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Re: JURISDICTION

RODOLFO M. CUENCA and CUENCA INVESTMENT CORP., petitioners, vs. THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, INDEPENDENT REALTY CORP., and UNIVERSAL HOLDINGS CORP., respondents.

VELASCO, JR., J.:

The Case

In this Petition for Review on Certiorari under Rule 45, petitioners assail the January 6, 2003 Decision1 of the Court of Appeals (CA) in consolidated cases CA-G.R. CV No. 603382 and CA-G.R. SP No. 496863 which upheld the JURISDICTION of Sandiganbayan over a dispute involving the transfer of stocks and subscription rights of respondent Universal Holdings Corporation (UHC), a sequestered company, in favor of petitioners Rodolfo M. Cuenca and Cuenca Investment Corporation (CIC); and its July 15, 2003 Resolution4 denying petitioners’ Motion for Reconsideration.5 The consolidated cases originated from Civil Case No. 91-2721 entitled Rodolfo M. Cuenca, et al. v. Independent Realty Corp., et al. filed before the Makati City Regional Trial Court (RTC), Branch 61––CA-G.R. CV No. 60338 being an appeal from the April 23, 1998 Decision rendered by the Makati City RTC, and CA-G.R. SP No. 49686 being a special civil action formerly filed as a petition for certiorari before the Supreme Court, but was remanded to the CA for a review of the denial of the motion for intervention filed by respondent Presidential Commission on Good Government (PCGG).

The Facts

Respondent UHC is a wholly owned subsidiary of Independent Realty Corporation (IRC). UHC had an authorized capital stock of PhP 200,000,000 of which 401,995 shares worth PhP 40,199,500 were subscribed and PhP 10,050,000 was paid up by IRC. Five stockholders of IRC held qualifying shares in UHC and served in its Board of Directors. UHC became an inactive holding company until the later months of 1978.

In 1978, petitioner Rodolfo M. Cuenca and his family’s holding company, petitioner CIC, negotiated and reached an agreement with respondents IRC and UHC, whereby petitioners Cuenca and CIC would purchase all the shares of stock and subscription rights of IRC in UHC for PhP 10,000,000 and assume IRC’s unpaid subscription of PhP 30,000,000. Petitioners Cuenca and CIC were then the controlling stockholders of the Construction and Development Corporation of the Philippines (CDCP), now the Philippine National Construction Corporation (PNCC), Sta. Ines Melale Forest Products Corporation (Sta. Ines), and Resort Hotels Corporation (Resort Hotels). In order to build up UHC as his flagship company, petitioner Cuenca transferred to UHC the shares of stocks in CDCP, Sta. Ines, and Resort Hotels worth PhP 67,233,405, with UHC assuming Cuenca’s various bank obligations, some or all of which were secured by pledges or liens on the stocks.

On October 21, 1978, petitioner Cuenca was elected Chairperson and President of UHC at a special stockholders’ meeting in accordance with the acquisition plan, and through UHC, Cuenca continued to control and manage CDCP, Sta. Ines, and Resort Hotels. Pursuant to the acquisition plan and agreement with IRC, Cuenca and CIC transferred their shares of stock in CDCP, Sta. Ines, and Resort Hotels to UHC, which in turn paid PhP 10,000,000 to IRC. In addition, petitioners assumed IRC’s unpaid subscription of PhP 30,000,000 in UHC. The only remaining matter to be accomplished was the transfer of the stocks and subscription rights of IRC in UHC to petitioners, but despite demand, IRC did not comply.

In 1986, the instant controversy between petitioners and respondent IRC was overtaken by dramatic political events. President Marcos was ousted in a bloodless revolution and left behind an unbelievably large amount of funds and assets that were sequestered by the new government of President Aquino through PCGG. In July 1987, because of Marcos nominee Jose Yao Campos’ sworn statement, respondent PCGG directed Santos Luis Diego, President of IRC, to dissolve all the boards of directors of IRC’s fully-owned subsidiaries. A year later, it turned over IRC and its subsidiary, UHC, to the Asset Privatization Trust (APT) for rehabilitation, conservation, or disposition, enabling APT to assign one share of stock in IRC and in each of its 25 subsidiaries, including UHC, to Paterno Bacani, Jr.

Amidst this state of affairs, petitioners filed the October 2, 1991 Complaint6 against IRC, UHC, APT, and Bacani before the Makati City RTC, which was docketed as Civil Case No. 91-2721, to compel IRC to transfer all its stock and subscription rights in UHC to them or order IRC and UHC to return and re-convey to them all the assets and shares of stock in CDCP, Sta. Ines, and Resort Hotels that they had transferred to UHC.

The Ruling of the Regional Trial Court

On November 29, 1991, respondents IRC and UHC filed a Joint Motion to Dismiss7 on the ground of lack of JURISDICTION, claiming that the exclusive JURISDICTION was lodged in the Sandiganbayan and not in the RTC. Meanwhile, on December 9, 1991, respondents IRC and UHC, represented by respondent PCGG, filed another Motion to Dismiss8 on the ground of litis pendentia as petitioner Cuenca had a pending case filed by respondent PCGG before the Sandiganbayan and docketed as Civil Case No. 0016 entitled Republic of the Philippines v. Rodolfo M. Cuenca, et al., which involved respondent UHC and several other corporations

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beneficially owned or controlled by petitioner Cuenca for and in behalf of the Marcoses. Meanwhile, in the May 14, 1992 Order, the trial court dismissed the Complaint against APT and Bacani, and dropped them as defendants on October 16, 1992.9 On March 25, 1993, the trial court, however, denied both motions to dismiss on the ground that respondent PCGG was not impleaded in the instant case and that the transaction involved specific performance of a contract entered into in 1978 before the PCGG came into existence.

Consequently, on August 19, 1993, respondents IRC and UHC filed their Answer with Counterclaim.10 Before pre-trial, petitioners sent their Interrogatories11 to IRC and UHC, which were answered by IRC on July 25, 1994.12 After considerable time had elapsed without UHC filing its answer to the interrogatories, and unsatisfied with IRC’s answer not accomplished, duly signed, and sworn to by a competent and responsible IRC officer as only IRC’s counsel signed it, petitioners filed on August 30, 1994 a Motion to Compel UHC to Answer Interrogatories13 to which the trial court issued two related Orders, the first dated January 17, 1995 directing IRC to submit proper and complete answers and UHC to answer the interrogatories,14 and the second dated February 10, 1995 granting respondents IRC and UHC an extension of 15 days to file their answers to the interrogatories.15

On September 29, 1995, petitioners filed a Motion to Declare Defendants in Default16 for non-compliance with Section 5 of Rule 29,17 Revised Rules of Civil Procedure. Respondents IRC and UHC filed their respective Answers to Interrogatories18 on October 17, 1995 or only after the motion to declare them in default was filed and served. Consequently, the trial court issued its February 7, 1996 Order of default, which also granted petitioners the right to adduce their evidence ex-parte.19 On September 9, 1996, the trial court likewise denied20 the Motion for Reconsideration and/or Lift Order of Default21 filed by respondents IRC and UHC.

Subsequently, respondent PCGG filed its Motion for Leave to Intervene with Motion to Dismiss on December 18, 1996, which was denied by the trial court only on April 20, 1998.22

Parenthetically, on October 22, 1996, petitioners filed an Urgent Ex-Parte Application for Receivership which was granted through an October 28, 1996 Order, appointing Jaime C. Laya as UHC’s receiver. After posting the requisite bond, the trial court issued on November 5, 1996 an Order approving the bond, and receiver Laya submitted his November 13, 1996 Oath of Office.

Petitioners adduced their evidence and presented the testimonies of petitioner Rodolfo Cuenca and Lourdes G. Labao, a supervisor of Caval Securities Registry, Inc., who testified on the transfers of shares of stock of CDCP, Sta. Ines, and Resort Hotels from Cuenca and CIC to UHC. On March 20, 1998, petitioners filed their Formal Offer of Exhibits.23

On April 23, 1998, the trial court rendered a Decision in favor of petitioners. The fallo reads:

Accordingly, JUDGMENT is hereby rendered in favor of plaintiffs and as against defendants IRC and UHC, who are hereby ordered to immediately return and reconvey to plaintiffs all of the shares of stocks and stock subscriptions in Philippine National Construction Corporation (formerly known as Construction and Development [Corporation] of the Philippines), Resort Hotels Corporation and Sta. Ines Melale Forest Products Corporation, including those transferred by plaintiffs to UHC such as the 24,780,746 shares in CDCP/PNCC, the 468,062 shares in Resort Hotels Corporation and the 23,748,932 shares in Sta. Ines Melale Forest Products Corporation plus all fruits thereof such as stock and cash dividends and stock splits.

The plaintiffs’ prayer for damages and attorney’s fees are hereby DENIED.

The counterclaim of defendants UHC and IRC for damages and attorney’s fees is hereby DENIED for lack of evidence.

The appointment of JAIME C. LAYA as Receiver of defendant UHC is hereby MAINTAINED until finality of this Decision and full execution of this Decision or full compliance herewith by defendants.24

From the adverse Decision, respondents IRC and UHC appealed to the CA, which was docketed as CA-G.R. CV No. 60338. On the other hand, after the trial court denied respondent PCGG’s Motion for Reconsideration25 through its July 22, 1998 Order,26 PCGG brought the instant case before this Court in G.R. No. 13516. Said PCGG special civil action was remanded to the CA and docketed as CA-G.R. SP No. 49686 entitled Presidential Commission on Good Government (PCGG) v. Hon. Fernando V. Gorospe, as Presiding Judge RTC of Makati City, Branch 61, et al. In the petition before the CA, PCGG also assailed the April 20, 1998 Order of the trial court denying its motion for intervention in Civil Case No. 91-2721. Thus, the petition for certiorari (CA-G.R. SP No. 49686) and the appeal (CA-G.R. CV No. 60338) were consolidated.

The Ruling of the Court of Appeals

Through its assailed Decision, the appellate court reversed the Makati City RTC’s Decision, granted the petition filed by PCGG, and dismissed the instant case for lack of JURISDICTION. The appellate court ratiocinated that the Sandiganbayan had exclusive JURISDICTION to hear the instant case involving petitioners and the sequestered respondents corporations. It held that the recourse of parties, petitioners in the instant case, who wish to challenge respondent PCGG’s acts or orders, would be to the Sandiganbayan pursuant to Executive Order No. (EO) 14 issued on May, 7, 1986,27 which ordained that this body alone had the original JURISDICTION over all of respondent PCGG’s cases, civil or criminal, citing PCGG v. Peña28 as authority. The appellate court applied

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Republic v. Sandiganbayan29 on the issue of sequestration by respondent PCGG of UHC, CIC, and CDCP (now PNCC) against petitioner Cuenca, the Marcos spouses, their relatives, friends, and colleagues.

The CA applied the doctrine of conclusiveness of judgment that any rule which had already been authoritatively established in a previous litigation should be deemed the law of the case between the same parties. As such, the appellate court adopted the ruling in Republic on the continuing force of the order of sequestration and concluded that, indeed, respondent UHC is a sequestered company. The CA did not find merit in petitioners’ contention that sequestration did not affect their transaction with respondents as it arose before PCGG was created.

