a Restraining Order against Evelyn and an Application for a Writ of a Preliminary Injunction. He asked that Evelyn be enjoined from disposing or encumbering all of the properties registered in her name. At the hearing on the said motion, Evelyn and her lawyer voluntarily undertook not to dispose of the properties registered in her name during the pendency of the case, thus rendering Eijis application and motion moot. On the basis of said commitment, the Makati RTC rendered the following Order dated October 2, 1996:

 O R D E R

In view of the commitment made in open court by Atty. Lupo Leyva, counsel for the defendant [Evelyn], together with his client, the defendant in this case, that the properties registered in the name of the defendant would not be disposed of, alienated or encumbered in any manner during the pendency of this petition, the Motion for the Issuance of a Restraining Order and Application for a Writ of a Preliminary Injunction scheduled today is hereby considered moot and academic. SO ORDERED.[7] (Emphasis supplied.)

  The above Order was annotated on the title of the Paraaque townhouse unit or TCT No. 99791, thus: 

Entry No. 8729 Order issued by Hon. Josefina Guevara Salonga, Judge, RTC, Branch 149, Makati City, ordering the defendant in Civil Case No. 96-776 entitled Eiji Yanagisawa, Plaintiff-versus-Evelyn Castaeda Yanagisawa, that the properties registered in the name of the defendant would not be disposed of, alienated or encumbered in any manner during the pendency of the petition, the Motion for the Issuance of a Restraining Order and Application for a Writ of Preliminary Injunction is hereby considered moot and academic. Date of Instrument October 2, 1996Date of Inscription March 17, 1997 11:21 a.m.[8] (Emphasis supplied.) 

 Sometime in March 1997, Evelyn obtained a loan of P500,000.00 from petitioner Pacific Ace Finance Ltd. (PAFIN).[9] To secure the loan, Evelyn executed on August 25, 1998 a real estate mortgage (REM)[10] in favor of PAFIN over the Paraaque townhouse unit covered by TCT No. 99791. The instrument was submitted to the Register of Deeds of Paraaque City for annotation on the same date.[11]

 At the time of the mortgage, Eijis appeal in the nullity of marriage case was pending before the CA.[12] The Makati RTC had dissolved Eiji and Evelyns marriage,[13] and had ordered the liquidation of their registered properties, including the Paraaque townhouse unit, with its proceeds to be divided between the parties.[14] The Decision of the Makati RTC did not lift or dissolve its October 2, 1996 Order on Evelyns commitment not to dispose of or encumber the properties registered in her name. Eiji learned of the REM upon its annotation on TCT No. 99791. Deeming the mortgage as a violation of the Makati RTCs October 2, 1996 Order, Eiji filed a complaint for the annulment of REM (annulment of mortgage case) against Evelyn and PAFIN.[15] The complaint, docketed as Civil Case No. 98-0431, was raffled to Branch 258 of the Regional Trial Court of Paraaque City (Paraaque RTC). For its defense, PAFIN denied prior knowledge of the October 2, 1996 Order against Evelyn. It admitted, however, that it did not conduct any verification of the title with the Registry of Deeds of Paraaque City because x x x Evelyn was a good, friendly and trusted neighbor.[16] PAFIN maintained that Eiji has no

personality to seek the annulment of the REM because a foreign national cannot own real properties located within the Philippines.[17]

 Evelyn also denied having knowledge of the October 2, 1996 Order.[18] Evelyn asserted that she paid for the property with her own funds[19] and that she has exclusive ownership thereof.[20]

 Paraaque Regional Trial Court Decision[21]

 The Paraaque RTC determined that the only issue before it is whether x x x [Eiji] has a cause of action against the defendants and x x x is entitled to the reliefs prayed for despite the fact that he is not the registered owner of the property being a Japanese national.[22]

 The Paraaque RTC explained that Eiji, as a foreign national, cannot possibly own the mortgaged property. Without ownership, or any other law or contract binding the defendants to him, Eiji has no cause of action that may be asserted against them.[23] Thus, the Paraaque RTC dismissed Eijis complaint: 

WHEREFORE, premises considered, for failure of the plaintiff to state a cause of action against defendants, EVELYN CASTAEDA YANAGISAWA and Pacific Ace Finance Ltd. (PAFIN), this case isDISMISSED. The counterclaim and cross-claim are likewise DISMISSED. SO ORDERED.[24]

  Eiji appealed the trial courts decision arguing that the trial court erred in holding that his inability to own real estate property in the Philippines deprives him of all interest in the mortgaged property, which was bought with his money. He added that the Makati RTC has even recognized his contribution in the purchase of the property by its declaration that he is entitled to half of the proceeds that would be obtained from its sale. Eiji also emphasized that Evelyn had made a commitment to him and to the Makati RTC that she would not dispose of, alienate, or encumber the properties registered in her name while the case was pending. This commitment incapacitates Evelyn from entering into the REM contract. Court of Appeals Decision[25]

 The CA found merit in Eijis appeal. The CA noted that the Makati RTC ruled on Eijis and Evelyns ownership rights over the properties that were acquired during their marriage, including the Paraaque townhouse unit. It was determined therein that the registered properties should be sold at public auction and the proceeds thereof to be divided between Eiji and Evelyn.[26]

 

Contrary to this ruling, the Paraaque RTC ruled that Eiji has no ownership rights over the Paraaque townhouse unit in light of the constitutional prohibition on foreign ownership of lands and that the subject property is Evelyns exclusive property.[27]

 The appellate court determined that the Paraaque RTCs Decision was improper because it violated the doctrine of non-interference. Courts of equal jurisdiction, such as regional trial courts, have no appellate jurisdiction over each other.[28] For this reason, the CA annulled and set aside the Paraaque RTCsdecision to dismiss Eijis complaint.[29]

 The CA then proceeded to resolve Eijis complaint.[30] The CA noted that Eiji anchored his complaint upon Evelyns violation of her commitment to the Makati RTC and to Eiji that she would not dispose of, alienate, or encumber the properties registered in her name, including the Paraaque townhouse unit. This commitment created a right in favor of Eiji to rely thereon and a correlative obligation on Evelyns part not to encumber the Paraaque townhouse unit. Since Evelyns commitment was annotated on TCT No. 99791, all those who deal with the said property are charged with notice of the burdens on the property and its registered owner.[31]

 On the basis of Evelyns commitment and its annotation on TCT No. 99791, the CA determined that Eiji has a cause of action to annul the REM contract. Evelyn was aware of her legal impediment to encumber and dispose of the Paraaque townhouse unit. Meanwhile, PAFIN displayed a wanton disregard of ordinary prudence when it admitted not conducting any verification of the title whatsoever. The CA determined that PAFIN was a mortgagee in bad faith.[32]

 Thus, the CA annulled the REM executed by Evelyn in favor of PAFIN. The parties to the annulled mortgage filed separate motions for reconsideration on August 22, 2006,[33] which were both denied for lack of merit by the appellate court in its November 7, 2006 Resolution.[34]

 PAFIN filed this petition for review. Petitioners Arguments Petitioner seeks a reversal of the CA Decision, which allegedly affirmed theMakati RTC ruling that Eiji is a co-owner of the mortgaged property. PAFIN insists that the CA sustained a violation of the constitution with its declaration that an alien can have an interest in real property located in the Philippines.[35]

 Petitioner also seeks the reinstatement of the Paraaque RTCs Decision dated April 20, 2003[36] and prays that this Court render a decision that Eiji cannot have ownership rights over the mortgaged property and that Evelyn enjoys exclusive ownership thereof. As the sole owner, Evelyn can validly mortgage the same to PAFIN without need of Eijis consent. Corollarily, Eiji has no cause of action to seek the REMs annulment.[37]

 Respondents Arguments 

Respondent argues that he has an interest to have the REM annulled on two grounds: First, Evelyn made a commitment in open court that she will not encumber the Paraaque townhouse unit during the pendency of the case. Second, the Makati RTCs decision declared that he is entitled to share in the proceeds of the Paraaque townhouse unit.[38]

 Respondent also insists that petitioner is in bad faith for entering into the mortgage contract with Evelyn despite the annotation on TCT No. 99791 that Evelyn committed herself not to encumber the same.[39]

 Issues

 Petitioner raises the following issues:[40]

 1. Whether a real property in the Philippines can be part of the community property of a Filipina and her foreigner spouse; 2. Whether a real property registered solely in the name of the Filipina wife is paraphernal or conjugal; 3. Who is entitled to the real property mentioned above when the marriage is declared void? 4. Whether the Paraaque RTC can rule on the issue of ownership, even as the same issue was already ruled upon by the Makati RTC and is pending appeal in the CA. 

Our Ruling The petition has no merit. Contrary to petitioners stance, the CA did not make any disposition as to who between Eiji and Evelyn owns the Paraaque townhouse unit. It simply ruled that the Makati RTC had acquired jurisdiction over the said question and should not have been interfered with by the Paraaque RTC. The CA only clarified that it was improper for the Paraaque RTC to have reviewed the ruling of a co-equal court. The Court agrees with the CA. The issue of ownership and liquidation of properties acquired during the cohabitation of Eiji and Evelyn has been submitted for the resolution of the Makati RTC, and is pending[41] appeal before the CA. The doctrine of judicial stability or non-interference dictates that the assumption by the Makati RTC over the issue operates as an insurmountable barrier to the subsequent assumption by the Paraaque RTC.[42] By insisting on ruling on the same issue, the Paraaque RTC effectively interfered with the Makati RTCs resolution of the issue and created the possibility of conflicting decisions. Cojuangco v. Villegas[43] states: The various branches of the [regional trial courts] 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. A contrary rule would obviously lead to confusion and seriously hamper the administration of justice. The matter is further explained thus: 

It has been held that "even in cases of concurrent jurisdiction, it is, also, axiomatic that the court first acquiring jurisdiction excludes the other courts."

 In addition, it is a familiar principle that when a court of competent jurisdiction acquires jurisdiction over the subject matter of a case, its authority continues, subject only to the appellate authority, until the matter is finally and completely disposed of, and that no court of co-ordinate authority is at liberty to interfere with its action. This doctrine is applicable to civil cases, to criminal prosecutions, and to courts-martial. The principle is essential to the proper and orderly administration of the laws; and while its observance might be required on the grounds of judicial comity and courtesy, it does not rest upon such considerations exclusively, but is enforced to prevent unseemly, expensive, and dangerous conflicts of jurisdiction and of the process.[44]

  

Petitioner maintains that it was imperative for the Paraaque RTC to rule on the ownership issue because it was essential for the determination of the validity of the REM.[45]

 The Court disagrees. A review of the complaint shows that Eiji did not claim ownership of the Paraaque townhouse unit or his right to consent to the REM as his bases for seeking its annulment. Instead, Eiji invoked his right to rely on Evelyns commitment not to dispose of or encumber the property (as confirmed in the October 2, 1996 Order of the Makati RTC), and the annotation of the said commitment on TCT No. 99791. It was Evelyn and PAFIN that raised Eijis incapacity to own real property as their defense to the suit. They maintained that Eiji, as an alien incapacitated to own real estate in the Philippines, need not consent to the REM contract for its validity. But this argument is beside the point and is not a proper defense to the right asserted by Eiji. This defense does not negate Eijis right to rely on the October 2, 1996 Order of the Makati RTC and to hold third persons, who deal with the registered property, to the annotations entered on the title. Thus, the RTC erred in dismissing the complaint based on this defense. Petitioner did not question the rest of the appellate courts ruling, which held that Evelyn and PAFIN executed the REM in complete disregard and violation of the October 2, 1996 Order of the Makati RTC and the annotation on TCT No. 99791. It did not dispute the legal effect of the October 2, 1996 Order on Evelyns capacity to encumber the Paraaque townhouse unit nor the CAs finding that petitioner is a mortgagee in bad faith. The October 2, 1996 Order, embodying Evelyns commitment not to dispose of or encumber the property, is akin to an injunction order against the disposition or encumbrance of the property. Jurisprudence holds that all acts done in violation of a standing injunction order are voidable as to the party enjoined and third parties who are not in good faith.[46] The party, in whose favor the injunction is issued, has a cause of action to seek the annulment of the offending actions.[47] The following is instructive: 

An injunction or restraining order must be obeyed while it remains in full force and effect until the injunction or restraining order has been set aside, vacated, or modified by the court which granted it, or until the order or decree awarding it has been reversed on appeal. The injuction must be obeyed irrespective of the ultimate validity of the order, and no matter how unreasonable and unjust the injunction may be in its terms.[48]

  In view of the foregoing discussion, we find no need to discuss the other issues raised by the petitioner. WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The August 1, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 78944 is AFFIRMED. SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 196200               September 11, 2013

ERNESTO DY, Petitioner, vs.HON. GINA M. BIBAT- PALAMOS, in her capacity as Presiding Judge of the Regional Trial Court, Branch 64, Makati City, and ORIX METRO LEASING AND FINANCE CORPORATION, Respondents.

D E C I S I O N

MENDOZA, J.:

This petition for certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure questions the December 13, 2010 and March 7, 2011Orders1 of the Regional Trial Court of Makati, Branch 64 (RTC), in Civil Case No. 92-2311, granting the motion for execution of petitioner, but denying his prayer for the return of his cargo vessel in the condition when the possession thereof was seized from him.

The Facts

The present controversy finds its roots in the Court’s decision in Orix Metro Leasing and Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy2 involving the same parties. The facts, as culled from the Court’s decision in the said case and the records, are not disputed by the parties.

Petitioner Ernesto Dy (petitioner) and his wife, Lourdes Dy (Lourdes), were the proprietors of Limchia Enterprises which was engaged in the shipping business. In 1990, Limchia Enterprises, with Lourdes as co-maker, obtained a loan from Orix Metro Leasing and Finance Corporation (respondent) to fund its acquisition of M/V Pilar-I, a cargo vessel. As additional security for the loan, Limchia Enterprises executed the Deed of Chattel Mortgage over M/V Pilar-I.3

Due to financial losses suffered when M/V Pilar-I was attacked by pirates, Spouses Dy failed to make the scheduled payments as required in their promissory note. After receiving several demand letters from respondent, Spouses Dy applied for the restructuring of their loan. Meanwhile, Lourdes issued several checks to cover the remainder of their loan but the same were dishonored by the bank, prompting respondent to institute a criminal complaint for violation of the Bouncing Checks Law. Lourdes appealed to respondent with a new proposal to update their outstanding loan obligations.4

On August 18, 1992, respondent filed the Complaint and Petition for Extrajudicial Foreclosure of Preferred Ship Mortgage under Presidential Decree No. 1521 with Urgent Prayer for Attachment with the RTC. Following the filing of an affidavit of merit and the posting of bond by respondent, the RTC ordered the seizure of M/V Pilar-I and turned over its possession to respondent. On September 28, 1994, respondent transferred all of its rights, title to and interests, as mortgagee, in M/V Pilar-I to Colorado Shipyard Corporation (Colorado).5

On July 31, 1997, the RTC rendered a decision in favor of Spouses Dy, ruling that they had not yet defaulted on their loan because respondent agreed to a restructured schedule of payment. There being no default, the foreclosure of the chattel mortgage on M/V Pilar-I was premature. The RTC ordered that the vessel be returned to Spouses Dy.6 This was affirmed by the Court of Appeals (CA), with the modification that Spouses Dy be ordered to reimburse the respondent for repair and dry docking expenses while the vessel was in the latter’s possession.7 On appeal, the Court promulgated its Decision, dated September 11, 2009, upholding the findings of the CA but deleting the order requiring Spouses Dy to reimburse respondent.8

Consequently, on August 17, 2010, petitioner filed a motion for execution of judgment with the RTC. In the intervening period, Colorado filed its Manifestation/Motion, dated July 29, 2010, informing the RTC that M/V Pilar-I, which was in its possession, had sustained severe damage and deterioration and had sunk in its shipyard because of its exposure to the elements. For this reason, it sought permission from the court to cut the sunken vessel into pieces, sell its parts and deposit the proceeds in escrow.9 In his Comment/Objection, petitioner insisted that he had the right to require that the vessel be returned to him in the same condition that it had been at the time it was wrongfully seized by respondent or, should it no longer be possible, that another vessel of the same tonnage, length and beam similar to that of M/V Pilar-I be delivered.10 Colorado, however, responded that the vessel had suffered severe damage and deterioration that refloating or restoring it to its former condition would be futile, impossible and very costly; and should petitioner persist in his demand that the ship be refloated, it should be done at the expense of the party adjudged by the court to pay the same.11

The RTC issued its questioned December 13, 2010 Order granting the motion for execution but denying petitioner’s prayer for the return of M/V Pilar-I in the same state in which it was taken by respondent. In so resolving, the RTC ratiocinated:

First, the judgment of the Supreme Court does not require the delivery of M/V Pilar in the state the defendants wanted it to be. Secondly, said judgment has now become final and it is axiomatic that after judgment has become executory, the court cannot amend the same, except: x x x None of the three circumstances where a final and executory judgment may be amended is present in

this case. And third, the present deplorable state of M/V Pilar certainly did not happen overnight, thus, defendants should have brought it to the attention of this Court, the Court of Appeals or the Supreme Court after it became apparent. Their inaction until after the judgment has become final, executory and immutable rendered whatever right they may have to remedy the situation to be nugatory. [Underlining supplied]

Petitioner moved for reconsideration but the motion was denied by the RTC in its March 7, 2011 Order.12

Hence, this petition.

The Issues

Petitioner raises the following issues in its Memorandum:

1. Whether or not the rule on hierarchy of courts is applicable to the instant petition?

2. Whether or not the honorable trial court gravely abused its discretion, amounting to lack or excess of jurisdiction, in finding that petitioner is not entitled to the return of M/VPilar-1 in the condition that it had when it was wrongfully seized by Orix Metro, or in the alternative, to a vessel of similar tonnage, length, beam, and other particulars as M/VPilar-1;

3. Whether or not petitioner is estopped from asking for the return of the vessel in the condition it had at the time it was seized?

4. Whether or not it was petitioner’s duty to look out for the vessel’s condition?13

To be succinct, only two central issues need to be resolved: (1) whether petitioner was justified in resorting directly to this Court via a petition for certiorari under Rule 65; and (2) whether petitioner is entitled to the return of M/V Pilar-I in the same condition when it was seized by respondent.

The Court’s Ruling

The Court finds the petition to be partly meritorious.

Hierarchy of Courts; Direct ResortTo The Supreme Court Justified

Petitioner argues that his situation calls for the direct invocation of this Court’s jurisdiction in the interest of justice. Moreover, as pointed out by the RTC, what is involved is a judgment of the Court which the lower courts cannot modify. Hence, petitioner deemed it proper to bring this case immediately to the attention of this Court. Lastly, petitioner claims that the present case involves a novel issue of law – that is, whether in an action to recover, a defendant in wrongful

possession of the subject matter in litigation may be allowed to return the same in a deteriorated condition without any liability.14

Respondent, on the other hand, contends that the petition should have been filed with the CA, following the doctrine of hierarchy of courts. It pointed out that petitioner failed to state any special or important reason or any exceptional and compelling circumstance which would warrant a direct recourse to this Court.15

Under the principle of hierarchy of courts, direct recourse to this Court is improper because the Supreme Court is a court of last resort and must remain to be so in order for it to satisfactorily perform its constitutional functions, thereby allowing it to devote its time and attention to matters within its exclusive jurisdiction and preventing the overcrowding of its docket. 16 Nonetheless, the invocation of this Court’s original jurisdiction to issue writs of certiorari has been allowed in certain instances on the ground of special and important reasons clearly stated in the petition, such as,(1) when dictated by the public welfare and the advancement of public policy; (2) when demanded by the broader interest of justice; (3) when the challenged orders were patent nullities; or (4) when analogous exceptional and compelling circumstances called for and justified the immediate and direct handling of the case.17

This case falls under one of the exceptions to the principle of hierarchy of courts. Justice demands that this Court take cognizance of this case to put an end to the controversy and resolve the matter which has been dragging on for more than twenty (20) years. Moreover, in light of the fact that what is involved is a final judgment promulgated by this Court, it is but proper for petitioner to call upon its original jurisdiction and seek final clarification.

Wrong Mode of Appeal;

Exception

Petitioner asserts that the RTC committed grave abuse of discretion when it failed to rule in his favor despite the fact that he had been deprived by respondent of his property rights over M/V Pilar-I for the past eighteen(18) years. Moreover, the change in the situation of the parties calls for a relaxation of the rules which would make the execution of the earlier decision of this Court inequitable or unjust. According to petitioner, for the RTC to allow respondent to return the ship to him in its severely damaged and deteriorated condition without any liability would be to reward bad faith.18

Conversely, respondent submits that there was no grave abuse of discretion on the part of the RTC as the latter merely observed due process and followed the principle that an execution order may not vary or go beyond the terms of the judgment it seeks to enforce.19 Respondent adds that the proper remedy should have been an ordinary appeal, where a factual review of the records can be made to determine the condition of the ship at the time it was taken from petitioner, and not a special civil action for certiorari.20

There are considerable differences between an ordinary appeal and a petition for certiorari which have been exhaustively discussed by this Court in countless cases. The remedy for errors of

judgment, whether based on the law or the facts of the case or on the wisdom or legal soundness of a decision, is an ordinary appeal.21 In contrast, a petition for certiorari under Rule 65 is an original action designed to correct errors of jurisdiction, defined to be those "in which the act complained of was issued by the court, officer, or quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack of in excess of jurisdiction."22 A court or tribunal can only be considered to have acted with grave abuse of discretion if its exercise of judgment was so whimsical and capricious as to be equivalent to a lack of jurisdiction. The abuse must be extremely patent and gross that it would amount to an "evasion of a positive duty or to virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion and hostility."23

Therefore, a misappreciation of evidence on the part of the lower court, as asserted by petitioner, may only be reviewed by appeal and not by certiorari because the issue raised by the petitioner does not involve any jurisdictional ground.24 It is a general rule of procedural law that when a party adopts an inappropriate mode of appeal, his petition may be dismissed outright to prevent the erring party from benefiting from his neglect and mistakes.25 There are exceptions to this otherwise ironclad rule, however. One is when the strict application of procedural technicalities would hinder the expeditious disposition of this case on the merits,26 such as in this case.