Even if petitioners had initially a cause of action, the CA ruled that the complaint was certainly affected by the passage of the law charging respondent PCGG with the performance of certain tasks over the subject matter of the action; and that the same subject matter had become subject to the new exclusive JURISDICTION vested in the Sandiganbayan at the time petitioners filed the instant case.

Aggrieved, petitioners filed their Motion for Reconsideration30 which was denied by the assailed July 15, 2003 CA Resolution.31 Hence, they filed this petition for review.

The Issues

Petitioners raise the following grounds for our consideration:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DISMISSING CIVIL CASE NO. 91-2721 BELOW ON THE GROUND THAT THE SANDIGANBAYAN HAS EXCLUSIVE JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.

A.

THE FACT ALONE THAT RESPONDENT UHC MAY HAVE BEEN SEQUESTERED DID NOT DIVEST THE REGIONAL TRIAL COURT OF ITS JURISDICTION OVER THE SUBJECT MATTER OF PETITIONERS’ COMPLAINT IN CIVIL CASE NO. 91-2721 BELOW.

B.

THE COURT OF APPEALS’ RELIANCE ON THE CASE OF REPUBLIC VS. SANDIGANBAYAN, 240 SCRA 376 (1995), IS MISPLACED.

C.

THE COURT OF APPEALS’ APPLICATION OF THE DOCTRINE OF CONCLUSIVENESS OF JUDGMENT IS ERRONEOUS.32

The Court’s Ruling

The petition must fail.

The core issue before us is that of JURISDICTION. In gist, petitioners argue that UHC was not sequestered, and even if it was sequestered, the trial court still has the JURISDICTION to hear the case for rescission of contract or specific performance, and conclude that the doctrine of conclusiveness of judgment does not apply in the instant case.

Issue of JURISDICTION

JURISDICTION is defined as the power and authority of a court to hear, try, and decide a case.33 JURISDICTION over the subject matter is conferred by the Constitution or by law while JURISDICTION over the person is acquired by his/her voluntary submission to the authority of the court or through the exercise of its coercive processes. JURISDICTION over the res is obtained by actual or constructive seizure placing the property under the orders of the court.34

We are primarily concerned here with the first kind of JURISDICTION, that is, JURISDICTION over the subject matter.

Petitioners contend that even if UHC was indeed sequestered, JURISDICTION over the subject matter of petitioners’ Complaint for enforcement or rescission of contract between petitioners and respondents belonged to the RTC and not the Sandiganbayan. Petitioners cited Philippine Amusement and Gaming Corporation v. Court of Appeals,35 involving Philippine Casino Operators Corporation (PCOC) which was sequestered on March 19, 1986. In said case, this Court held that the fact of sequestration alone did not automatically oust the RTC of JURISDICTION to decide upon the question of ownership of the disputed gaming and office equipment as PCGG must be a party to the suit in order that the Sandiganbayan’s exclusive JURISDICTION may be correctly invoked, and as Section 236 of EO 14 was duly applied in PCGG v. Peña37 and PCGG v. Nepomuceno,38 which ineluctably spoke of respondent PCGG as a party-litigant.

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Likewise, petitioners cited Holiday Inn (Phils.), Inc. v. Sandiganbayan,39 which also involved a sequestered company, New Riviera Hotel and Development Co., Inc. (NRHDCI), where this Court held that there is a distinction between an action for the recovery of ill-gotten wealth, as well as all incidents arising from, incidental to, or related to such cases, and cases filed by those who wish to question or challenge respondent PCGG’s acts or orders in such cases vis-à-vis ordinary civil cases that do not pertain to the Sandiganbayan. As such, petitioners contend that the instant ordinary civil case for the enforcement or rescission of the 1978 contract between petitioners and respondents UHC and IRC is distinct from and has absolutely no bearing with the unrelated issue of the sequestration of respondents UHC and IRC. Thus, petitioners strongly contend that the trial court indeed had JURISDICTION over the instant case. Besides, petitioners point out that PCGG was not impleaded as a defendant in Civil Case No. 91-2721, and that the Complaint "does not question the PCGG’s alleged sequestration of respondent UHC x x x or any other act or order of the PCGG."40

Sandiganbayan has exclusive JURISDICTION over the instant case

A rigorous examination of the antecedent facts and existing records at hand shows that Sandiganbayan has exclusive JURISDICTION over the instant case.

Thus, the petition must fail for the following reasons:

First, it is a fact that the shares of stock of UHC and CDCP, the subject matter of Civil Case No. 91-2721 before the Makati City RTC, were also the subject matter of an ill-gotten wealth case, specifically Civil Case No. 0016 before the Sandiganbayan. In Civil Case No. 91-2721 of the Makati City RTC, petitioners prayed for a judgment either transferring the UHC shares or restoring and reconveying the PNCC shares to them. In the event a final judgment is rendered in said Makati City RTC case in favor of petitioners, then such adjudication tends to render moot and academic the judgment to be rendered in Sandiganbayan Civil Case No. 0016 considering that the legal ownership of either the UHC or PNCC shares would now be transferred to petitioners Rodolfo Cuenca and CIC. Such adverse judgment would run counter to the rights of ownership of the government over the UHC and PNCC shares in question. It must be remembered that on March 21, 1986, a Sworn Statement41 executed by Mr. Jose Y. Campos in Vancouver, Canada, whereby Mr. Campos, a crony and close business associate of the deposed President Marcos, named and identified IRC and UHC (a wholly-owned subsidiary of IRC) as among the several corporations organized, established, and managed by him and other business associates for and in behalf of the former President Marcos. Subsequently, the UHC and IRC shares were surrendered and turned over by Mr. Campos to PCGG, transferring, in effect, the ownership of the shares to the Government.

Moreover, inasmuch as UHC was impleaded in Civil Case No. 0016 as a defendant and was listed among the corporations beneficially owned or controlled by petitioner Cuenca, the issue of the latter’s right to acquire ownership of UHC shares is inexorably intertwined with the right of the Republic of the Philippines, through PCGG, to retain ownership of said UHC shares.

It must be borne in mind that the Sandiganbayan was created in 1978 pursuant to Presidential Decree No. (PD) 1606.42 Said law has been amended during the interim period after the Edsa Revolution of 1986 and before the 1987 Constitution was drafted, passed, and ratified. Thus, the executive issuances during such period before the ratification of the 1987 Constitution had the force and effect of laws. Specifically, then President Corazon C. Aquino issued the following Executive Orders which amended PD 1606 in so far as the JURISDICTION of the Sandiganbayan over civil and criminal cases instituted and prosecuted by the PCGG is concerned, viz:

a) EO 1, entitled "Creating the Presidential Commission on Good Government," dated February 28, 1986;

b) EO 2, entitled "Regarding the Funds, Moneys, Assets, and Properties Illegally Acquired or Misappropriated by Former President Ferdinand E. Marcos, Mrs. Imelda Romualdez Marcos, Their Close Relatives, Subordinates, Business Associates, Dummies, Agents, or Nominees," dated March 12, 1986;

c) EO 14, entitled "Defining the JURISDICTION over Cases Involving the Ill-gotten Wealth of Former President Ferdinand E. Marcos, Mrs. Imelda R. Marcos, Members of their Immediate Family, Close Relatives, Subordinates, Close and/or Business Associates, Dummies, Agents and Nominees," dated May 7, 1986; and

d) EO 14-A, entitled "Amending Executive Order No. 14," dated August 18, 1986.

Bearing on the JURISDICTION of the Sandiganbayan over cases of ill-gotten wealth, EO 14, Secs. 1 and 2 provide:

SECTION 1. Any provision of the law to the contrary notwithstanding, the Presidential Commission on Good Government with the assistance of the Office of the Solicitor General and other government agencies, is hereby empowered to file and prosecute all cases investigated by it under Executive Order No. 1, dated February 28, 1986 and Executive Order No. 2, dated March 12, 1986, as may be warranted by its findings.

SECTION 2. The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original JURISDICTION thereof. (Emphasis supplied.)

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Notably, these amendments had been duly recognized and reflected in subsequent amendments to PD 1606, specifically Republic Act Nos. 797543 and 8249.44

In the light of the foregoing provisions, it is clear that it is the Sandiganbayan and not the Makati City RTC that has JURISDICTION over the disputed UHC and PNCC shares, being the alleged "ill-gotten wealth" of former President Ferdinand E. Marcos and petitioner Cuenca. The fact that the Makati City RTC civil case involved the performance of contractual obligations relative to the UHC shares is of no importance. The benchmark is whether said UHC shares are alleged to be ill-gotten wealth of the Marcoses and their perceived cronies. More importantly, the interests of orderly administration of justice dictate that all incidents affecting the UHC shares and PCGG’s right of supervision or control over the UHC must be addressed to and resolved by the Sandiganbayan. Indeed, the law and courts frown upon split JURISDICTION and the resultant multiplicity of suits, which result in much lost time, wasted effort, more expenses, and irreparable injury to the public interest.

Second, the UHC shares in dispute were sequestered by respondent PCGG. Sequestration is a provisional remedy or freeze order issued by the PCGG designed to prevent the disposal and dissipation of ill-gotten wealth.45 The power to sequester property means to

place or cause to be placed under [PCGG’s] possession or control said property, or any building or office wherein any such property or any records pertaining thereto may be found, including business enterprises and entities, for the purpose of preventing the destruction of, and otherwise conserving and preserving the same, until it can be determined, through appropriate judicial proceedings, whether the property was in truth ill-gotten. (Silverio v. PCGG, 155 SCRA 60 [1987]).46

Considering that the UHC shares were already sequestered, enabling the PCGG to exercise the power of supervision, possession, and control over said shares, then such power would collide with the legal custody of the Makati City RTC over the UHC shares subject of Civil Case No. 91-2721. Whatever the outcome of Civil Case No. 91-2721, whether from enforcement or rescission of the contract, would directly militate on PCGG’s control and management of IRC and UHC, and consequently hamper or interfere with its mandate to recover ill-gotten wealth. As aptly pointed out by respondents, petitioners’ action is inexorably entwined with the Government’s action for the recovery of ill-gotten wealth––the subject of the pending case before the Sandiganbayan. Verily, the transfer of shares of stock of UHC to petitioners or the return of the shares of stock of CDCP (now PNCC) will wreak havoc on the sequestration case as both UHC and CDCP are subject of sequestration by PCGG.

Third, Philippine Amusement and Gaming Corporation and Holiday Inn (Phils.), Inc.47 are not analogous to the case at bar. The first dealt with ownership of gaming and office equipment, which is distinct from and will not impact on the sequestration issue of PCOC. The second dealt with an ordinary civil case for performance of a contractual obligation which did not in any way affect the sequestration proceeding of NRHDCI; thus, the complaint-in-intervention of Holiday Inn (Phils.), Inc. was properly denied for lack of JURISDICTION over the subject matter.