Petitioner Not Barred from DemandingReturn of the Vessel in its Former Condition

Petitioner insists that it is respondent who should bear the responsibility for the deterioration of the vessel because the latter, despite having in its possession the vessel M/V Pilar-I during the pendency of the foreclosure proceedings, failed to inform the court and petitioner himself about the actual condition of the ship. For estoppel to take effect, there must be knowledge of the real facts by the party sought to be estopped and reliance by the party claiming estoppel on the representation made by the former. In this case, petitioner cannot be estopped from asking for the return of the vessel in the condition that it had been at the time it was seized by respondent because he had not known of the deteriorated condition of the ship.27

On the contrary, respondent argues that petitioner is barred from asking for a modification of the judgment since he never prayed for the return of M/V Pilar-I in the same condition that it had been at the time it was seized.28Petitioner could have prayed for such relief in his prior pleadings and presented evidence thereon before the judgment became final and executory. During the course of the trial, and even at the appellate phase of the case, petitioner failed to ask the courts to look into the naturally foreseeable depreciation of M/V Pilar-I and to determine who should pay for the wear and tear of the vessel. Consequently, petitioner can no longer pursue such relief for the first time at this very late stage.29 Moreover, respondent posits that it can only be held liable for the restoration and replacement of the vessel if it can be proven that M/V Pilar-I deteriorated through the fault of respondent. Nowhere in the prior decision of this Court, however, does it appear that respondent was found to have been negligent in its care of the vessel. In fact, respondent points out that, for a certain period, it even paid for the repair and maintenance of the vessel and engaged the services of security guards to watch over the vessel. It

reasons that the vessel’s deterioration was necessarily due to its exposure to sea water and the natural elements for the almost twenty years that it was docked in the Colorado shipyard.30

On this matter, the Court finds for petitioner.

This Court is not unaware of the doctrine of immutability of judgments. When a judgment becomes final and executory, it is made immutable and unalterable, meaning it can no longer be modified in any respect either by the court which rendered it or even by this Court. Its purpose is to avoid delay in the orderly administration of justice and to put an end to judicial controversies. Even at the risk of occasional errors, public policy and sound practice dictate that judgments must become final at some point.31

As with every rule, however, this admits of certain exceptions. When a supervening event renders the execution of a judgment impossible or unjust, the interested party can petition the court to modify the judgment to harmonize it with justice and the facts.32 A supervening event is a fact which transpires or a new circumstance which develops after a judgment has become final and executory. This includes matters which the parties were unaware of prior to or during trial because they were not yet in existence at that time.33

In this case, the sinking of M/V Pilar-I can be considered a supervening event.1âwphi1 Petitioner, who did not have possession of the ship, was only informed of its destruction when Colorado filed its Manifestation, dated July 29, 2010, long after the September 11, 2009 Decision of this Court in Orix Metro Leasing and Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy attained finality on January 19, 2010. During the course of the proceedings in the RTC, the CA and this Court, petitioner could not have known of the worsened condition of the vessel because it was in the possession of Colorado.

It could be argued that petitioner and his lawyer should have had the foresight to ask for the return of the vessel in its former condition at the time respondent took possession of the same during the proceedings in the earlier case. Nonetheless, the modification of the Court’s decision is warranted by the superseding circumstances, that is, the severe damage to the vessel subject of the case and the belated delivery of this information to the courts by the party in possession of the same.

Having declared that a modification of our earlier judgment is permissible in light of the exceptional incident present in this case, the Court further rules that petitioner is entitled to the return of M/V Pilar-I in the same condition in which respondent took possession of it. Considering, however, that this is no longer possible, then respondent should pay petitioner the value of the ship at such time.

This disposition is not without precedent. In the case of Metro Manila Transit Corporation v. D.M. Consortium, Inc.,34 D.M. Consortium, Inc. (DMCI) acquired 228 buses under a lease purchase agreement with Metro Manila Transit Corporation (MMTC). MMTC later alleged that DMCI was in default of its amortization, as a result of which, MMTC took possession of all the buses. This Court upheld the right of DMCI, after having been unjustly denied of its right of possession to several buses, to have them returned by MMTC. Considering, however, that the

buses could no longer be returned in their original state, the Court sustained the resolution of the CA ordering MMTC to pay DMCI the value of the buses at the time of repossession.

The aforecited case finds application to the present situation of petitioner. After having been deprived of his vessel for almost two decades, through no fault of his own, it would be the height of injustice to permit there turn of M/V Pilar-I to petitioner in pieces, especially after a judgment by this very same Court ordering respondent to restore possession of the vessel to petitioner. To do so would leave petitioner with nothing but a hollow and illusory victory for although the Court ruled in his favor and declared that respondent wrongfully took possession of his vessel, he could no longer enjoy the beneficial use of his extremely deteriorated vessel that it is no longer seaworthy and has no other commercial value but for the sale of its parts as scrap.

Moreover, the incongruity only becomes more palpable when consideration is taken of the fact that petitioner's obligation to respondent, for which the now practically worthless vessel serves as security, is still outstanding.35The Court cannot countenance such an absurd outcome. It could not have been the intention of this Court to perpetrate an injustice in the guise of a favorable decision. As the court of last resort, this Court is the final bastion of justice where litigants can hope to correct any error made in the lower courts.

WHEREFORE, the petition is PARTIALLYGRANTED. Respondent is ordered to pay petitioner the value of M/V Pilar- I at the time it was wrongfully seized by it. The case is hereby REMANDED to the Regional Trial Court, Branch 64, Makati City, for the proper determination of the value of the vessel at said time.

SO ORDERED.

JOSE CATRAL MENDOZAAssociate Justice

Republic of the PhilippinesSupreme Court

Manila 

SECOND DIVISION

REPUBLIC OF THE PHILIPPINES,Petitioner,   - versus -   BANTIGUE POINT DEVELOPMENT CORPORATION,

G. R. No. 162322 Present: CARPIO, J., Chairperson,BRION,PEREZ,SERENO, andREYES, JJ. Promulgated:

Respondent.  March 14, 2012

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

D E C I S I O N

SERENO, J.:

This Rule 45 Petition requires this Court to address the issue of the proper scope of the delegated jurisdiction of municipal trial courts in land registration cases. Petitioner Republic of the Philippines (Republic) assails the Decision of the Court of Appeals (CA)[1] in CA-G.R. CV No. 70349, which affirmed the Decision of the Municipal Trial Court (MTC) of San Juan, Batangas[2] in LRC Case No. N-98-20, LRA Record No. 68329, granting respondent Bantigue Point Development Corporations (Corporation) application for original registration of a parcel of land. Since only questions of law have been raised, petitioner need not have filed a Motion for Reconsideration of the assailed CA Decision before filing this Petition for Review.

The Facts

On 17 July 1997, respondent Bantigue Point Development Corporation filed with the Regional Trial Court (RTC) of Rosario, Batangas an application for original registration of title over a parcel of land with an assessed value of ₱4,330, ₱1,920 and ₱8,670, or a total assessed value of ₱14,920 for the entire property, more particularly described as Lot 8060 of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters, located at Barangay Barualte, San Juan, Batangas. [3]

On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October 1997.[4] On 7 August 1997, it issued a second Order setting the initial hearing on 4 November 1997.[5]

Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while the records were still with the RTC.[6]

 On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to the MTC of San Juan, because the assessed value of the property was allegedly less than ₱100,000.[7]

Thereafter, the MTC entered an Order of General Default[8] and commenced with the reception of evidence.[9] Among the documents presented by respondent in support of its application are

Tax Declarations,[10] a Deed of Absolute Sale in its favor,[11] and a Certification from the Department of Environment and Natural Resources (DENR) Community Environment and Natural Resources Office (CENRO) of Batangas City that the lot in question is within the alienable and disposable zone.[12] Thereafter, it awarded the land to respondent Corporation.[13]

Acting on an appeal filed by the Republic,[14] the CA ruled that since the former had actively participated in the proceedings before the lower court, but failed to raise the jurisdictional challenge therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on appeal.[15] The CA further found that respondent Corporation had sufficiently established the latters registrable title over the subject property after having proven open, continuous, exclusive and notorious possession and occupation of the subject land by itself and its predecessors-in-interest even before the outbreak of World War II.[16]

Dissatisfied with the CAs ruling, petitioner Republic filed this instant Rule 45 Petition and raised the following arguments in support of its appeal: 

I. 

THE REPUBLIC CANNOT BE ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE MUNICIPAL TRIAL COURT OVER THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE EVEN FOR THE FIRST TIME ON APPEAL 

II. THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE.[17]

 

The Courts Ruling

We uphold the jurisdiction of the MTC, but remand the case to the court  a quo for further proceedings in order to determine if the property in question forms part of the alienable and disposable land of the public domain.

IThe Republic is not estopped from raising the issue of jurisdiction in this

case.

At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of the lower court, even if the former raised the jurisdictional question only on appeal. The rule is settled that lack of jurisdiction over the subject matter may be raised at any stage of the

proceedings.[18] Jurisdiction over the subject matter is conferred only by the Constitution or the law.[19] It cannot be acquired through a waiver or enlarged by the omission of the parties or conferred by the acquiescence of the court.[20]Consequently, questions of jurisdiction may be cognizable even if raised for the first time on appeal.[21]

The ruling of the Court of Appeals that a party may be estopped from raising such [jurisdictional] question if he has actively taken part in the very proceeding which he questions, belatedly objecting to the courts jurisdiction in the event that the judgment or order subsequently rendered is adverse to him[22] is based on the doctrine of estoppel by laches. We are aware of that doctrine first enunciated by this Court in Tijam v. Sibonghanoy.[23] In Tijam, the party-litigant actively participated in the proceedings before the lower court and filed pleadings therein. Only 15 years thereafter, and after receiving an adverse Decision on the merits from the appellate court, did the party-litigant question the lower courts jurisdiction. Considering the unique facts in that case, we held that estoppel by laches had already precluded the party-litigant from raising the question of lack of jurisdiction on appeal. In Figueroa v. People,[24] we cautioned that Tijam must be construed as an exception to the general rule and applied only in the most exceptional cases whose factual milieu is similar to that in the latter case.

The facts are starkly different in this case, making the exceptional rule in Tijam inapplicable. Here, petitioner Republic filed its Opposition to the application for registration when the records were still with the RTC.[25] At that point, petitioner could not have questioned the delegated jurisdiction of the MTC, simply because the case was not yet with that court. When the records were transferred to the MTC, petitioner neither filed pleadings nor requested affirmative relief from that court. On appeal, petitioner immediately raised the jurisdictional question in its Brief.[26] Clearly, the exceptional doctrine of estoppel by laches is inapplicable to the instant appeal.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to assert it. [27] In this case, petitioner Republic has not displayed such unreasonable failure or neglect that would lead us to conclude that it has abandoned or declined to assert its right to question the lower court's jurisdiction. 

IIThe Municipal Trial Court properly acquired jurisdiction over the case.

In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of contention: (a) the period for setting the date and hour of the initial hearing; and (b) the value of the land to be registered. 

First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because the RTC set the date and hour of the initial hearing beyond the 90-day period provided under the Property Registration Decree.[28]

We disagree. The Property Registration Decree provides:

Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing of the application, issue an order setting the date and hour of the initial hearing which shall not be earlier than forty-five days nor later than ninety days from the date of the order. x x x.

 In this case, the application for original registration was filed on 17 July 1997.[29] On 18 July 1997, or a day after the filing of the application, the RTC immediately issued an Order setting the case for initial hearing on 22 October 1997, which was 96 days from the Order.[30] While the date set by the RTC was beyond the 90-day period provided for in Section 23, this fact did not affect the jurisdiction of the trial court. In Republic v. Manna Properties, Inc.,[31] petitioner Republic therein contended that there was failure to comply with the jurisdictional requirements for original registration, because there were 125 days between the Order setting the date of the initial hearing and the initial hearing itself. We ruled that the lapse of time between the issuance of the Order setting the date of initial hearing and the date of the initial hearing itself was not fatal to the application.Thus, we held:

x x x [A] party to an action has no control over the Administrator or the Clerk of Court acting as a land court; he has no right to meddle unduly with the business of such official in the performance of his duties. A party cannot intervene in matters within the exclusive power of the trial court. No fault is attributable to such party if the trial court errs on matters within its sole power. It is unfair to punish an applicant for an act or omission over which the applicant has neither responsibility nor control, especially if the applicant has complied with all the requirements of the law.[32]

 

Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its application for registration on account of events beyond its control.

Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial hearing on 4 November 1997,[33] within the 90-day period provided by law, petitioner Republic argued that the jurisdictional defect was still not cured, as the second Order was issued more than five days from the filing of the application, again contrary to the prescribed period under the Property Registration Decree.[34]

Petitioner is incorrect.

The RTCs failure to issue the Order setting the date and hour of the initial hearing within five days from the filing of the application for registration, as provided in the Property Registration Decree, did not affect the courts its jurisdiction. Observance of the five-day period was merely directory, and failure to issue the Order within that period did not deprive the RTC of its jurisdiction over the case. To rule that compliance with the five-day period is mandatory would make jurisdiction over the subject matter dependent upon the trial court. Jurisdiction over the subject matter is conferred only by the Constitution or the law.[35] It cannot be contingent upon the action or inaction of the court.

This does not mean that courts may disregard the statutory periods with impunity. We cannot assume that the law deliberately meant the provision to become meaningless and to be treated as a dead letter.[36] However, the records of this case do not show such blatant disregard for the law. In fact, the RTC immediately set the case for initial hearing a day after the filing of the application for registration,[37] except that it had to issue a second Order because the initial hearing had been set beyond the 90-day period provided by law.

Second, petitioner contended[38] that since the selling price of the property based on the Deed of Sale annexed to respondents application for original registration was₱160,000,[39] the MTC did not have jurisdiction over the case. Under Section 34 of the Judiciary Reorganization Act, as amended,[40] the MTCs delegated jurisdiction to try cadastral and land registration cases is limited to lands, the value of which should not exceed ₱100,000.

We are not persuaded.

The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed set forth in the Judiciary Reorganization Act, which provides:

Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned by the Supreme Court to hear and determine cadastral or land registration cases covering lots where there is no controversy or opposition, or contested lots where the value of which does not exceed One hundred thousand pesos (₱100,000.00), such value to be ascertained by the affidavit of the claimant or by agreement of the respective claimants if there are more than one, or from the corresponding tax declaration of the real property. Their decision in these cases shall be appealable in the same manner as decisions of the Regional Trial Courts. (As amended by R.A. No. 7691) (Emphasis supplied.)

Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances: first, where there is no controversy or opposition; or, second, over contested lots, the value of which does not exceed ₱100,000. 

The case at bar does not fall under the first instance, because petitioner opposed respondent Corporations application for registration on 8 January 1998.[41]

However, the MTC had jurisdiction under the second instance, because the value of the lot in this case does not exceed ₱100,000.

Contrary to petitioners contention, the value of the land should not be determined with reference to its selling price. Rather, Section 34 of the Judiciary Reorganization Act provides that the value of the property sought to be registered may be ascertained in three ways: first, by the affidavit of the claimant; second, by agreement of the respective claimants, if there are more than one; or, third, from the corresponding tax declaration of the real property.[42]

In this case, the value of the property cannot be determined using the first method, because the records are bereft of any affidavit executed by respondent as to the value of the property. Likewise, valuation cannot be done through the second method, because this method finds application only where there are multiple claimants who agree on and make a joint submission as to the value of the property. Here, only respondent Bantigue Point Development Corporation claims the property.

The value of the property must therefore be ascertained with reference to the corresponding Tax Declarations submitted by respondent Corporation together with its application for registration. From the records, we find that the assessed value of the property is ₱4,330, ₱1,920 and ₱8,670, or a total assessed value of ₱14,920 for the entire property.[43]Based on these Tax Declarations, it is evident that the total value of the land in question does not exceed ₱100,000. Clearly, the MTC may exercise its delegated jurisdiction under the Judiciary Reorganization Act, as amended.

IIIA certification from the CENRO is not sufficient proof that the property in

question is alienable and disposable land of the public domain. 

Even as we affirm the propriety of the MTCs exercise of its delegated jurisdiction, we find that the lower court erred in granting respondent Corporations application for original registration in the absence of sufficient proof that the property in question was alienable and disposable land of the public domain.

The Regalian doctrine dictates that all lands of the public domain belong to the State.[44] The applicant for land registration has the burden of overcoming the presumption of State ownership by establishing through incontrovertible evidence that the land sought to be registered is alienable or disposable based on a positive act of the government.[45] We held in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to prove the alienable and disposable character of the land sought to be registered.[46] The applicant must also show sufficient proof that the DENR Secretary has approved the land classification and released the land in question as alienable and disposable.[47]

Thus, the present rule is that an application for original registration must be accompanied by (1) a CENRO or PENRO[48] Certification; and (2) a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records.[49]

 Here, respondent Corporation only presented a CENRO certification in support of its

application.[50] Clearly, this falls short of the requirements for original registration.

We therefore remand this case to the court a quo for reception of further evidence to prove that the property in question forms part of the alienable and disposable land of the public domain. If respondent Bantigue Point Development Corporation presents a certified true copy of the original classification approved by the DENR Secretary, the application for original registration should be granted. If it fails to present sufficient proof that the land in question is alienable and disposable based on a positive act of the government, the application should be denied.

WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this case be REMANDED to the Municipal Trial Court of San Juan, Batangas, for reception of evidence to prove that the property sought to be registered is alienable and disposable land of the public domain.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-21450             April 15, 1968

SERAFIN TIJAM, ET AL., plaintiffs-appellees, vs.MAGDALENO SIBONGHANOY alias GAVINO SIBONGHANOY and LUCIA BAGUIO, defendants, MANILA SURETY AND FIDELITY CO., INC. (CEBU BRANCH) bonding company and defendant-appellant.

F. S. Urot and G. A. Uriate for plaintiffs-appellees.Carlos J. Cuizon for defendants Gavino Sibonghanoy and Lucia Baguio.Villaluz Law Office, Velasco Law Office, Pages and Soberano for defendant-appellant Manila Surety and Fidelity Company, Inc.

DIZON, J.:

On July 19, 1948 — barely one month after the effectivity of Republic Act No. 296 known as the Judiciary Act of 1948 — the spouses Serafin Tijam and Felicitas Tagalog commenced Civil Case No. R-660 in the Court of First Instance of Cebu against the spouses Magdaleno Sibonghanoy and Lucia Baguio to recover from them the sum of P1,908.00, with legal interest thereon from the date of the filing of the complaint until the whole obligation is paid, plus costs. As prayed for in the complaint, a writ of attachment was issued by the court against defendants' properties, but the same was soon dissolved upon the filing of a counter-bond by defendants and the Manila Surety and Fidelity Co., Inc. hereinafter referred to as the Surety, on the 31st of the same month.

After being duly served with summons the defendants filed their answer in which, after making some admissions and denials of the material averments of the complaint, they interposed a counterclaim. This counterclaim was answered by the plaintiffs.

After trial upon the issues thus joined, the Court rendered judgment in favor of the plaintiffs and, after the same had become final and executory, upon motion of the latter, the Court issued a writ of execution against the defendants. The writ having been returned unsatisfied, the plaintiffs moved for the issuance of a writ of execution against the Surety's bond (Rec. on Appeal, pp. 46-49), against which the Surety filed a written opposition (Id. pp. 49) upon two grounds, namely, (1) Failure to prosecute and (2) Absence of a demand upon the Surety for the payment of the amount due under the judgment. Upon these grounds the Surety prayed the Court not only to deny the motion for execution against its counter-bond but also the following affirmative relief : "to relieve the herein bonding company of its liability, if any, under the bond in question" (Id. p. 54) The Court denied this motion on the ground solely that no previous demand had been made on the Surety for the satisfaction of the judgment. Thereafter the necessary demand was made, and upon failure of the Surety to satisfy the judgment, the plaintiffs filed a second motion for execution against the counterbond. On the date set for the hearing thereon, the Court, upon motion of the Surety's counsel, granted the latter a period of five days within which to answer the motion. Upon its failure to file such answer, the Court granted the motion for execution and the corresponding writ was issued.

Subsequently, the Surety moved to quash the writ on the ground that the same was issued without the required summary hearing provided for in Section 17 of Rule 59 of the Rules of Court. As the Court denied the motion, the Surety appealed to the Court of Appeals from such order of denial and from the one denying its motion for reconsideration (Id. p. 97). Its record on appeal was then printed as required by the Rules, and in due time it filed its brief raising therein no other question but the ones covered by the following assignment of errors:

I. That the Honorable Court a quo erred in issuing its order dated November 2, 1957, by holding the incident as submitted for resolution, without a summary hearing and compliance with the other mandatory requirements provided for in Section 17, Rule 59 of the Rules of Court.

II. That the Honorable Court a quo erred in ordering the issuance of execution against the herein bonding company-appellant.

III. That the Honorable Court a quo erred in denying the motion to quash the writ of execution filed by the herein bonding company-appellant as well as its subsequent motion for reconsideration, and/or in not quashing or setting aside the writ of execution.

Not one of the assignment of errors — it is obvious — raises the question of lack of jurisdiction, neither directly nor indirectly.

Although the appellees failed to file their brief, the Court of Appeals, on December 11, 1962, decided the case affirming the orders appealed from.

On January 8, 1963 — five days after the Surety received notice of the decision, it filed a motion asking for extension of time within which to file a motion for reconsideration. The Court of Appeals granted the motion in its resolution of January 10 of the same year. Two days later the Surety filed a pleading entitled MOTION TO DISMISS, alleging substantially that appellees action was filed in the Court of First Instance of Cebu on July 19, 1948 for the recovery of the sum of P1,908.00 only; that a month before that date Republic Act No. 296, otherwise known as the Judiciary Act of 1948, had already become effective, Section 88 of which placed within the original exclusive jurisdiction of inferior courts all civil actions where the value of the subject-matter or the amount of the demand does not exceed P2,000.00, exclusive of interest and costs; that the Court of First Instance therefore had no jurisdiction to try and decide the case. Upon these premises the Surety's motion prayed the Court of Appeals to set aside its decision and to dismiss the case. By resolution of January 16, 1963 the Court of Appeals required the appellees to answer the motion to dismiss, but they failed to do so. Whereupon, on May 20 of the same year, the Court resolved to set aside its decision and to certify the case to Us. The pertinent portions of its resolution read as follows:

It would indeed appear from the record that the action at bar, which is a suit for collection of money in the sum of exactly P1,908.00 exclusive of interest, was originally instituted in the Court of First Instance of Cebu on July 19, 1948. But about a month prior to the filing of the complaint, more specifically on June 17, 1948, the Judiciary Act of 1948 took effect, depriving the Court of First Instance of original jurisdiction over cases in which the demand, exclusive of interest, is not more than P2,000.00. (Secs. 44[c] and 86[b], R.A. No. 296.)

We believe, therefore, that the point raised in appellant's motion is an important one which merits serious consideration. As stated, the complaint was filed on July 19, 1948. This case therefore has been pending now for almost 15 years, and throughout the entire proceeding appellant never raised the question of jurisdiction until after receipt of this Court's adverse decision.