In both cases cited by petitioners, there was a substantial distinction between the sequestration proceedings and the subject matter of the actions. This does not prevail in the instant case, as the ownership of the shares of stock of the sequestered companies, UHC and CDCP, is the subject matter of a pending case and thus addressed to the exclusive JURISDICTION of the Sandiganbayan.

Sec. 2 of EO 14 pertinently provides: "The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original JURISDICTION thereof."

The above proviso has been squarely applied in Peña,48 where this Court held that the exclusive JURISDICTION conferred on the Sandiganbayan would evidently extend not only to the principal causes of action, that is, recovery of alleged ill-gotten wealth, but also to all incidents arising from, incidental to, or related to such cases, including a dispute over the sale of the shares, the propriety of the issuance of ancillary writs of relative provisional remedies, and the sequestration of the shares, which may not be made the subject of separate actions or proceedings in another forum. Indeed, the issue of the ownership of the sequestered companies, UHC and PNCC, as well as IRC’s ownership of them, is undeniably related to the recovery of the alleged ill-gotten wealth and can be squarely addressed via the exclusive JURISDICTION of the Sandiganbayan.

Fourth, while it is clear that the exclusive JURISDICTION of the Sandiganbayan only encompasses cases where PCGG is impleaded, such requirement is satisfied in the instant case. The appellate court clearly granted PCGG’s petition for certiorari in CA-G.R. SP No. 49686, assailing the trial court’s denial of its Motion for Leave to Intervene with Motion to Dismiss. Thus, the trial court’s April 20, 1998 Order was reversed and set aside by the appellate court through its assailed Decision. Consequently, PCGG was granted the right to intervene and thus became properly impleaded in the instant case. Without doubt, the trial court has no JURISDICTION to hear and decide Civil Case No. 91-2721.

Respondent UHC duly sequestered by PCGG

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The trial court ruled that respondent PCGG could not stop the transfer of the shares of respondent UHC in CDCP to petitioners as there was no proof of sequestration except a writ of sequestration of Cuenca’s stocks in CDCP. On the other hand, petitioners contend that the appellate court’s reliance on Republic49 is misplaced. They point out that neither PCGG nor respondent corporations relied on said case. Besides, petitioners contend that the Court’s statements in said case did not constitute a ruling but mere references to unproven allegations by PCGG in its complaint against Cuenca in Sandiganbayan Civil Case No. 0016; and as such, it cannot be relied upon to hold that UHC was a sequestered corporation. As it is, petitioners conclude that it was a mere obiter dictum which was not essential to the disposition of the aforecited case and thus, it is not binding upon the parties for purposes of res judicata or conclusiveness of judgment.

We are not moved by petitioners’ submission.

While it may be true that in Republic, our statement on Civil Case No. 0016, as cited by PCGG, refers to the allegations in the complaint filed by PCGG against petitioner Cuenca,50 we nonetheless stated in said case the fact of the sequestration of the assets and records of Rodolfo Cuenca, UHC, CIC, CDCP, San Mariano Mining Corp., etc. on May 23, 1986 and July 23, 1987. We took factual notice of the sequestration of various companies and properties in said case, thus:a

III. Orders of Sequestration issued by PCGG

During 1986 and 1987 numerous orders of sequestration, freezing or provisional takeover of companies or properties, real or personal, were issued and implemented. Among those were the orders handed out against the firms or assets hereunder listed, with the dates of sequestration, freezing or take-over, to wit:

SUBJECTS/OBJECTS OF SEQUESTRATION DATE

x x x x

i. Assets and records of Rodolfo Cuenca, May 23, 1986,Universal Holdings Corp., Cuenca July 23, 1987Investment Corporation, PhilippineNational Construction Corp. (formerlyCDCP), San Mariano Mining Corp., etc.51

From the foregoing account, we concluded that UHC had indeed been sequestered by the PCGG in 1986 and 1987. Consequently, the appellate court properly applied Republic as basis for its finding that UHC was a sequestered company. Since the issue of sequestration has been resolved, we see no need to delve into the issue of conclusiveness of judgment. Suffice it to say that with the unequivocal finding that UHC was indeed sequestered, then it is the Sandiganbayan, not the Makati City RTC, that has exclusive JURISDICTION over the subject matter of Civil Case No. 91-2721.

WHEREFORE, the instant petition is DISMISSED for lack of merit. The January 6, 2003 Decision and July 15, 2003 Resolution of the CA in CA-G.R. CV No. 60338 and CA-G.R. SP No. 49686 are AFFIRMED in toto. No costs.

SO ORDERED.

(2) ASIA INTERNATIONAL AUCTIONEERS, INC. and SUBIC BAY MOTORS CORPORATION, petitioners, vs. HON. GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue (BIR), THE REGIONAL DIRECTOR, BIR, Region III, THE REVENUE DISTRICT OFFICER, BIR, Special Economic Zone, and OFFICE OF THE SOLICITOR GENERAL, respondents.

PUNO, C.J.:

At bar is a petition for review on certiorari seeking the reversal of the decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 79329 declaring the Regional Trial Court (RTC) of Olongapo City, Branch 74, without JURISDICTION over Civil Case No. 275-0-2003.

The facts are undisputed.

Congress enacted Republic Act (R.A.) No. 7227 creating the Subic Special Economic Zone (SSEZ) and extending a number of economic or tax incentives therein. Section 12 of the law provides:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the [SSEZ] shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;

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(b) The [SSEZ] shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the [SSEZ], as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the [SSEZ]. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprise within the [SSEZ] shall be remitted to the National Government, one percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income earned by all business and enterprise within the [SSEZ] to be utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the [SSEZ], the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and maintained in the [SSEZ]; (emphasis supplied)

On January 24, 1995, then Secretary of Finance Roberto F. De Ocampo, through the recommendation of then Commissioner of Internal Revenue (CIR) Liwayway Vinzons-Chato, issued Revenue Regulations [Rev. Reg.] No. 1-95,2 providing the "Rules and Regulations to Implement the Tax Incentives Provisions Under Paragraphs (b) and (c) of Section 12, [R.A.] No. 7227, [o]therwise known as the Bases Conversion and Development Act of 1992." Subsequently, Rev. Reg. No. 12-973 was issued providing for the "Regulations Implementing Sections 12(c) and 15 of [R.A.] No. 7227 and Sections 24(b) and (c) of [R.A.] No. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All Businesses and Enterprises Within the Subic, Clark, John Hay, Poro Point Special Economic Zones and other Special Economic Zones under PEZA." On September 27, 1999, Rev. Reg. No. 16-994 was issued "Amending [RR] No. 1-95, as amended, and other related Rules and Regulations to Implement the Provisions of paragraphs (b) and (c) of Section 12 of [R.A.] No. 7227, otherwise known as the ‘Bases Conversion and Development Act of 1992’ Relative to the Tax Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone."

On June 3, 2003, then CIR Guillermo L. Parayno, Jr. issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the "Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction." The assailed portions of the RMC read:

II. Tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones and subsequent sale thereof through public auction.—Pursuant to existing revenue issuances, the following are the uniform tax treatments that are to be adopted on the different transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones that are subsequently sold through public auction:

A. Importation of motor vehicles into the freeport zones

1. Motor vehicles that are imported into the Freeport zones for exclusive use within the zones are, as a general rule, exempt from customs duties, taxes and other charges, provided that the importer-consignee is a registered enterprise within such freeport zone. However, should these motor vehicles be brought out into the customs territory without returning to the freeport zones, the customs duties, taxes and other charges shall be paid to the BOC before release thereof from its custody.

x x x

3. For imported motor vehicles that are imported by persons that are not duly registered enterprises of the freeport zones, or that the same are intended for public auction within the freeport zones, the importer-consignee/auctioneer shall pay the value-added tax (VAT) and excise tax to the BOC before the registration thereof under its name with the LTO and/or the conduct of the public auction.

x x x

B. Subsequent sale/public auction of the motor vehicles

1. Scenario One – The public auction is conducted by the consignee of the imported motor vehicles within the freeport zone

x x x

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1.2. In case the consignee-auctioneer is a registered enterprise and/or locator not entitled to the preferential tax treatment or if the same is entitled from such incentive but its total income from the customs territory exceeds 30% of its entire income derived from the customs territory and the freeport zone, the income derived from the public auction shall be subjected to the regular internal revenue taxes imposed by the Tax Code.

x x x

1.4. In the event that the winning bidder shall bring the motor vehicles into the customs territory, the winning bidder shall be deemed the importer thereof and shall be liable to pay the VAT and excise tax, if applicable, based on the winning bid price. However, in cases where the consignee-auctioneer has already paid the VAT and excise tax on the motor vehicles before the registration thereof with LTO and the conduct of public auction, the additional VAT and excise tax shall be paid by winning bidder resulting from the difference between the winning bid price and the value used by the consignee-auctioneer in payment of such taxes. For excise tax purposes, in case the winning bid price is lower than the total costs to import, reconditioning/rehabilitation of the motor vehicles, and other administrative and selling expenses, the basis for the computation of the excise tax shall be the total costs plus ten percent (10%) thereof. The additional VAT and excise taxes shall be paid to the BIR before the auctioned motor vehicles are registered with the LTO.

1.5 In case the services of a professional auctioneer is employed for the public auction, the final withholding tax of 25%, in case he/she is a non-resident citizen or alien, or the expanded withholding tax of 20%, in case he/she is a resident citizen or alien, shall be withheld by the consignee-auctioneer from the amount of consideration to be paid to the professional auctioneer and shall be remitted accordingly to the BIR.

This was later amended by RMC No. 32-2003,5 to wit:

II. The imported motor vehicles after its release from Customs custody are sold through public auction/negotiated sale by the consignee within or outside of the Freeport Zone:

A. The gross income earned by the consignee-seller from the public auction/negotiated sale of the imported vehicles shall be subject to the preferential tax rate of five percent (5%) in lieu of the internal revenue taxes imposed by the National Internal Revenue Code of 1997, provided that the following conditions are present:

1.That the consignee-seller is a duly registered enterprise entitled to such preferential tax rate as well as a registered taxpayer with the Bureau of Internal Revenue (BIR).

2.That the total income generated by the consignee-seller from sources within the customs territory does not exceed thirty percent (30%) of the total income derived from all sources.

B. In case the consignee-seller is a registered enterprise and/or locator not entitled to the preferential tax treatment or if the same is entitled from such incentive but its total income from the customs territory exceeds thirty percent (30%) of its entire income derived from the customs territory and the freeport zone, the sales or income derived from the public auction/negotiated sale shall be subjected to the regular internal revenue taxes imposed by the Tax Code. The consignee-seller shall also observe the compliance requirements prescribed by the Tax Code. When public auction or negotiated sale is conducted within or outside of the freeport zone, the following tax treatment shall be observed:

1. Value Added Tax (VAT)/ Percentage Tax (PT) – VAT or PT shall be imposed on every public auction or negotiated sale.

2. Excise Tax – The imposition of excise tax on public auction or negotiated sale shall be held in abeyance pending verification that the importer’s selling price used as a basis by the Bureau of Customs in computing the excise tax is correctly determined.