There are three cases decided by the Honorable Supreme Court which may be worthy of consideration in connection with this case, namely: Tyson Tan, et al. vs. Filipinas Compañia de Seguros, et al., G.R. No. L-10096, March 23, 1956; Pindangan Agricultural Co., Inc. vs. Jose P. Dans, etc., et al., G.R. No. L-14591, September 26, 1962; and Alfredo Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. No. L-15092, September 29, 1962, wherein the Honorable Supreme Court frowned upon the

'undesirable practice' of appellants submitting their case for decision and then accepting the judgment, if favorable, but attacking it for lack of jurisdiction when adverse.

Considering, however, that the Supreme Court has the "exclusive" appellate jurisdiction over "all cases in which the jurisdiction of any inferior court is in issue" (See. 1, Par. 3[3], Judiciary Act of 1948, as amended), we have no choice but to certify, as we hereby do certify, this case to the Supreme Court.1äwphï1.ñët

ACCORDINGLY, pursuant to Section 31 of the Judiciary Act of 1948 as amended, let the record of this case be forwarded to the Supreme Court.

It is an undisputed fact that the action commenced by appellees in the Court of First Instance of Cebu against the Sibonghanoy spouses was for the recovery of the sum of P1,908.00 only — an amount within the original exclusive jurisdiction of inferior courts in accordance with the provisions of the Judiciary Act of 1948 which had taken effect about a month prior to the date when the action was commenced. True also is the rule that jurisdiction over the subject matter is conferred upon the courts exclusively by law, and as the lack of it affects the very authority of the court to take cognizance of the case, the objection may be raised at any stage of the proceedings. However, considering the facts and circumstances of the present case — which shall forthwith be set forth — We are of the opinion that the Surety is now barred by laches from invoking this plea at this late hour for the purpose of annuling everything done heretofore in the case with its active participation.

As already stated, the action was commenced in the Court of First Instance of Cebu on July 19, 1948, that is, almost fifteen years before the Surety filed its motion to dismiss on January 12, 1963 raising the question of lack of jurisdiction for the first time.

It must be remembered that although the action, originally, was exclusively against the Sibonghanoy spouses the Surety became a quasi-party therein since July 31, 1948 when it filed a counter-bond for the dissolution of the writ of attachment issued by the court of origin (Record on Appeal, pp. 15-19). Since then, it acquired certain rights and assumed specific obligations in connection with the pending case, in accordance with sections 12 and 17, Rule 57, Rules of Court (Bautista vs. Joaquin, 46 Phil. 885; Kimpang & Co. vs. Javier, 65 Phil. 170).

Upon the filing of the first motion for execution against the counter-bond the Surety not only filed a written opposition thereto praying for its denial but also asked for an additional affirmative relief — that it be relieved of its liability under the counter-bond upon the grounds relied upon in support of its opposition — lack of jurisdiction of the court a quo not being one of them.

Then, at the hearing on the second motion for execution against the counter-bond, the Surety appeared, through counsel, to ask for time within which to file an answer or opposition thereto. This motion was granted, but instead of such answer or opposition, the Surety filed the motion to dismiss mentioned heretofore.

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

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

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.

It has been held that a party can not invoke the jurisdiction of a court to sure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was further said that the question whether the court had jurisdiction either of the subject-matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated — obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.

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

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it could have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take cognizance of the present action by reason of the sum of money involved which, according to the law then in force, was within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead, at several stages of the proceedings in the court a quo as well as in the Court of Appeals, it invoked the jurisdiction of said courts to obtain affirmative relief and submitted its case for a final adjudication on the merits. It was only after an adverse decision was

rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction. Were we to sanction such conduct on its part, We would in effect be declaring as useless all the proceedings had in the present case since it was commenced on July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The inequity and unfairness of this is not only patent but revolting.

Coming now to the merits of the appeal: after going over the entire record, We have become persuaded that We can do nothing better than to quote in toto, with approval, the decision rendered by the Court of Appeals on December 11, 1962 as follows:

In Civil Case No. R-660 of the Court of First Instance of Cebu, which was a suit for collection of a sum of money, a writ of attachment was issued against defendants' properties. The attachment, however, was subsequently discharged under Section 12 of Rule 59 upon the filing by defendants of a bond subscribed by Manila Surety & Fidelity Co., Inc.

After trial, judgment was rendered in favor of plaintiffs.

The writ of execution against defendants having been returned totally unsatisfied, plaintiffs moved, under Section 17 of Rule 59, for issuance of writ of execution against Manila Surety & Fidelity Co., Inc. to enforce the obligation of the bond. But the motion was, upon the surety's opposition, denied on the ground that there was "no showing that a demand had been made, by the plaintiffs to the bonding company for payment of the amount due under the judgment" (Record on Appeal, p. 60).

Hence, plaintiffs made the necessary demand upon the surety for satisfaction of the judgment, and upon the latter's failure to pay the amount due, plaintiffs again filed a motion dated October 31, 1957, for issuance of writ of execution against the surety, with notice of hearing on November 2, 1957. On October 31, 1957, the surety received copy of said motion and notice of hearing.

It appears that when the motion was called on November 2, 1957, the surety's counsel asked that he be given time within which to answer the motion, and so an order was issued in open court, as follows:1äwphï1.ñët

As prayed for, Atty. Jose P. Soberano, Jr., counsel for the Manila Surety & Fidelity Co., Inc., Cebu Branch, is given until Wednesday, November 6, 1957, to file his answer to the motion for the issuance of a writ of execution dated October 30, 1957 of the plaintiffs, after which this incident shall be deemed submitted for resolution.

SO ORDERED.

Given in open court, this 2nd day of November, 1957, at Cebu City, Philippines.

(Sgd.) JOSE M. MENDOZA Judge

(Record on Appeal, pp. 64-65, emphasis ours)

Since the surety's counsel failed to file any answer or objection within the period given him, the court, on December 7, 1957, issued an order granting plaintiffs' motion for execution against the surety; and on December 12, 1957, the corresponding writ of execution was issued.

On December 24, 1957, the surety filed a motion to quash the writ of execution on the ground that the same was "issued without the requirements of Section 17, Rule 59 of the Rules of Court having been complied with," more specifically, that the same was issued without the required "summary hearing". This motion was denied by order of February 10, 1958.

On February 25, 1958, the surety filed a motion for reconsideration of the above-stated order of denial; which motion was likewise denied by order of March 26, 1958.

From the above-stated orders of February 10, 1958 and March 26, 1958 — denying the surety's motion to quash the writ of execution and motion for reconsideration, respectively — the surety has interposed the appeal on hand.

The surety insists that the lower court should have granted its motion to quash the writ of execution because the same was issued without the summary hearing required by Section 17 of Rule 59, which reads;

"Sec. 17. When execution returned unsatisfied, recovery had upon bond. — If the execution be returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant to the provisions of this role to secure the payment of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff upon demand the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action." (Emphasis ours)

Summary hearing is "not intended to be carried on in the formal manner in which ordinary actions are prosecuted" (83 C.J.S. 792). It is, rather, a procedure by which a question is resolved "with dispatch, with the least possible delay, and in preference to ordinary legal and regular judicial proceedings" (Ibid, p. 790). What is essential is that "the defendant is notified or summoned to appear and is given an opportunity to hear what is urged upon him, and to interpose a defense, after which follows an adjudication of the rights of the parties" (Ibid., pp. 793-794); and as to the extent and latitude of the hearing, the same will naturally lie upon the discretion of the court, depending upon the attending circumstances and the nature of the incident up for consideration.

In the case at bar, the surety had been notified of the plaintiffs' motion for execution and of the date when the same would be submitted for consideration. In fact, the surety's counsel was present in court when the motion was called, and it was upon his request that the court a quo gave him a period of four days within which to file an answer. Yet he allowed that period to lapse without filing an answer or objection. The surety cannot now, therefore, complain that it was deprived of its day in court.

It is argued that the surety's counsel did not file an answer to the motion "for the simple reason that all its defenses can be set up during the hearing of the motion even if the same are not reduced to writing" (Appellant's brief, p. 4). There is obviously no merit in this pretense because, as stated above, the record will show that when the motion was called, what the surety's counsel did was to ask that he be allowed and given time to file an answer. Moreover, it was stated in the order given in open court upon request of the surety's counsel that after the four-day period within which to file an answer, "the incident shall be deemed submitted for resolution"; and counsel apparently agreed, as the order was issued upon his instance and he interposed no objection thereto.

It is also urged that although according to Section 17 of Rule 59, supra, there is no need for a separate action, there must, however, be a separate judgment against the surety in order to hold it liable on the bond (Appellant's Brief, p. 15). Not so, in our opinion. A bond filed for discharge of attachment is, per Section 12 of Rule 59, "to secure the payment to the plaintiff of any judgment he may recover in the action," and stands "in place of the property so released". Hence, after the judgment for the plaintiff has become executory and the execution is "returned unsatisfied" (Sec. 17, Rule 59), as in this case, the liability of the bond automatically attaches and, in failure of the surety to satisfy the judgment against the defendant despite demand therefor, writ of execution may issue against the surety to enforce the obligation of the bond.

UPON ALL THE FOREGOING, the orders appealed from are hereby affirmed, with costs against the appellant Manila Surety and Fidelity Company, Inc.

Reyes, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

Republic of the PhilippinesSupreme Court

Manila 

FIRST DIVISION 

SAMUEL JULIAN, represented by his   G.R. No. 174193Attorney-in-Fact, ROBERTO DELA    CRUZ,    Petitioner,   Present:     

    CORONA, C.J., Chairperson,

- versus -   LEONARDO-DE CASTRO,    BERSAMIN,

    DEL CASTILLO, andDEVELOPMENT BANK OF THE   VILLARAMA, JR., JJ.PHILIPPINES and THE CITY    SHERIFF,   Promulgated:

Respondents.   December 7, 2011x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

  

D E C I S I O N  

DEL CASTILLO, J.: 

The requirement of an appeal fee is not a mere technicality of law or procedure and should not be disregarded without the most compelling of reasons. 

Before us is a Petition for Review on Certiorari[1] of the Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 00240 dated April 12, 2005 which dismissed petitioners appeal as follows: 

Considering that per JRD Report dated March 30, 2005, the appellant failed to pay the required docket and other lawful fees, the instant Appeal is hereby DISMISSED pursuant to Section [1](c) Rule 50 of the 1997 Rules of Civil Procedure.

 SO ORDERED.[3]

Also assailed is the CAs Resolution[4] dated July 27, 2006 which denied the Motion for Reconsideration thereto. Petitioner seeks to reverse the aforesaid Resolutions of the CA and direct the latter to admit the payment for the docket fees enclosed in his Motion for Reconsideration[5] so that his appeal may be given due course, or, in the alternative, to remand the case to the court a quo for further proceedings. Factual Antecedents 

This case stemmed from a Real Estate Mortgage[6] executed by Thelma Julian (Thelma), mother of herein petitioner Samuel Julian, over a property situated in Fuentes Subdivision,Roxas City covered by Transfer Certificate of Title (TCT) No. T-16705.[7]

 On December 23, 1980,[8] Thelma obtained a housing loan from respondent Development Bank

of the Philippines (DBP) in the amount of P99,400.00.[9] To secure payment of the loan, she executed in favor of the respondent a Real Estate Mortgage on the aforementioned parcel of land registered under her name. A Special Power of Attorney (SPA) appointing the respondent and its personnel to sell the

property in the event of extrajudicial foreclosure was inserted and made an integral part of the mortgage contract.[10]

 Subsequently, Thelma died on January 8, 1982.[11]

 Because of arrearages in the monthly amortizations, respondent foreclosed

the mortgaged property. Same was sold at public auction on September 15, 1983[12] with respondent as the highest bidder.[13] No redemption having been made, title to the property was consolidated in favor of the respondent on September 21, 1984[14] and TCT No. T-19303[15] was thereafter issued in its name. 