Petitioners Asia International Auctioneers, Inc. (AIAI) and Subic Bay Motors Corporation are corporations organized under Philippine laws with principal place of business within the SSEZ. They are engaged in the importation of mainly secondhand or used motor vehicles and heavy transportation or construction equipment which they sell to the public through auction.

Petitioners filed a complaint before the RTC of Olongapo City, praying for the nullification of RMC No. 31-2003 for being unconstitutional and an ultra vires act. The complaint was docketed as Civil Case No. 275-0-2003 and raffled to Branch 74. Subsequently, petitioners filed their "First Amended Complaint to Declare Void, Ultra Vires, and Unconstitutional [RMC] No. 31-2003 dated June 3, 2003 and [RMC] No. 32-2003 dated June 5, 2003, with Application for a Writ of Temporary Restraining Order and Preliminary Injunction"6 to enjoin respondents from implementing the questioned RMCs while the case is pending. Particularly, they question paragraphs II(A)(1) and (3), II(B)(1.2), (1.4) and (1.5) of RMC No. 31-2003 and paragraphs II(A)(2) and (B) of RMC No. 32-2003. Before a responsive pleading was filed, petitioners filed their Second Amended Complaint7 to include Rev. Reg. Nos. 1-95, 12-97 and 16-99 dated January 24, 1995, August 7, 1997 and September 27, 1999, respectively, which allegedly contain some identical provisions as the questioned RMCs, but without changing the cause of action in their First Amended Complaint.

9

The Office of the Solicitor General (OSG) submitted its "Comment (In Opposition to the Application for Issuance of a Writ of Preliminary Injunction)."8 Respondents CIR, Regional Director and Revenue District Officer submitted their joint "Opposition (To The Prayer for Preliminary Injunction and/or Temporary Restraining Order by Petitioners)."9

Then Secretary of Finance Jose Isidro N. Camacho filed a Motion to Dismiss the case against him, alleging that he is not a party to the suit and petitioners have no cause of action against him.10 Respondents CIR, BIR Regional Director and BIR Revenue District Officer also filed their joint Motion to Dismiss on the grounds that "[t]he trial court has no JURISDICTION over the subject matter of the complaint" and "[a] condition precedent, that is, exhaustion of administrative remedies, has not been complied with."11 Petitioners filed their "Motion to Expunge from the Records the Respondents[’] Motion to Dismiss"12 for allegedly failing to comply with Section 4, Rule 15 of the Rules of Court. To this, the respondents filed their Opposition.13

Meantime, BIR Revenue District Officer Rey Asterio L. Tambis sent a 10-Day Preliminary Notice14 to the president of petitioner AIAI for unpaid VAT on auction sales conducted on June 6-8, 2003, as per RMC No. 32-2003.

On August 1, 2003, the trial court issued its order15 granting the application for a writ of preliminary injunction. The dispositive portion of the order states:

WHEREFORE, premises considered, petitioners’ application for the issuance of a writ of preliminary injunction is hereby GRANTED. Let the writ issue upon the filing and approval by the court of an injunction bond in the amount of Php 1 Million.

SO ORDERED.16

Consequently, respondents CIR, the BIR Regional Director of Region III, the BIR Revenue District Officer of the SSEZ, and the OSG filed with the CA a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the trial court from exercising JURISDICTION over the case.17

Meantime, BIR Regional Director Danilo A. Duncano sent a Preliminary Assessment Notice18 to the President of AIAI, informing him of the VAT due from the company for the auction sales conducted on June 6-8, 2003 as per RMC No. 32-2003, plus surcharge, interest and compromise penalty. Thereafter, a Formal Letter of Demand19 was sent to the President of petitioner AIAI by the Officer-in-Charge of the BIR Office of the Regional Director.

On March 31, 2004, the CA issued its assailed decision, the dispositive portion of which states:

WHEREFORE, the petition is GRANTED. Public respondent Regional Trial Court, Branch 74, of Olongapo City is hereby declared bereft of JURISDICTION to take cognizance of Civil Case No. 275-0-2003. Accordingly, said Civil Case No. 275-0-2003 is hereby DISMISSED and the assailed Order dated August 1, 2003, ANNULLED and SET ASIDE.

SO ORDERED.20

Hence, this Petition for Review on Certiorari21 with an application for a temporary restraining order and a writ of preliminary injunction to enjoin respondents "from pursuing sending letters of assessments to petitioners." Petitioners raise the following issues:

[a] [W]hether a petition for certiorari under Rule 65 of the New Rules is proper where the issue raised therein has not yet been resolved at the first instance by the Court where the original action was filed, and, necessarily, without first filing a motion for reconsideration;

[b] [W]hich Court- the regular courts of justice established under Batas Pambansa Blg. 129 or the Court of Tax Appeals – is the proper court of JURISDICTION to hear a case to declare Revenue Memorandum Circulars unconstitutional and against an existing law where the challenge does not involve the rate and figures of the imposed taxes;

[c] [D]ependent on an affirmative resolution of the second issue in favor of the regular courts of justice, whether the writ of preliminary injunction granted by the Court at Olongapo City was properly and legally issued.22

Petitioners contend that there were fatal procedural defects in respondents’ petition for certiorari with the CA. They point out that the CA resolved the issue of JURISDICTION without waiting for the lower court to first rule on the issue. Also, respondents did not file a motion for reconsideration of the trial court’s order granting the writ of preliminary injunction before filing the petition with the CA.

The arguments are unmeritorious.

10

JURISDICTION is defined as the power and authority of a court to hear, try and decide a case.23 The issue is so basic that it may be raised at any stage of the proceedings, even on appeal.24 In fact, courts may take cognizance of the issue even if not raised by the parties themselves.25 There is thus no reason to preclude the CA from ruling on this issue even if allegedly, the same has not yet been resolved by the trial court.

As to respondents’ failure to file a motion for reconsideration, we agree with the ruling of the CA, which states:

It is now settled that the filing of a motion for reconsideration is not always sine qua non before availing of the remedy of certiorari.26 Hence, the general rule of requiring a motion for reconsideration finds no application in a case where what is precisely being assailed is lack of JURISDICTION of the respondent court.27 And considering also the urgent necessity for resolving the issues raised herein, where further delay could prejudice the interests of the government,28 the haste with which the Solicitor General raised these issues before this Court becomes understandable.29

Now, to the main issue: does the trial court have JURISDICTION over the subject matter of this case?

Petitioners contend that JURISDICTION over the case at bar properly pertains to the regular courts as this is "an action to declare as unconstitutional, void and against the provisions of [R.A. No.] 7227" the RMCs issued by the CIR. They explain that they "do not challenge the rate, structure or figures of the imposed taxes, rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes." They claim that the challenge on the authority of the CIR to issue the RMCs does not fall within the JURISDICTION of the Court of Tax Appeals (CTA).

Petitioners’ arguments do not sway.

R.A. No. 1125, as amended, states:

Sec. 7. JURISDICTION.—The Court of Tax Appeals shall exercise exclusive appellate JURISDICTION to review by appeal, as herein provided—

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue; x x x (emphases supplied)

We have held that RMCs are considered administrative rulings which are issued from time to time by the CIR.30

Rodriguez v. Blaquera31 is in point. This case involves Commonwealth Act No. 466, as amended by R.A. No. 84, which imposed upon firearm holders the duty to pay an initial license fee of P15 and an annual fee of P10 for each firearm, with the exception that in case of "bona fide and active members of duly organized gun clubs and accredited by the Provost Marshal General," the annual fee is reduced to P5 for each firearm. Pursuant to this, the CIR issued General Circular No. V-148 which stated that "bona fide and active members of duly organized gun clubs and accredited by the Provost Marshal General… shall pay an initial fee of fifteen pesos and an annual fee of five pesos for each firearm held on license except caliber .22 revolver or rifle." The General Circular further provided that "[m]ere membership in the gun club does not, as a matter of right, entitle the member to the reduced rates prescribed by law. The licensee must be accredited by the Chief of Constabulary… [and] the firearm covered by the license of the member must be of the target model in order that he may be entitled to the reduced rates." Rodriguez, as manager of the Philippine Rifle and Pistol Association, Inc., a duly accredited gun club, in behalf of the members who have paid under protest the regular annual fee of P10, filed an action in the Court of First Instance (now RTC) of Manila for the nullification of the circular and the refund of P5. On the issue of JURISDICTION, plaintiff similarly contended that the action was not an appeal from a ruling of the CIR but merely an attempt to nullify General Circular No. V-148, hence, not within the JURISDICTION of the CTA. The Court, in finding this argument unmeritorious, explained:

We find no merit in this pretense. General Circular No. V-148 directs the officers charged with the collection of taxes and license fees to adhere strictly to the interpretation given by the defendant to the statutory provision above mentioned, as set forth in the circular. The same incorporates, therefore, a decision of the Collector of Internal Revenue (now Commissioner of Internal Revenue) on the manner of enforcement of said statute, the administration of which is entrusted by law to the Bureau of Internal Revenue. As such, it comes within the purview of [R.A.] No. 1125, section 7 of which provides that the [CTA] "shall exercise exclusive appellate JURISDICTION to review by appeal * * * decisions of the Collector of Internal Revenue in * * * matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue." Besides, it is plain from plaintiff’s original complaint that one of its main purposes was to secure an order for the refund of the sums collected in excess of the amount he claims to be due by way of annual fee from the gun club members, regardless of the class of firearms they have. Although the prayer for reimbursement has been eliminated from his amended complaint, it is only too obvious that the nullification of General Circular No. V-148 is merely a step preparatory to a claim for refund.

11

Similarly, in CIR v. Leal,32 pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue Code, as amended) which states that "[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of their gross income," the CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops based on their gross income and requiring all investigating units of the BIR to investigate and assess the lending investor’s tax due from them. The issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the pawnshop business is akin to that of "lending investors" as defined in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91 subjecting pawn tickets to documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of Josefina’s Pawnshop, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the same was denied by petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo, Rizal, seeking to prohibit petitioner CIR from implementing the revenue orders. The CIR, through the OSG, filed a motion to dismiss on the ground of lack of JURISDICTION. The RTC denied the motion. Petitioner filed a petition for certiorari and prohibition with the CA which dismissed the petition "for lack of basis." In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the trial court and ordering the dismissal of the case before the trial court, the Supreme Court held that "[t]he questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of pawnshops." They were issued pursuant to the CIR’s power under Section 24533 of the Tax Code "to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including ruling on the classification of articles of sales and similar purposes." The Court held that under R.A. No. 1125 (An Act Creating the Court of Tax Appeals), as amended, such rulings of the CIR are appealable to the CTA.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines." They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code,34 viz:

Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.-- The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original JURISDICTION of the Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate JURISDICTION of the Court of Tax Appeals. (emphases supplied)

Petitioners point out that the CA based its decision on Section 7 of R.A. No. 1125 that the CTA "shall exercise exclusive appellate JURISDICTION to review by appeal…" decisions of the CIR. They argue that in the instant case, there is no decision of the respondent CIR on any disputed assessment to speak of as what is being questioned is purely the authority of the CIR to impose and collect value-added and excise taxes.