Thereafter, the actual occupants of the mortgaged property, spouses Ramon de la Cruz and his wife, who is likewise petitioners sibling, Ruth Julian de la Cruz (spouses De la Cruz), offered to purchase the property. Respondent accepted the offer and executed a Deed of Conditional Sale[16] on October 31, 1985. However, spouses De la Cruz failed to pay[17] 72 monthly amortizations resulting in the rescission of the said deed on February 28, 1992. Notwithstanding, spouses De la Cruz refused to vacate the premises compelling respondent to file an Unlawful Detainer case against them on February 23, 1993. Judgment was rendered in favor of respondent on July 29, 1993.[18]

 However, before the Writ of Execution could be carried out,[19] petitioner filed Civil Case No.

6387[20] before the Regional Trial Court (RTC) of Roxas City on October 27, 1993,[21] for the cancellation of respondents TCT No. T-19303. He contended that the SPA which was used to sell the mortgaged property at public auction in 1983 was no longer effective in view of Thelmas death in 1982. Consequently, the public auction, the resulting Deed of Sale,[22] Affidavit of Consolidation and TCT No. T-19303 are null and void.

 During the course of the proceedings, a series of postponements[23] were

made at the instance of both parties due to an impending amicable settlement. Eventually, the parties were able to reach a settlement. Thus, in an Order[24] dated October 28, 1998, the RTC directed both parties to submit a joint motion to dismiss the case. However, almost two years passed without the parties complying with the said Order.

 Consequently, in an Order[25] dated October 11, 2000, the RTC dismissed the case for failure of

the parties to comply for an unreasonable length of time. The dismissal, however, was set aside in an Order[26] dated February 12, 2003 in consideration of petitioners payment of ten percent (10%) of respondents claim. The parties were then given 15 days from notice within which to submit their compromise agreement,[27] which was subsequently extended for 30 days from notice.[28] Despite the extensions, however, no compromise agreement was filed in court. As a result, in an Order[29] dated July 24, 2003, the trial court directed the parties to show cause within 15 days from notice why the case should not be dismissed for failure to prosecute. Meanwhile, with petitioners conformity, his counsel withdrew her appearance on August 13, 2003.[30]

 Ruling of the Regional Trial Court

 On January 28, 2004 or six months from the issuance of the show cause Order, the trial court

dismissed the case in an Order[31] which states:

 For failure of the parties thru counsel to comply with the Order dated July 24,

2003, the instant case is hereby DISMISSED. SO ORDERED.

  Petitioner, through his new counsel, timely filed a Notice of Appeal[32] on April 26, 2004 but

failed to pay the docket and other lawful fees. 

Ruling of the Court of Appeals 

As earlier mentioned, the CA dismissed the appeal for non-payment of the required docket and other lawful fees pursuant to Section 1(c), Rule 50 of the Rules of Court.[33]

Seeking reconsideration,[34] petitioner attached to his motion Postal Money Order Nos. A-0620000276, B-0610000283 and J-065000566 in the aggregate amount of P3,020.00[35] as payment for the docket fees. He explained that his failure to pay the required fees was due to oversight and non-cognizance of the necessity to pay the said fees since his counsel did not inform him of such requirement to pay. Petitioner prayed for liberal application of the Rules as according to him, a strict enforcement would be tantamount to imposing a penalty not commensurate to his thoughtlessness or oversight in not adhering to the procedural requisite.[36]

 Petitioners submission did not move the CA, which disposed of his motion for reconsideration through its second assailed Resolution[37] thus: 

In the case of Meatmaster International Corporation vs. Lelis Integrated Development Corporation, it was held that the payment of docket fees within the prescribed period is mandatory for the perfection of an appeal. This is so because a court acquires jurisdiction over the subject matter of the action only upon the payment of the correct amount of docket fees regardless of the actual date of filing of the case in court. The payment of the full amount of the docket fee is sine qua non for the perfection of an appeal. The court acquires jurisdiction over the case only upon the payment of the prescribed docket fees. Verily, the requirement of an appeal fee is not a mere technicality of law or procedure but an essential requirement without which the decision appealed from would become final and executory as if no appeal was filed at all. Thus, if We allow belated payment as prayed for and reinstate the instant appeal, it will have the effect of withholding the finality of the judgment or order appealed from. Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a partys substantive rights. Like all rules, they are required to be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not proportionate with the degree of his thoughtlessness in not complying with the procedure prescribed. 

In his Motion for Reconsideration, appellant has not shown weighty and persuasive reasons to compel Us to exercise Our discretion of suspending the strict adherence to the Rules. Other than his flimsy excuse that the ground in the Courts Resolution is merely technical, appellant has miserably failed to proffer a convincing justification for [his] procedural error. Thus, appellant failed to justify why the Rules should be relaxed and [why] the equitable consideration of the Court should be exercised in his situation as an exception to the strict implementation of the Rules. IN VIEW THEREOF, the Motion for Reconsideration is hereby DENIED and the Resolution dated April 12, 2005 MAINTAINED. SO ORDERED.[38]

  

Issues 

Petitioner comes before this Court by way of Petition for Review on Certiorari raising the following issues: 

A.WHETHER X X X THE DISMISSAL OF THE TRIAL COURT [WAS] PROPER. 

B.WHETHER X X X THE COURT OF APPEALS ERRED IN APPLYING STRICTLY THE RULES ON DOCKET FEES.[39]

  The pivotal issue is whether the CA was correct in strictly applying the rules on the payment of

docket fees. Petitioner acknowledges the mandatory nature of the rule that docket and other lawful fees must be paid in full within the prescribed period for an appeal to be perfected. However, he asserts that the broader interest of justice and the desired objective of deciding the case on the merits call for leniency in the application of the rules. Hence, he must be given an opportunity to air his cause without the constraints of technicalities. Petitioner contends that the CA should apply the pronouncement of this Court in Yambao v. Court of Appeals[40] relaxing the policy of strict adherence to the rule regarding appeal fees if justifiable reason for the non-payment of the correct amount of docket fees within the prescribed period is shown. He further contends that his act of attaching the payment for the fees to his Motion for Reconsideration shows his intention and willingness to comply with the rules. 

Our Ruling 

The petition lacks merit. 

Payment of full docket fees within the prescribed period for taking an appeal is mandatory.

  It is well-established that [t]he right to appeal is a statutory privilege and must be exercised only

in the manner and in accordance with the provisions of the law.[41] Thus, one who seeks to avail of the right to appeal must strictly comply with the requirements of the rules, and failure to do so leads to the loss of the right to appeal.[42]

The applicable rule for appeals from judgments issued by the RTC in the exercise of its original jurisdiction is Rule 41 of the Rules of Court, Section 4 of which provides:

 Section 4. Appellate court docket and other lawful fees. - Within the period for

taking an appeal, the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record or the record on appeal.  The Rules also provide that failure of the appellant to pay the docket and other lawful fees is a

ground for dismissal of the appeal.[43]

 The Court has consistently ruled in a number of cases that the payment of the full amount of

docket fees within the prescribed period is both mandatory and jurisdictional.[44] It is a condition sine qua non for the appeal to be perfected and only then can a court acquire jurisdiction over the case.[45] The requirement of an appeal fee is not a mere technicality of law or procedure and should not be undermined except for the most persuasive of reasons. Non-observance would be tantamount to no appeal being filed thereby rendering the challenged decision, resolution or order final and executory.

 Admittedly, this rule is not without recognized qualifications. The Court has declared that in

appealed cases, failure to pay the appellate court docket fee within the prescribed period warrants only discretionary as opposed to automatic dismissal of the appeal and that the court shall exercise its power to dismiss in accordance with the tenets of justice and fair play and with great deal of circumspection considering all attendant circumstances.[46]

In the case at bench, the justifications presented by petitioner for the non-payment of the docket fees are oversight and the lack of advice from his counsel. Unfortunately, the reasons presented are neither convincing nor adequate to merit leniency. Petitioner submits that he only found out about the requirement to pay the docket fees when he received the CA Resolution denying his appeal on April 22, 2005 or three days short of one year from filing of the said appeal. This Court finds this not to be logically true to human experience. It is unusual for petitioners counsel not to advice him of the required docket fees. More often than not, counsels are aware of the docket fees required to be paid to the courts, and will ask clients for the said amount prior to filing pleadings in court. This is so because counsels are not expected to shoulder or advance payment for their clients. Assuming arguendo that petitioners counsel did not inform him of the requirement to pay the docket fees to perfect the appeal, what we find incredible is that petitioner apparently failed to communicate with his counsel after the filing of said appeal. This Court has repeatedly held that litigants, represented by counsel, should not expect that all they need to do is sit back, relax and await the outcome of their case.[47] It is the duty of a party-litigant to be in contact with his counsel from time to time in order to be informed of the progress of his case.

[48] Moreover, the counsels negligence binds petitioner and, for that reason alone the loss of his remedy was caused by his own negligence.[49] Consequently, a relaxation of the rule cannot be granted.[50] The bitter consequence of such grave inadvertence is to render the trial courts order final and executory.[51]

 Further, the Court notes that petitioner only attempted to perfect his appeal on May 6, 2005 by appending the postal money orders to his Motion for Reconsideration, or one year and nine days too late.[52] By that time, the challenged Order has long become final and no longer open to an appeal.[53]

 Petitioners reliance on the policy espoused in the case of Yambao[54] is likewise unavailing. The pertinent portion relied on by petitioner reads: 

Thus, the appellate court may extend the time for the payment of the docket fees if appellant is able to show that there is a justifiable reason for his failure to pay the correct amount of docket fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or a similar supervening casualty, without fault on the part of the appellant. x x x[55] (Emphasis supplied.)

  Clearly, the case applies to a situation where payment of the docket fees was made albeit incomplete. In the instant case, no payment was made by petitioner at all. Even assuming arguendothat Yambao is applicable to petitioners case, still, the Court sees no justifiable reason to allow this Court to relax the strict application of the Rules. Likewise assuming for the sake of argument that consideration be given to petitioners willingness to comply with the rules since he attached postal money orders to his motion for reconsideration, the broader interest of justice will still not be served if petitioners appeal is reinstated. On one hand, petitioner calls for leniency to enable him to establish his case. On the other hand is respondent, which has been embroiled in a decades-long waiting game. The long-running dispute could be recapped thus: (1) petitioners predecessor-in-interest, Thelma, obtained a loan from respondent secured by a Real Estate Mortgage on the subject property; (2) Thelma was unable to pay the loan thereby causing foreclosure of the Real Estate Mortgage; (3) petitioner filed his civil action to question the validity of the public auction sale only on October 27, 1993 or 10 years after the sale was conducted; and, (4) from the time of the consolidation of title in the name of respondent in 1984 until the present, spouses De la Cruz have been in possession of the foreclosed property.Petitioner and his sister Ruth Julian de la Cruz (Ruth) know that their mother Thelma has already lost ownership rights to the property in question when the latter defaulted in her payment to respondent and none of her successors-in-interest redeemed the property within the prescribed period. This is the reason why Ruth and her husband offered to purchase the property from respondent. However, when the said spouses De la Cruz defaulted in their payment, they refused to surrender the property to respondent. For his part, petitioner reinforces such refusal to surrender by questioning the validity of the public auction sale. 