Petitioners’ failure to ask the CIR for a reconsideration of the assailed revenue regulations and RMCs is another reason why the instant case should be dismissed. It is settled that the premature invocation of the court's intervention is fatal to one's cause of action. If a remedy within the administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his JURISDICTION, then such remedy must first be exhausted before the court’s power of judicial review can be sought.35 The party with an administrative remedy must not only initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court. 36

Petitioners’ insistence for this Court to rule on the merits of the case would only prove futile. Having declared the court a quo without JURISDICTION over the subject matter of the instant case, any further disquisition would be obiter dictum.

IN VIEW WHEREOF, the petition is DENIED.

SO ORDERED.

Re: Allocation of JURISDICTION

MINERVA GOMEZ-CASTILLO, petitioner, vs. COMMISSION ON ELECTIONS and STRIKE B. REVILLA, respondents.

D E C I S I O N

BERSAMIN, J.:

12

Petitioner Minerva Gomez-Castillo (Castillo) hereby seeks to nullify the orders dated January 30, 2009 and March 11, 20091 issued in EAC No. A-01-2009 by the Commission on Elections (COMELEC).

Antecedents

Castillo and respondent Strike P. Revilla ran for Municipal Mayor of Bacoor, Cavite during the May 14, 2007 local elections. After the Municipal Board of Canvassers proclaimed Revilla as the elected Municipal Mayor of Bacoor, Cavite, Castillo filed an Election Protest Ad Cautelam2 in the Regional Trial Court (RTC) in Bacoor, Cavite, which was eventually raffled to Branch 19.

Through his Answer, Revilla sought the dismissal of the election protest, alleging that it was filed in the wrong Branch of the RTC. He pointed out that Supreme Court Administrative Order (SCAO) No. 54-2007 designated Branch 22 of the RTC in Imus, Cavite and Branch 88 of the RTC in Cavite City to hear, try and decide election contests involving municipal officials in Cavite; and that contrary to SCAO No. 54-2007, Castillo filed his protest in the RTC in Bacoor, Cavite, which was not the proper court.

On November 21, 2008, Branch 19 dismissed Castillo’s election protest for being violative of SCAO No. 54-2007.

On December 23, 2008, Castillo presented a notice of appeal.3 Thereupon, the RTC ordered that the complete records of the protest be forwarded to the Election Contests Adjudication Department (ECAD) of the COMELEC.41avvphi1

The First Division of the COMELEC dismissed the appeal for being brought beyond the five-day reglementary period, noting that although Castillo had received the November 21, 2008 order of the RTC on December 15 , 2008, she filed her notice of appeal on December 23, 2008, a day too late to appeal, to wit:

Pursuant to Section 3, Rule 22 of the COMELEC Rules of Procedure which requires the appellant to file her notice of appeal "within five (5) days after promulgation of the decision of the court xxx" and considering further that jurisprudence holds that perfection of an appeal in the manner and within the period laid down by law is not only mandatory but JURISDICTIONAL, this Commission, First Division, RESOLVES to DISMISS the instant appeal for appellant's failure to file her Notice of Appeal within the five (5) day reglementary period.

SO ORDERED.5

Castillo moved for the reconsideration of the dismissal of her appeal, but the COMELEC denied the motion because she did not pay the motion fees required under Sec. 7(f), Rule 40 of the COMELEC Rules of Procedure, as amended by COMELEC Resolution No. 02-0130, viz:

The "Motion for Reconsideration" filed by protestant-appellant Minerva G. Castillo, thru registered mail on 13 February 2009 and received by this Commission on 4 March 2009, seeking reconsideration of the Commission's (First Division) Order dated 30 January 2009, is hereby DENIED for failure of the movant to pay the necessary motion fees under Sec. 7(f), Rule 40 of the Comelec Rules of Procedure6 as amended by Comelec Resolution no. 02-0130.71avvphi1

Castillo has brought the present recourse, contending that the COMELEC’s orders dismissing her appeal and denying her motion for reconsideration were issued with grave abuse of discretion amounting to lack or excess of JURISDICTION.

Parties’ Arguments

Castillo insists that her notice of appeal was seasonably filed; otherwise, the RTC would not have given due course to his appeal; that Section 3, Rule 22 of the COMELEC Rules of Procedure, cited in the assailed order dated January 30, 2009, did not apply to her case, because Section 2 of Rule I of the COMELEC Rules of Procedure provides that:

Sec. 2. Applicability.- These rules, except Part VI, shall apply to all actions and proceedings brought before the Commission. Part VI shall apply to election contests and Quo Warranto cases cognizable by courts of general JURISDICTION.

that the COMELEC Rules of Procedure applied only to actions and proceedings brought before the COMELEC, not to actions or proceedings originating in courts of general JURISDICTION; that even assuming that the appeal was belatedly filed, the rules on election contests should be liberally construed to the end that mere technical objections would not defeat the will of the people in the choice of public officers; that the Court relaxed on numerous occasions the application of the rules in order to give due course to belated appeals upon strong and compelling reasons; that an electoral contest like hers was imbued with public interest, because it involved the paramount need to clarify the real choice of the electorate; that Section 4 of Rule I of the COMELEC Rules of Procedure even allows the COMELEC to suspend its own rules of procedure in order to obtain a speedy disposition of all matters pending before the COMELEC; and that the COMELEC should not have dismissed her motion for reconsideration for her mere failure to pay the corresponding filing fee, but should have considered the soundness of her argument to the effect that SCAO No. 54-2007 continued to

13

vest JURISDICTION to try and decide election contest involving elective municipal officials in the RTC as a whole, rendering the designation of the RTC branches to handle election protests akin to a designation of venue.

Castillo further insists that Section 12 of Rule 2 of the COMELEC Rules of Procedure provides that assignment of cases to the specially designated courts should be done exclusively by raffle conducted by the executive judge or by the judges designated by the Supreme Court; and that her protest was thus duly raffled to the RTC in Bacoor, Cavite, considering that SCAO 54-2007 should be construed as a permissive rule that cannot supersede the general rule that JURISDICTION over election contests is vested in the RTC.

In his comment,8 Revilla submits that the COMELEC correctly dismissed Castillo’s appeal for being filed beyond the five-day reglementary period prescribed in Section 3 of Rule 22 of the COMELEC Rules of Procedure, thus:

Section 3. Notice of Appeal. - Within five (5) days after promulgation of the decision of the court, the aggrieved party may filed with said court a notice of appeal, and serve a copy thereof upon the attorney of record of the adverse party.

that A.M. No. 07-4-15-SC, otherwise known as The Rules of Procedure in Election Contests Involving Elective Municipal and Barangay Officials, clearly and categorically directed:

Section 8. Appeal. - An aggrieved party may appeal the decision to the commission on Elections, within five days after promulgation, by filing a notice of appeal with the court that rendered the decision, with copy served on the adverse counsel or party if not represented by counsel.

that the period for filing an appeal is not a mere technicality of law or procedure and the right to appeal is merely a statutory privilege that may be exercised only in the manner prescribed by the law; that the notice of appeal, even on the assumption that it was filed on time, still remained futile due to the petitioner’s failure to pay the corresponding fee for the motion for reconsideration; that the failure to pay the filing fee rendered the motion for reconsideration a mere scrap of paper, because it prevented the COMELEC from acquiring JURISDICTION over the protest; and that the COMELEC could not be faulted for applying its procedural rules to achieve a just and expeditious determination of every proceeding brought before it.

Issues

Does Section 13 of Rule 2 of A.M. No. 07-4-15-SC designate the RTC Branch that has JURISDICTION over an election contest, or does it merely designate the proper venue for filing?

In case the RTC was incorrect, is the error enough to warrant the reversal of its order of dismissal despite its having attained finality?

Ruling

The petition has no merit.

AError of Petitioner in filing the protest in RTC in Bacoor, not JURISDICTIONal

It is well-settled that JURISDICTION is conferred by law. As such, JURISDICTION cannot be fixed by the will of the parties; nor be acquired through waiver nor enlarged by the omission of the parties; nor conferred by any acquiescence of the court. The allocation of JURISDICTION is vested in Congress, and cannot be delegated to another office or agency of the Government.

The Rules of Court does not define JURISDICTIONal boundaries of the courts. In promulgating the Rules of Court, the Supreme Court is circumscribed by the zone properly denominated as the promulgation of rules concerning pleading, practice, and procedure in all courts;9 consequently, the Rules of Court can only determine the means, ways or manner in which said JURISDICTION, as fixed by the Constitution and acts of Congress, shall be exercised. The Rules of Court yields to the substantive law in determining JURISDICTION.10

The JURISDICTION over election contests involving elective municipal officials has been vested in the RTC by Section 251, Batas Pambansa Blg. 881 (Omnibus Election Code).11 On the other hand, A.M. No. 07-4-15-SC, by specifying the proper venue where such cases may be filed and heard, only spelled out the manner by which an RTC with JURISDICTION exercises such JURISDICTION. Like other rules on venue, A.M. No. 07-4-15-SC was designed to ensure a just and orderly administration of justice,12 and is permissive, because it was enacted to ensure the exclusive and speedy disposition of election protests and petitions for quo warranto involving elective municipal officials.13

Castillo’s filing her protest in the RTC in Bacoor, Cavite amounted only to a wrong choice of venue. Hence, the dismissal of the protest by Branch 19 constituted plain error, considering that her wrong choice did not affect the JURISDICTION of the RTC. What Branch 19 should have done under the circumstances was to transfer the protest to Branch 22 of the RTC in Imus, Cavite, which was the proper

14

venue. Such transfer was proper, whether she as the protestant sought it or not, given that the determination of the will of the electorate of Bacoor, Cavite according to the process set forth by law was of the highest concern of our institutions, particularly of the courts.

BCastillo’s tardy appeal should be dismissed

Section 8 of A.M. No. 07-4-15-SC provides that:

Section 8. Appeal. - An aggrieved party may appeal the decision to the Commission on Elections within five days after promulgation by filing a notice of appeal with the court that rendered the decision with copy served on the adverse counsel or party if not represented by counsel.

Although Castillo had received the November 21, 2008 order of the RTC on December 15, 2008, she filed her notice of appeal only on December 23, 2008, or eight days after her receipt of the decision. Her appeal was properly dismissed for being too late under the aforequoted rule of the COMELEC.

Castillo now insists that her appeal should not be dismissed, because she claims that the five-day reglementary period was a mere technicality, implying that such period was but a trivial guideline to be ignored or brushed aside at will.

Castillo’s insistence is unacceptable. The period of appeal and the perfection of appeal are not mere technicalities to be so lightly regarded, for they are essential to the finality of judgments, a notion underlying the

stability of our judicial system.14 A greater reason to adhere to this notion exists herein, for the short period of five days as the period to appeal recognizes the essentiality of time in election protests, in order that the will of the electorate is ascertained as soon as possible so that the winning candidate is not deprived of the right to assume office, and so that any doubt that can cloud the incumbency of the truly deserving winning candidate is quickly removed.

Contrary to Castillo’s posture, we cannot also presume the timeliness of her appeal from the fact that the RTC gave due course to her appeal by its elevating the protest to the COMELEC. The presumption of timeliness would not arise if her appeal was actually tardy.

It is not trite to observe, finally, that Castillo’s tardy appeal resulted in the finality of the RTC’s dismissal even before January 30, 2002. This result provides an additional reason to warrant the assailed actions of the COMELEC in dismissing her appeal. Accordingly, the Court finds that the COMELEC’s assailed actions were appropriate and lawful, not tainted by either arbitrariness or whimsicality,

WHEREFORE, the petition is dismissed for lack of merit.

SO ORDERED.

DEPARTMENT of BUDGET and MANAGEMENT PROCUREMENT SERVICE (DBM-PS) and the Inter-Agency Bids and Awards Committee (IABAC), petitioners, vs. KOLONWEL TRADING, respondent.

G.R. No. 175616. June 8, 2007.*VIBAL PUBLISHING HOUSE, INC., LG & M CORPORATION and SD PUBLICATIONS, INC., petitioners, vs. KOLONWEL TRADING, respondent.

G.R. No. 175659. June 8, 2007.*DEPARTMENT OF EDUCATION, petitioner, vs. KOLONWEL TRADING, respondent.

D E C I S I O N

GARCIA, J.:

Before the Court are these consolidated three (3) petitions for review under Rule 45 of the Rules of Court, with a prayer for a temporary restraining order, to nullify and set aside the Order1 dated December 4, 2006 of the Manila Regional Trial Court (RTC), Branch 18, in SP Civil Case No. 06-116010, a special civil action for certiorari and prohibition thereat commenced by herein respondent Kolonwel Trading (Kolonwel for short) against the Department of Budget and Management Procurement Service (DBM-PS), et al.

At the core of the controversy are the bidding and the eventual contract awards for the supply and delivery of some 17.5 million copies of Makabayan (social studies) textbooks and teachers manuals, a project of the Department of Education (DepEd).

15

The factual antecedents:

In the middle of 2005, the DepEd requested the services of the DBM-PS to undertake the aforementioned procurement project which is to be jointly funded by the World Bank (WB), through the Second Social Expenditure Management Program (SEMP2) of the Philippines (RP) – International Bank for Reconstruction and Development (IBRD) Loan Agreement No. 7118-PH2 (Loan No. 7118-PH, hereinafter) dated September 12, 2002; and the Asian Development Bank (ADB), through SEDIP Loan No. 1654-PHI. Earlier, the Executive Director of the Government Procurement Policy Board (GPPB), in reply to a DepEd query, stated that "procurement[s] for MAKABAYAN …textbooks where funds therefore (sic) are sourced from World Bank Loan shall be governed by the applicable procurement guidelines of the foreign lending institution. The 2005 Call for Submission of Textbooks and Teacher’s Manuals shall be viewed vis-à-vis relevant World Bank guidelines."3

On October 27, 2005, the DBM-PS Inter-Agency Bids and Awards Committee (IABAC) called for a bidding for the supply of the Makabayan textbooks and manuals, divided into three (3) lots, to wit: Lot 1 for Sibika Grades 1-3; Lot 2 for HeKaSi Grades 4-6 and Lot 3 for Araling Panlipunan Years I-IV. Of the entities, foreign and local, which responded and procured the Bidding Documents,4 only eleven (11) bidders submitted, either as principal or in joint venture arrangement, proposals for the different lots. Among them were Watana Phanit Printing & Publishing Co., Ltd., of Thailand (Watana, for short), petitioner Vibal Publishing House, Inc., (Vibal, hereinafter), Daewoo International Corporation of South Korea (Daewoo, for brevity) and respondent Kolonwel. Kolonwel’s tender appeared to cover all three (3) lots.5

Following the bid and the book content/body evaluation process, the IABAC, via Resolution (Res.) No. 001-20066 dated March 9, 2006, resolved "to recommend to the [WB] and the [ADB] failure of bids for all lots in view of the abovementioned disqualifications, non-compliance and reservations of [DepEd]." Issues of "Conflict of interest" with respect to Watana and Vibal, "failure in cover stock testing" for Kolonwel and DepEd’s "reservation" were among the disqualifying reasons stated in the resolution.

On March 15, 2006, the IABAC submitted to WB for its review and information Res. No. 001-2006. Appended to the covering letter was a document entitled "Bid Evaluation Report and Recommendation for Award of Contract."7

The following events, as recited in the assailed Manila RTC order and as borne out by the records, then transpired:

1. In a letter8 dated April 24, 2006 to the DepEd and the DBM-PS IABAC Chairman, the WB, through its Regional Senior Economist, Ms. Rekha Menon, disagreed, for stated reasons, with the IABAC’s finding of conflict of interest on the part of Vibal and Watana and the rejection of their bids. Ms. Menon, however, upheld the disqualification of all the other bidders. She thus asked the IABAC to review its evaluation and to provide the WB with the revised Bid Evaluation Report (BER), taking into account the December 31, 2006 RP-IBRD Loan closing date.

2. On May 11, 2006, the IABAC informed Kolonwel of its or its bid’s failure to post qualify and of the grounds for the failure.9

In its reply-letter of May 18, 2006,10 Kolonwel raised several issues and requested that its disqualification be reconsidered and set aside. In reaction, IABAC apprised WB of Kolonwel’s concerns stated in its letter-reply.

3) Subsequently, the IABAC, agreeing with WB’s position articulated in Ms. Menon, issued Res. No. 001-2006-A effectively recommending to WB the contract award to Vibal of Sibika 1 & 3 and HekaSi 5; to Watana of Sibika 2 and HeKaSi 4 & 5 and to Daewoo of Sibika 3. Upon review, WB offered "no objection" to the recommended award.11

4) The issuance of notices of award and the execution on September 12, 2006 of the corresponding Purchaser-Supplier contracts followed.12

5. On June 23, 2006, the DBM-PS IABAC chairman informed Kolonwel of the denial of its request for reconsideration and of the WB’s concurrence with the denial.13 The IABAC denied, on September 8, 2006, a second request for reconsideration of Kolonwel14 after WB found the reasons therefor, as detailed in PS IABAC Res. No. 001-2006-B15 dated July 18, 2006, unmeritorious, particularly on the aspect of cover stock testing.

Such was the state of things when on, October 12, 2006, Kolonwel filed with the RTC of Manila a special civil action for certiorari and prohibition with a prayer for a temporary restraining order (TRO) and/or writ of preliminary injunction. Docketed as SP Civil Case No. 06-116010, and raffled to Branch 18 of the court,16 the petition sought to nullify IABAC Res. Nos. 001-2006 and 001-2006-A and to set aside the contract awards in favor of Vibal and Watana. In support of its TRO application, Kolonwel alleged, among other things, that the supply-awardees were rushing with the implementation of the void supply contracts to beat the loan closing-date deadline.

A week after, the Manila RTC scheduled - and eventually conducted - a summary hearing on the TRO application. In an order17 of October 31, 2006, as amended in another order18 dated November 20, 2006, the court granted a 20-day TRO enjoining the IABAC, et

16

al, starting November 6, 2006, from proceeding with the subject September 12, 2006 purchase- supply contracts. In the original order, the court set the preliminary conference and hearing for the applied preliminary injunction on November 7, and 8, 2006, respectively.

In the meantime, Vibal filed an urgent motion to dismiss19 Kolonwel’s petition on several grounds, among them want of JURISDICTION and lack of cause of action, inter alia alleging that the latter had pursued judicial relief without first complying with the protest procedure prescribed by Republic Act (R.A.) No. 9184, otherwise known as the "Government Procurement Reform Act." The DepEd later followed with its own motion to dismiss, partly based on the same protest provision. As records show, the trial court did not conduct a hearing on either dismissal motions, albeit it heard the parties on their opposing claims respecting the propriety of issuing a writ of preliminary injunction.

On December 4, 2006, the Manila RTC issued its assailed Order 20 finding for Kolonwel, as petitioner a quo, disposing as follows:

WHEREFORE, the court grants the petition for certiorari and prohibition. The IABAC Resolution No. 001-2006-A dated May 30, 2006 is annulled and set aside. IABAC Resolution No. 001-2006 is declared validly and regularly issued in the absence of a showing of grave abuse of discretion or excess of JURISDICTION. All subsequent actions of the respondents resulting from the issuance of IABAC Resolution No. 001-2006-A are consequently nullified and set aside. This court grants a final injunction pursuant to Sec. 9 of Rule 58 of the Rules of Court as amended, restraining respondents Department of Education and Culture (sic), [DBM-PS], [IABAC], Vibal Publishing House, Inc., LG & M Corporation and SD Publications from the commission or continuance of acts, contracts or transactions proceeding from the issuance of IABAC Resolution No. 001-2006-A.

SO ORDERED. (Emphasis and words in brackets supplied)

Hence, these three (3) petitions which the Court, per its Resolution21 of January 16, 2007, ordered consolidated. Earlier, the Court issued, in G. R. No. 175616, a TRO22 enjoining the presiding judge23 of the RTC of Manila, Branch 18, from proceeding with SP Civil Case No. 06-116010 or implementing its assailed order.

Petitioners urge the annulment of the assailed RTC Order dated December 4, 2006, on JURISDICTIONal ground, among others. It is their parallel posture that the Manila RTC erred in assuming JURISDICTION over the case despite respondent Kolonwel’s failure to observe the protest mechanism provided under Sec. 55 in relation to Secs. 57 and 58 of R.A. No. 9184, respectively reading as follows:

Sec. 55. Protest on Decision of the BAC.- Decisions of the BAC [Bids and Awards Committee] in all stages of procurement may be protested to the head of the procuring entity…. Decisions of the BAC may be protested by filing a verified position paper and paying a non-refundable protest fee. The amount of the protest fee and the periods during which the protest may be filed and resolved shall be specific in the IRR.

Sec. 57. Non-interruption of the Bidding Process. In no case shall any process taken from any decision treated in this Article stay or delay the bidding process. Protests must first be resolved before any award is made.

Sec. 58. Report to Regular Courts; Certiorari.- Court action may be resorted to only after the protests contemplated in this Article shall have been completed. Cases that are filed in violation of the process specified in this article shall be dismissed for lack of JURISDICTION. The [RTC] shall have JURISDICTION over final decisions of the head of the procuring entity. (Emphasis and words in bracket added.)

As a counterpoint, the respondent draws attention to its having twice asked, and having been twice spurned by, the IABAC to reconsider its disqualification, obviously agreeing with the Manila RTC that the judicial window was already opened under the exhaustion of available administrative remedies principle. In the same breath, however, the respondent would argue, again following the RTC’s line, that it was prevented from filing a protest inasmuch as the government had not issued the Implementing Rules and Regulations (IRR) of R.A. No. 9184 to render the protest mechanism of the law operative for foreign-funded projects.