Now petitioner comes before this Court praying for leniency in the interest of justice. It must be stressed, however, that it is only when persuasive reasons exist that the Rules may be relaxed to spare a litigant of an injustice not commensurate with his failure to comply with the prescribed procedure.[56] Here, the Court finds that petitioner is under no threat of suffering an injustice.On the contrary, it will be the height of injustice if the Court accords petitioner leniency and reinstates his appeal as this would mean further waiting on the part of the respondent which has long been deprived of its right to possess the property it owns.

 WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals in CA-G.R. CV No. 00240 dated April 12, 2005 and July 27, 2006 are AFFIRMED. SO ORDERED.

 Republic of the Philippines

Supreme CourtManila

FIRST DIVISION  FEDMAN DEVELOPMENT CORPORATION,Petitioner,    - versus -    FEDERICO AGCAOILI,Respondent.

G.R. No. 165025 Present: 

CORONA, C.J., Chairperson,LEONARDO-DE CASTRO,BERSAMIN,DEL CASTILLO, andVILLARAMA, JR., JJ.

 Promulgated: August 31, 2011 

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

D E C I S I O N 

BERSAMIN, J.:  

The non-payment of the prescribed filing fees at the time of the filing of the complaint or other initiatory pleading fails to vest jurisdiction over the case in the trial court. Yet, where the plaintiff has paid the amount of filing fees assessed by the clerk of court, and the amount paid turns out to be deficient, the trial court still acquires jurisdiction over the case, subject to the payment by the plaintiff of the deficiency assessment.

 

Fedman Development Corporation (FDC) appeals the decision promulgated on August 20, 2004, [1] whereby the Court of Appeals (CA) affirmed the judgment rendered on August 28, 1998 by the Regional Trial Court (RTC), Branch 150, Makati City, in favor of the respondent.[2]

 Antecedents

 FDC was the owner and developer of a condominium project known as Fedman Suites

Building (FSB) located on Salcedo Street, Legazpi Village, Makati City. On June 18, 1975, Interchem Laboratories Incorporated (Interchem) purchased FSBs Unit 411 under a contract to sell. On March 31, 1977, FDC executed a Master Deed with Declaration of Restrictions,[3] and formed the Fedman Suite Condominium Corporation (FSCC) to manage FSB and hold title over its common areas.[4]

 On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in Unit 411

to respondent Federico Agcaoili (Agcaoili), a practicing attorney who was then also a member of the Provincial Board of Quezon Province.[5] As consideration for the transfer, Agcaoili agreed: (a) to pay Interchem ₱150,000.00 upon signing of the deed of transfer; (b) to update the account by paying to FDC the amount of ₱15,473.17 through a 90 day-postdated check; and (c) to deliver to FDC the balance of ₱137,286.83 in 135 equal monthly installments of ₱1,857.24 effective October 1980, inclusive of 12% interest per annum on the diminishing balance. The obligations Agcaoili assumed totaled₱302,760.00.[6]

 In December 1983, the centralized air-conditioning unit of FSBs fourth floor broke down.

[7] On January 3, 1984, Agcaoili, being thereby adversely affected, wrote to Eduardo X. Genato (Genato), vice-president and board member of FSCC, demanding the repair of the air-conditioning unit.[8] Not getting any immediate response, Agcaoili sent follow-up letters to FSCC reiterating the demand, but the letters went unheeded. He then informed FDC and FSCC that he was suspending the payment of his condominium dues and monthly amortizations.[9]

 On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off

the electric supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC in the RTC, Makati City, Branch 144 for injunction and damages.[10] The parties later executed a compromise agreement that the RTC approved through its decision of August 26, 1985. As stipulated in the compromise agreement, Agcaoili paid FDC the sum of ₱39,002.04 as amortizations for the period from November 1983 to July 1985; and also paid FSCC an amount of ₱17,858.37 for accrued condominium dues, realty taxes, electric bills, and surcharges as of March 1985. As a result, FDC reinstated the contract to sell and allowed Agcaoili to temporarily install two window-type air-conditioners in Unit 411.[11]

 On April 22, 1986, FDC again disconnected the electric supply of Unit 411.[12] Agcaoili

thus moved for the execution of the RTC decision dated August 26, 1985. [13] On July 17, 1986, the RTC issued an order temporarily allowing Agcaoili to obtain his electric supply from the other units in the fourth floor of FSB until the main meter was restored.[14]

 On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and FSCC in

the RTC, which was raffled to Branch 150 in Makati City. He alleged that the disconnection of

the electric supply of Unit 411 on April 22, 1986 had unjustly deprived him of the use and enjoyment of the unit; that the disconnection had seriously affected his law practice and had caused him sufferings, inconvenience and embarrassment; that FDC and FSCC violated the compromise agreement; that he was entitled to actual damages amounting to ₱21,626.60, as well as to moral and exemplary damages, and attorneys fees as might be proven during the trial; that the payment of interest sought by FDC and FSCC under the contract to sell was illegal; and that FDC and FSCC were one and the same corporation. He also prayed that FDC and FSCC be directed to return the excessive amounts collected for real estate taxes.[15]

 In its answer, FDC contended that it had a personality separate from that of FSCC; that it

had no obligation or liability in favor of Agcaoili; that FSCC, being the manager of FSB and the title-holder over its common areas, was in charge of maintaining all central and appurtenant equipment and installations for utility services (like air-conditioning unit, elevator, light and others); that Agcaoili failed to comply with the terms of the contract to sell; that despite demands, Agcaoili did not pay the amortizations due from November 1983 to March 1985 and the surcharges, the total amount of which was ₱376,539.09; that due to the non-payment, FDC cancelled the contract to sell and forfeited the amount of ₱219,063.97 paid by Agcaoili, applying the amount to the payment of liquidated damages, agents commission, and interest; that it demanded that Agcaoili vacate Unit 411, but its demand was not heeded; that Agcaoili did not pay his monthly amortizations of ₱1,883.84 from October 1985 to May 1986, resulting in FSCC being unable to pay the electric bills on time to the Manila Electric Company resulting in the disconnection of the electric supply of FSB; that it allowed Agcaoili to obtain electric supply from other units because Agcaoili promised to settle his accounts but he reneged on his promise; that Agcaoilis total obligation was ₱55,106.40; that Agcaoilis complaint for damages was baseless and was intended to cover up his delinquencies; that the interest increase from 12% to 24% per annum was authorized under the contract to sell in view of the adverse economic conditions then prevailing in the country; and that the complaint for damages was barred by the principle of res judicata because the issues raised therein were covered by the RTC decision dated August 26, 1985.

As compulsory counterclaim, FDC prayed for an award of moral and exemplary damages each amounting to ₱1,000,000.00, attorneys fees amounting to ₱100,000.00 and costs of suit.[16]

 On its part, FSCC filed an answer, admitting that the electric supply of Unit 411 was

disconnected for the second time on April 22, 1986, but averring that the disconnection was justified because of Agcaoilis failure to pay the monthly amortizations and condominium dues despite repeated demands. It averred that it did not repair the air-conditioning unit because of dwindling collections caused by the failure of some unit holders to pay their obligations on time; that the unit holders were notified of the electricity disconnection; and that the electric supply of Unit 411 could not be restored until Agcaoili paid his condominium dues totaling ₱14,701.16 as of April 1987. [17]

 By way of counterclaim, FSCC sought moral damages and attorneys fees of ₱100,000.00

and ₱50,000.00, respectively, and cost of suit.[18]

 On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that his

complaint for damages was not barred by res judicata; that he was justified in suspending the

payment of his monthly amortizations; that FDCs cancellation of the contract to sell was improper; that FDC and FSCC had no separate personalities; and that Agcaoili was entitled to damages. The RTC disposed thuswise:

 WHEREFORE, judgment is hereby rendered in favor of the plaintiff and as

against both defendants, declaring the increased rates sought by defendants to be illegal, and ordering defendant FDC/FSCC to reinstate the contract to sell, as well as to provide/restore the air-conditioning services/electric supply to plaintiffs unit. Both defendants are likewise ordered to pay plaintiff:

 a. The amount of ₱21,626.60 as actual damages; b.      ₱500,000.00 as moral damages; c. ₱50,000.00 as exemplary damages; and

 d.      ₱50,000.00 as and for attorneys fees.

 and to return to plaintiff the excess amount collected from him for real estate taxes. 

SO ORDERED.[19]

  FDC appealed, but the CA affirmed the RTC.[20] Hence, FDC comes to us on further

appeal.[21]

 Issues

 FDC claims that there was a failure to pay the correct amount of docket fee herein

because the complaint did not specify the amounts of moral damages, exemplary damages, and attorneys fees; that the payment of the prescribed docket fee by Agcaoili was necessary for the RTC to acquire jurisdiction over the case; and that, consequently, the RTC did not acquire jurisdiction over this case.

 FDC also claims that the proceedings in the RTC were void because the jurisdiction over

the subject matter of the action pertained to the Housing and Land Use Regulatory Board (HLURB); and that both the RTC and the CA erred in ruling: (a) that Agcaoili had the right to suspend payment of his monthly amortizations; (b) that FDC had no right to cancel the contract to sell; and (c) that FDC and FSCC were one and same corporation, and as such were solidarily liable to Agcaoili for damages.[22]

 Ruling

 The petition has no merit.

I

 The filing of the complaint or other initiatory pleading and the payment of the prescribed

docket fee are the acts that vest a trial court with jurisdiction over the claim. [23]In an action where the reliefs sought are purely for sums of money and damages, the docket fees are assessed on the basis of the aggregate amount being claimed.[24] Ideally, therefore, the complaint or similar pleading must specify the sums of money to be recovered and the damages being sought in order that the clerk of court may be put in a position to compute the correct amount of docket fees.

 If the amount of docket fees paid is insufficient in relation to the amounts being sought,

the clerk of court or his duly authorized deputy has the responsibility of making a deficiency assessment, and the plaintiff will be required to pay the deficiency. [25] The non-specification of the amounts of damages does not immediately divest the trial court of its jurisdiction over the case, provided there is no bad faith or intent to defraud the Government on the part of the plaintiff.[26]

 The prevailing rule is that if the correct amount of docket fees are not paid at the time of

filing, the trial court still acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring prescription.[27] The prescriptive period that bars the payment of the docket fees refers to the period in which a specific action must be filed, so that in every case the docket fees must be paid before the lapse of the prescriptive period, as provided in the applicable laws, particularly Chapter 3, Title V, Book III, of the Civil Code, the principal law on prescription of actions.[28]

 In Rivera v. Del Rosario,[29] the Court, resolving the issue of the failure to pay the correct

amount of docket fees due to the inadequate assessment by the clerk of court,ruled  that jurisdiction over the complaint was still validly acquired upon the full payment of the docket fees assessed by the Clerk of Court. Relying on Sun Insurance Office, Ltd., (SIOL) v. Asuncion,[30] the Court opined that the filing of the complaint or appropriate initiatory pleading and the payment of the prescribed docket fees vested a trial court with jurisdiction over the claim, and although the docket fees paid were insufficient in relation to the amount of the claim, the clerk of court or his duly authorized deputy retained the responsibility of making a deficiency assessment, and the party filing the action could be required to pay the deficiency, without jurisdiction being automatically lost.