The Court is unable to lend concurrence to the trial court’s and respondent’s positions on the interplay of the protest and JURISDICTIONal issues. As may be noted, the aforequoted Section 55 of R.A. No. 9184 sets three (3) requirements that must be met by the party desiring to protest the decision of the Bids and Awards Committee (BAC). These are: 1) the protest must be in writing, in the form of a verified position paper; 2) the protest must be submitted to the head of the procuring entity; and 3) the payment of a non-refundable protest fee. The JURISDICTIONal caveat that authorizes courts to assume or, inversely, precludes courts from assuming, JURISDICTION over suits assailing the BAC’s decisions is in turn found in the succeeding Section 58 which provides that the courts would have JURISDICTION over such suits only if the protest procedure has already been completed.

Respondent’s letters of May 18, 200624 and June 28, 200625 in which it requested reconsideration of its disqualification cannot plausibly be given the status of a protest in the context of the aforequoted provisions of R.A. No. 9184. For one, neither of the letter-request was addressed to the head of the procuring entity, in this case the DepEd Secretary or the head of the DBM Procurement

17

Service, as required by law. For another, the same letters were unverified. And not to be overlooked of course is the fact that the third protest-completing requirement, i.e., payment of protest fee, was not complied with.

Given the above perspective, it cannot really be said that the respondent availed itself of the protest procedure prescribed under Section 55 of R.A. No. 9184 before going to the RTC of Manila via a petition for certiorari. Stated a bit differently, respondent sought judicial intervention even before duly completing the protest process. Hence, its filing of SP Civil Case No. 06-116010 was precipitate. Or, as the law itself would put it, cases that are filed in violation of the protest process "shall be dismissed for lack of JURISDICTION."

Considering that the respondent’s petition in RTC Manila was actually filed in violation of the protest process set forth in Section 55 of R.A. No. 9184, that court could not have lawfully acquired JURISDICTION over the subject matter of this case. In fact, Section 58, supra, of R.A. No. 9184 emphatically states that cases filed in violation of the protest process therein provided "shall be dismissed for lack of JURISDICTION."

It is to be stressed that the protest mechanism adverted to is a built-in administrative remedy embodied in the law itself. It was not prescribed by an administrative agency tasked with implementing a statute through the medium of interpretative circulars or bulletins. Ignoring thus this administrative remedy would be to defy the law itself.

It will not avail the respondent any to argue that the absence of an IRR to make the protest mechanism under R.A. No. 9184 become operative for foreign-funded projects was what prevented it from complying with the protest procedure. As the last sentence of the afore-quoted Section 55 of R.A. No. 9184 is couched, the specific office of an IRR for foreign-funded project, vis-à-vis the matter of protest, is limited to fixing "the amount of the protest fee and the periods during which the protest may be filed and resolved." Surely, the absence of provisions on protest fee and reglementary period does not signify the deferment of the implementation of the protest mechanism as a condition sine qua non to resort to judicial relief. As applied to the present case, the respondent had to file a protest and pursue it until its completion before going to court. There was hardly any need to wait for the specific filing period to be prescribed by the IRR because the protest, as a matter of necessity, has to be lodged before court action.

Neither is it necessary that the amount of protest fee be prescribed first. Respondent could very well have proceeded with its protest without paying the required protest fee, remitting the proper amount once the appropriate IRR fixed the protest fee.

There may perhaps be room for relaxing the prescription on protest if a bona fide attempt to comply with legal requirements had been made. But the fact alone that the respondent did not even submit a verified position paper by way of protest argues against such plausibility. Significantly, none of the reconsideration-seeking letters of the respondent advert to the protest procedure under Section 55 of R.A. No. 9184, even by way of noting that it was at a loss as to the inoperativeness of such provision in the light of the absence of an IRR.

In its petition before the Manila RTC, the respondent veritably admitted to not complying with the protest requirement, albeit with the lame excuse that it was effectively barred from complying with the required administrative remedies of protest. Neither did the respondent then argue that it was not able to comply due to the absence of an IRR for foreign- funded projects.

At any rate, there is, in fact a set of implementing rules and regulations, denominated as "IRR-A," issued on July 11, 2003 by the GPPB and the Joint Congressional Oversight Committee, Section 55.126 of which provides that prior to a resort to protest, the aggrieved party must first file a motion for reconsideration of the decision of the BAC. It is only after the BAC itself denies reconsideration that the protest, accompanied by a fixed protest fee, shall be filed within the period defined in the IRR.

It may be that IRR-A specifically defines its coverage to "all fully domestically-funded procurement activities," it being also provided that "foreign-funded procurement activities shall be the subject of a subsequent issuance." 27 However, a similarly drawn argument involving IRR-A was set aside in Abaya v. Ebdane,28 a case involving Loan Agreement No. PH-P204 entered into by and between the RP and the Japan Bank for International Cooperation (JBIC) for the implementation DPWH Contract Package No. I (CP I). Wrote the Court in Abaya:

Admittedly, IRR-A covers only fully domestically-funded procurement activities from procurement planning up to contract implementation and that it is expressly stated that IRR-B for foreign-funded procurement activities shall be subject of a subsequent issuance. Nonetheless, there is no reason why the policy behind Section 77 of IRR-A cannot be applied to foreign-funded procurement projects like the CP I project. Stated differently, the policy on the prospective or non-retroactive application of RA 9184 with respect to domestically-funded procurement projects cannot be any different with respect to foreign-funded procurement projects …. It would be incongruous, even absurd, to provide for the prospective application of RA 9184 with respect to domestically-funded procurement projects and, on the other hand, as urged by the petitioners, apply RA 9184 retroactively with respect to foreign-funded procurement projects. To be sure, the lawmakers could not have intended such an absurdity.

As in Abaya, there really should be no reason why the policy behind Section 55.l of IRR-A on the procedure for protest cannot be applied, even analogously, to foreign-funded procurement projects, such as those in this case. Indeed, there is no discernable justification why a different procedure should obtain with respect to foreign-funded procurement undertakings as opposed to a

18

locally funded project, and certainly there is no concrete foundation in R.A. 9184 to indicate that Congress intended such a variance in the protest procedure.

The Manila RTC, in granting the petition for certiorari and prohibition, stated the observation that there was "substantial compliance of the requirement of protest."29 Yet, it is not even clear that respondent Kolonwel, in its dealings with the IABAC, particularly in seeking reconsideration of its decision, was even aware of the protest requirements. What is beyond dispute, however, is that courts are precluded by express legislative command from entertaining protests from decisions of the BAC. What Congress contextually intended under the premises was that not only would there be a distinct administrative grievance mechanism to be observed in assailing decisions of the BAC, but that courts would be without JURISDICTION over actions impugning decisions of the BACs, unless, in the meantime, the protest procedure mandated under Section 55 of R.A. No. 9184 is brought to its logical completion.

It is Congress by law, not the courts by discretion, which defines the court’s JURISDICTION not otherwise conferred by the Constitution. Through the same medium, Congress also draws the parameters in the exercise of the functions of administrative agencies. Section 55 of R.A. No. 9184 could not be any clearer when it mandates the manner of protesting the decision of bids and awards committees. Similarly, there can be no quibbling that, under Section 58 of the same law, courts do not have JURISDICTION over decisions of the BACs unless the appropriate protest has been made and completed. The absence of the IRR does not detract from the reality that R.A. No. 9184 requires a protest to be filed under the form therein prescribed.

Given the above perspective, the Manila RTC had no JURISDICTION over respondent Kolonwel’s petition for certiorari and prohibition. Accordingly, it ought to have granted herein petitioners’ motion to dismiss, but it did not. Worse, the court even added another layer to its grievous error when it granted the respondent’s basic petition for certiorari and prohibition itself.

Compounding the Manila RTC’s error is its having proceeded with SP Civil Case No. 06-116010 even without acquiring JURISDICTION over Watana. As may be recalled, the respondent, in its petition before the RTC, impleaded Watana as one of the defendants, the latter having been awarded by the IABAC Sibika 2 and HeKaSi 4 &5. The records, however, show that Watana was not served with summons. The Sheriff’s Return dated October 18, 2006, noted that summons was not served on Watana and another defendant at "No. 1281 G. Araneta Avenue cor. Ma. Clara Street, Quezon City, on the ground that said companies were not holding office thereat according to Mr. Marvin V. Catacutan."

There can be no dispute that Watana is an indispensable party to the respondent’s petition in SP Civil Case No. 06-116010, Kolonwel having therein assailed and sought to nullify the contract-award made in its and Vibal’s favor. Indispensable parties are those with such interest in the controversy that a final decree would necessarily affect their rights so that courts cannot proceed without their presence.30 All of them must be included in a suit for an action to prosper or for a final determination to be had.31 Watana, to repeat, was never served with summons; neither did it participate in the proceedings below. Plainly, then, the Manila RTC did not acquire JURISDICTION over one of the indispensable parties, the joinder of whom is compulsory.32

With the foregoing disquisitions, the Court finds it unnecessary to even dwell on the other points raised in this consolidated cases. In the light, however, of the Manila RTC’s holding that the WB Guidelines on Procurement under IBRD Loans do not in any way provided superiority over local laws on the matter,33 the Court wishes to state the following observation:

As may be recalled, all interested bidders were put on notice that the DepEd’s procurement project was to be funded from the proceeds of the RP-IBRD Loan No. 7118-PH,34 Section 1, Schedule 4 of which stipulates that "Goods … shall be procured in accordance with the provisions of Section 135 of the ‘Guidelines for Procurement under IBRD Loans.’" Accordingly, the IABAC conducted the bidding for the supply of textbooks and manuals based on the WB Guidelines, particularly the provisions on International Competitive Bidding (ICB). Section 4 of R.A. No. 9184 expressly recognized this particular process, thus:

Sec. 4. Scope and application. - This Act shall apply to the Procurement of … Goods and Consulting Services, regardless of source of funds, whether local or foreign by all branches and instrumentalities of government …. Any treaty or international or executive agreement affecting the subject matter of this Act to which the Philippine government is a signatory shall be observed. (Emphasis added.)

The question as to whether or not foreign loan agreements with international financial institutions, such as Loan No. 7118-PH, partake of an executive or international agreement within the purview of the Section 4 of R.A. No. 9184, has been answered by the Court in the affirmative in Abaya, supra. Significantly, Abaya declared that the RP-JBIC loan agreement was to be of governing application over the CP I project and that the JBIC Procurement Guidelines, as stipulated in the loan agreement, shall primarily govern the procurement of goods necessary to implement the main project.

Under the fundamental international law principle of pacta sunt servanda,36 which is in fact embodied in the afore-quoted Section 4 of R.A. No. 9184, the RP, as borrower, bound itself to perform in good faith its duties and obligation under Loan No. 7118- PH. Applying this postulate in the concrete to this case, the IABAC was legally obliged to comply with, or accord primacy to, the WB Guidelines on the conduct and implementation of the bidding/procurement process in question.