 Even where the clerk of court fails to make a deficiency assessment, and the deficiency is

not paid as a result, the trial court nonetheless continues to have jurisdiction over the complaint, unless the party liable is guilty of a fraud in that regard, considering that the deficiency will be collected as a fee in lien within the contemplation of Section 2, [31]Rule 141 (as revised by A.M. No. 00-2-01-SC).[32] The reason is that to penalize the party for the omission of the clerk of court is not fair if the party has acted in good faith.

 Herein, the docket fees paid by Agcaoili were insufficient considering that the complaint

did not specify the amounts of moral damages, exemplary damages and attorneys fees. Nonetheless, it is not disputed that Agcaoili paid the assessed docket fees. Such payment negated bad faith or intent to defraud the Government.[33] Nonetheless, Agcaoili must remit any docket fee deficiency to the RTCs clerk of court.

 II

 FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction over

the case. As already stated, Agcaoili filed a complaint against FDC in the RTC on February 28, 1985 after FDC disconnected the electric supply of Unit 411. Agcaoili and FDC executed a compromise agreement on August 16, 1985. The RTC approved the compromise agreement through its decision of August 26, 1985. In all that time, FDC never challenged the RTCs jurisdiction nor invoked the HLURBs authority. On the contrary, FDC apparently recognized the RTCs jurisdiction by its voluntary submission of the compromise agreement to the RTC for approval. Also, FDC did not assert the HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6, 1987). Instead, it even averred in that answer that the decision of August 26, 1985 approving the compromise agreement already barred Agcaoili from filing the second complaint under the doctrine of res judicata. FDC also thereby sought affirmative relief from the RTC through its counterclaim.

 FDC invoked HLURBs authority only on September 10, 1990,[34] or more than five years

from the time the prior case was commenced on February 28, 1985, and after the RTC granted Agcaoilis motion to enjoin FDC from cancelling the contract to sell.[35]

 The principle of estoppel, which is based on equity and public policy, [36] dictates that

FDCs active participation in both RTC proceedings and its seeking therein affirmative reliefs now precluded it from denying the RTCs jurisdiction. Its acknowledgment of the RTCs jurisdiction and its subsequent denial of such jurisdiction only after an unfavorable judgment were inappropriate and intolerable. The Court abhors the practice of any litigant of submitting a case for decision in the trial court, and then accepting the judgment only if favorable, but attacking the judgment for lack of jurisdiction if it is not.[37]

 III

 In upholding Agcaoilis right to suspend the payment of his monthly amortizations due to

the increased interest rates imposed by FDC, and because he found FDCs cancellation of the contract to sell as improper, the CA found and ruled as follows:

 It is the contention of the appellee that he has the right to suspend payments

since the increase in interest rate imposed by defendant-appellant FDC is not valid and therefore cannot be given legal effect. Although Section II, paragraph d of the Contract to Sell entered into by the parties states that, should there be an increase in bank interest rate for loans and/or other financial accommodations, the rate of interest provided for in this contract shall be automatically amended to equal the said increased bank interest rate, the date of said amendment to coincide with the date of said increase in interest rate, the said increase still needs to [be] accompanied by valid proofs and not one of the parties must unilaterally alter what was originally agreed upon. However, FDC failed to substantiate the alleged increase with sufficient proof, thus we quote with approval the findings of the lower court, to wit:

 In the instant case, defendant FDC failed to show by evidence that it

incurred loans and /or other financial accommodations to pay interest for its loans in developing the property. Thus, the increased interest rates said defendant is imposing on plaintiff is not justified, and to allow the same is tantamount to unilaterally altering the terms of the contract which the law proscribes. Article 1308 of the Civil Code provides:

 Art. 1308 The contract must bind both contracting parties; its

validity or compliance cannot be left to the will of one of them. 

For this reason, the court sees no valid reason for defendant FDC to cancel the contract to sell on ground of default or non-payment of monthly amortizations. (RTC rollo, pp. 79-80)

 It was also grave error on the part of the FDC to cancel the contract to sell

for non-payment of the monthly amortizations without taking into consideration Republic Act 6552, otherwise known as the Maceda Law. The policy of law, as embodied in its title, is to provide protection to buyers of real estate on installment payments. As clearly specified in Section 3, the declared public policy espoused by Republic Act No. 6552 is to protect buyers of real estate on installment payments against onerous and oppressive conditions. Thus, in order for FDC to have validly cancelled the existing contract to sell, it must have first complied with Section 3 (b) of RA 6552. FDC should have refund the appellee the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made. At this point, we, find no error on the part of the lower court when it ruled that: 

There is nothing in the record to show that the aforementioned requisites for a valid cancellation of a contract where complied with by defendant FDC. Hence, the contract to sell which defendant FDC cancelled as per its letter dated August 17, 1987 remains valid and subsisting. Defendant FDC cannot by its own forfeit the payments already made by the plaintiff which as of the same date amounts to ₱263,637.73.(RTC rollo, p. 81)[38]

 We sustain the aforequoted findings and ruling of the CA, which were supported by the

records and relevant laws, and were consistent with the findings and ruling of the RTC. Factual findings and rulings of the CA are binding and conclusive upon this Court if they are supported by the records and coincided with those made by the trial court.[39]

 FDCs claim that it was distinct in personality from FSCC is unworthy of consideration

due to its being a question of fact that cannot be reviewed under Rule 45.[40]

 Among the obligations of FDC and FSCC to the unit owners or purchasers of FSBs units

was the duty to provide a centralized air-conditioning unit, lighting, electricity, and water; and to

maintain adequate fire exit, elevators, and cleanliness in each floor of the common areas of FSB.[41] But FDC and FSCC failed to repair the centralized air-conditioning unit of the fourth floor of FSB despite repeated demands from Agcaoili.[42] To alleviate the physical discomfort and adverse effects on his work as a practicing attorney brought about by the breakdown of the air-conditioning unit, he installed two window-type air-conditioners at his own expense.[43] Also, FDC and FSCC failed to provide water supply to the comfort room and to clean the corridors.[44] The fire exit and elevator were also defective.[45] These defects, among other circumstances, rightly compelled Agcaoili to suspend the payment of his monthly amortizations and condominium dues. Instead of addressing his valid complaints, FDC disconnected the electric supply of his Unit 411 and unilaterally increased the interest rate without justification.[46]

 Clearly, FDC was liable for damages. Article 1171 of the Civil Code provides that those

who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof are liable for damages. 

WHEREFORE, we DENY the petition for review; AFFIRM the decision of the Court of Appeals; and DIRECT the Clerk of Court of the Regional Trial Court, Makati City, Branch 150, or his duly authorized deputy to assess and collect the additional docket fees from the respondent as fees in lien in accordance with Section 2, Rule 141 of theRules of Court.

 SO ORDERED. 

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 92383 July 17, 1992

SUN INSURANCE OFFICE, LTD., petitioner, vs.THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

 

CRUZ, J.:

The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of P200,000.00. Two months later, he was dead with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on the policy but her claim was rejected. The petitioner agreed that there was no suicide. It argued, however that there was no accident either.

Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6, 1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim was in a happy mood (but not drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He was dead before he fell. 1

The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. 2 The petitioner was sentenced to pay her P200,000.00, representing the face value of the policy, with interest at the legal rate; P10,000.00 as moral damages; P5,000.00 as exemplary damages; P5,000.00 as actual and compensatory damages; and P5,000.00 as attorney's fees, plus the costs of the suit. This decision was affirmed on appeal, and the motion for reconsideration was denied. 3 The petitioner then came to this Court to fault the Court of Appeals for approving the payment of the claim and the award of damages.

The term "accident" has been defined as follows:

The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an insurance contract are to be construed and considered according to the ordinary understanding and common usage and speech of people generally. In-substance, the courts are practically agreed that the words "accident" and "accidental" mean that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident is an event that takes place without one's foresight or expectation — an event that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore not expected. 4

An accident is an event which happens without any human agency or, if happening through human agency, an event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also been defined as an injury which happens by reason of some violence or casualty to the injured without his design, consent, or voluntary co-operation. 5

In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says that "there is no accident when a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs which produces or brings about their injury or death." There was such a happening. This was the firing of the gun, which was the additional unexpected and independent and unforeseen occurrence that led to the insured person's death.

The petitioner also cites one of the four exceptions provided for in the insurance contract and contends that the private petitioner's claim is barred by such provision. It is there stated:

Exceptions —

The company shall not be liable in respect of

1. Bodily injury

xxx xxx xxx

b. consequent upon

i) The insured person attempting to commit suicide or willfully exposing himself to needless peril except in an attempt to save human life.

To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends that the insured willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy.

It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia because they both signify a disregard for one's life. The only difference is in degree, as suicide imports a positive act of ending such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent. To illustrate, a person who walks a tightrope one thousand meters above the ground and without any safety device may not actually be intending to commit suicide, but his act is nonetheless suicidal. He would thus be considered as "willfully exposing himself to needless peril" within the meaning of the exception in question.

The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully exposed himself to needless peril and so came under the exception. The theory is that a gun is per se dangerous and should therefore be handled cautiously in every case.

That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the magazine from the gun and believed it was no longer dangerous. He expressly assured her that the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun was indeed harmless.

The contrary view is expressed by the petitioner thus:

Accident insurance policies were never intended to reward the insured for his tendency to show off or for his miscalculations. They were intended to provide for contingencies. Hence, when I miscalculate and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome the current, I have wilfully exposed myself to peril and must accept the consequences of my act. If I drown I cannot go to the insurance company to ask them to compensate me for my failure to swim as well as I thought I could. The insured in the case at bar deliberately put the gun to his head and pulled the trigger. He wilfully exposed himself to peril.

The Court certainly agrees that a drowned man cannot go to the insurance company to ask for compensation. That might frighten the insurance people to death. We also agree that under the circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it is clear that when he braved the currents below, he deliberately exposed himself to a known peril.

The private respondent maintains that Lim did not. That is where she says the analogy fails. The petitioner's hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below were dangerous. By contrast, Lim did not know that the gun he put to his head was loaded.

Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. Indeed, most accidents are caused by negligence. There are only four exceptions expressly made in the contract to relieve the insurer from liability, and none of these exceptions is applicable in the case at bar. **

It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of the assured. There is no reason to deviate from this rule, especially in view of the circumstances of this case as above analyzed.

On the second assigned error, however, the Court must rule in favor of the petitioner. The basic issue raised in this case is, as the petitioner correctly observed, one of first impression. It is evident that the petitioner was acting in good faith then it resisted the private respondent's claim on the ground that the death of the insured was covered by the exception. The issue was indeed debatable and was clearly not raised only for the purpose of evading a legitimate obligation. We hold therefore that the award of moral and exemplary damages and of attorney's fees is unjust and so must be disapproved.

In order that a person may be made liable to the payment of moral damages, the law requires that his act be wrongful. The adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously. For these the law taxes costs. 7

The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing the action wrongful because in most cases one party will lose; we would be imposing an unjust condition or limitation on the right to litigate. We hold that the award of moral damages in the case at bar is not justified by the facts had circumstances as well as the law.

If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not the fact of winning alone that entitles him to recover such damages of the exceptional circumstances enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which should not be so. For those expenses, the law deems the award of costs as sufficient. 8

WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds the petitioner liable to the private respondent in the sum of P200,000.00 representing the face value of the insurance contract, with interest at the legal rate from the date of the filing of the complaint until the full amount is paid, but MODIFIED with the deletion of all awards for damages, including attorney's fees, except the costs of the suit.

SO ORDERED.