19

WHEREFORE, the instant consolidated petitions are GRANTED and the assailed Order dated December 4, 2006 of the Regional Trial Court of Manila in its SP Case No. 06-116010 is NULLIFIED and SET ASIDE.

No cost.

SO ORDERED.

THE COMMISSION ON ELECTIONS, petitioner, vs. HON. THELMA CANLAS TRINIDAD-PE AGUIRRE, Presiding Judge, Regional Trial Court, Br. 129, Caloocan City, and MA. LEONISA GENOVIA, respondents.D E C I S I O N

CARPIO MORALES, J.:

The present petition for Certiorari under Rule 64 of the Rules of Court involves JURISDICTION over an election offense punishable under the Omnibus Election Code by "imprisonment of not less than one year but not more than six years."

On the directive of the Commission on Elections (COMELEC) En Banc,1 its Law Department filed an Information against respondent Ma. Leonisa Genovia, for violation of Section 261 (z) (3) of the Omnibus Election Code which penalizes

"Any person who votes in substitution for another whether with or without the latter’s knowledge and/or consent." (Underscoring supplied)

The accusatory portion of the Information, dated July 26, 2005, which was filed before the Regional Trial Court (RTC) of Caloocan City where it was docketed as Criminal Case No. C-73774, reads:

That on or about July 15, 2002 Synchronized Barangay and Sangguniang Kabataan (SK) Elections, in the City of Caloocan, Metro Manila, Philippines, and within the JURISDICTION of this Honorable Court, the above-named accused, did, then and there, willfully and unlawfully, cast her vote in substitution of another person by misrepresenting herself to be Emely Genovia and voted in substitution of said Emely Genovia, a registered voter in Precinct No. 779-A, Barangay 60, Caloocan City.2

Under Section 264 of the Omnibus Election Code, violation of any election offense is punishable as follows:

SECTION 264. Penalties. – Any person found guilty of any election offense under this Code shall be punished with imprisonment of not less than one year but not more than six years and shall not be subject to probation. In addition, the guilty party shall be sentenced to suffer disqualification to hold public office and deprivation of the right of suffrage. If he is a foreigner, he shall be sentenced to deportation which shall be enforced after the prison term has been served. Any political party found guilty shall be sentenced to pay a fine of not less than ten thousand pesos, which shall be imposed upon such party after criminal action has been instituted in which their corresponding officials have been found guilty. x x x (Italics in the original; emphasis and underscoring supplied)

By Order of September 21, 2005,3 Branch 129 of the Caloocan RTC dismissed the case for lack of JURISDICTION, it citing Section 32(2) of Batas Pambansa (B.P.) Blg. 129 (The Judiciary Reorganization Act of 1980) reading:

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

x x x x

(2) Exclusive original JURISDICTION over all offenses punishable with imprisonment not exceeding six (6) years irrespective of the amount of fine regardless of other imposable accessory penalties, including the civil liability arising from such offenses or predicated thereon, irrespective of kind, nature, or value amount thereof: Provided, however, That in offenses involving damage to property through criminal negligence, they shall have exclusive original JURISDICTION thereof. (Italics in the original; emphasis and underscoring supplied)

The COMELEC moved to reconsider the trial court’s dismissal order,4 inviting attention to Section 268 of the Omnibus Election Code which reads:

SECTION 268. JURISDICTION of courts. – The regional trial court shall have the exclusive original JURISDICTION to try and decide any criminal action or proceedings for violation of this Code, except those relating to the offense of failure to register or failure to vote which shall be under the JURISDICTION of the metropolitan or municipal trial courts. From the decision of the courts, appeal will lie as in other criminal cases. (Underscoring supplied)

20

By a one sentence Order of November 15, 2005,5 the trial court denied the COMELEC’s motion for "lack of merit."

Hence, the present petition for certiorari under Rule 64,6 the COMELEC contending that the dismissal order is contrary to Section 268 of the Omnibus Election Code.

The COMELEC argues that under the above-quoted provision of Section 268 of the Omnibus Election Code, all criminal cases for violation of the Code, except those relating to failure to register or failure to vote which shall be under the exclusive JURISDICTION of inferior courts, fall under the exclusive JURISDICTION of regional trial courts.7

The petition is meritorious.

From the above-quoted provision of Section 32 of BP Blg. 129, JURISDICTION of first-level courts – the metropolitan trial courts, municipal trial courts and municipal circuit trial courts – does not cover criminal cases which, by specific provision of law, fall within the exclusive JURISDICTION of regional trial courts (and of the Sandiganbayan).8

As correctly argued by the COMELEC, Section 268 of the Omnibus Election Code specifically provides, regional trial courts have exclusive JURISDICTION to try and decide any criminal action or proceedings for violation of the Code "except those relating to the offense of failure to register or failure to vote."

It bears emphasis that Congress has the plenary power to define, prescribe and apportion the JURISDICTIONs of various courts. Hence, it may, by law, provide that a certain class of cases should be exclusively heard and determined by a specific court. Section 268 of Omnibus Election Code is one such and must thus be construed as an exception to BP Blg. 129, the general law on JURISDICTION of courts.9

In fine, while BP Blg. 129 lodges in municipal trial courts, metropolitan trial courts and municipal circuit trial courts JURISDICTION over criminal cases carrying a penalty of imprisonment of less than one year but not exceeding six years, following Section 268 of the Omnibus Election Code, any criminal action or proceeding which bears the same penalty, with the exception of the therein mentioned two cases, falls within the exclusive original JURISDICTION of regional trial courts.

WHEREFORE, the petition is GRANTED. The challenged orders of respondent Judge Thelma Canlas Trinided-Pe Aguirre, in Criminal Case No. C-73774 are SET ASIDE. Respondent judge is DIRECTED to reinstate the case to the court docket and to conduct appropriate proceedings thereon with reasonable dispatch.

SO ORDERED.

PAMELA S. SEVILLENO and PURITA S. SEVILLENO, petitioners, vs. PACITA CARILO and CAMELO CARILO, respondents.

Remedial Law; Civil Procedure; Appeals; Rule on appeal summarized in Macawiwili Gold Mining and Development Co., Inc. vs. Court of Appeals, 297 SCRA 602 (1998).—In Macawiwili Gold Mining and Development Co., Inc. v. Court of Appeals, 297 SCRA 602 (1998), we summarized the rule on appeals as follows: (1) In all cases decided by the RTC in the exercise of its original JURISDICTION, appeal may be made to the Court of Appeals by mere notice of appeal where the appellant raises questions of fact or mixed questions of fact and law; (2) In all cases decided by the RTC in the exercise of its original JURISDICTION where the appellant raises only questions of law, the appeal must be taken to the Supreme Court on a petition for review on certiorari under Rule 45. (3) All appeals from judgments rendered by the RTC in the exercise of its appellate JURISDICTION, regardless of whether the appellant raises questions of fact, questions of law, or mixed questions of fact and law, shall be brought to the Court of Appeals by filing a petition for review under Rule 42.

Same; Same; Same; Actions; JURISDICTIONs; A court’s JURISDICTION over the subject matter of an action is conferred only by the Constitution or by statute.—It is not disputed that the issue brought by petitioners to the Court of Appeals involves the JURISDICTION of the RTC over the subject matter of the case. We have a long standing rule that a court’s JURISDICTION over the subject matter of an action is conferred only by the Constitution or by statute. Otherwise put, JURISDICTION of a court over the subject matter of the action is a matter of law. Consequently, issues which deal with the JURISDICTION of a court over the subject matter of a case are pure questions of law. As petitioners’ appeal solely involves a question of law, they should have directly taken their appeal to this Court by filing a petition for review on certiorari under Rule 45, not an ordinary appeal with the Court of Appeals under Rule 41. Clearly, the appellate court did not err in holding that petitioners pursued the wrong mode of appeal.

Same; Same; Same; An appeal from the RTC to the Court of Appeals raising only questions of law shall be dismissed; An appeal erroneously taken to the Court of Appeals shall be dismissed outright.—The Court of Appeals did not err in dismissing petitioners’ appeal. Section 2, Rule 50 of the same Rules provides that an appeal from the RTC to the Court of Appeals raising only questions of law shall be dismissed; and that an appeal erroneously taken to the Court of Appeals shall be dismissed outright. [Sevilleno vs. Carilo, 533 SCRA 385(2007)]

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D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is a petition for review on certiorari assailing the Resolution1 of the Court of Appeals (Third Division) dated December 20, 2000 in CA-G.R. CV No. 63608.

On October 28, 1998, Pamela and Purita, both surnamed Sevilleno, petitioners, filed with the Regional Trial Court (RTC), Branch 82, Quezon City, a complaint for damages against spouses Camelo and Pacita Carilo, respondents, docketed as Civil Case No. Q-35895. Petitioners prayed for an award of P5,000.00 as actual damages, P400,000.00 as moral damages, P10,000.00 as exemplary damages, and P50,000.00 for attorney’s fees.

Respondents seasonably filed their answer with compulsory counterclaim. They prayed that the trial court dismiss the complaint for lack of cause of action.

On March 23, 1999, the RTC motu prioprio issued an Order dismissing the case for lack of JURISDICTION over the subject matter of the case.

Petitioners filed a motion for reconsideration but it was denied by the RTC in an Order dated May 18, 1999.

Petitioners interposed an appeal to the Court of Appeals but it was dismissed for being the wrong mode of appeal. The appellate court held that since the issue being raised is whether the RTC has JURISDICTION over the subject matter of the case, which is a question of law, the appeal should have been elevated to the Supreme Court under Rule 45 of the 1997 Rules of Civil Procedure, as amended.

Section 2, Rule 41 of the same Rules which governs appeals from judgments and final orders of the RTC to the Court of Appeals, provides:

SEC. 2. Modes of appeal. –

(a) Ordinary appeal. – The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original JURISDICTION shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner.

(b) Petition for review. – The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its appellate JURISDICTION shall be by petition for review in accordance with Rule 42.

(c) Appeal by certiorari. – In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

In Macawiwili Gold Mining and Development Co., Inc. v. Court of Appeals,2 we summarized the rule on appeals as follows:

(1) In all cases decided by the RTC in the exercise of its original JURISDICTION, appeal may be made to the Court of Appeals by mere notice of appeal where the appellant raises questions of fact or mixed questions of fact and law;

(2) In all cases decided by the RTC in the exercise of its original JURISDICTION where the appellant raises only questions of law, the appeal must be taken to the Supreme Court on a petition for review on certiorari under Rule 45.

(3) All appeals from judgments rendered by the RTC in the exercise of its appellate JURISDICTION, regardless of whether the appellant raises questions of fact, questions of law, or mixed questions of fact and law, shall be brought to the Court of Appeals by filing a petition for review under Rule 42.

It is not disputed that the issue brought by petitioners to the Court of Appeals involves the JURISDICTION of the RTC over the subject matter of the case. We have a long standing rule that a court’s JURISDICTION over the subject matter of an action is conferred only by the Constitution or by statute.3 Otherwise put, JURISDICTION of a court over the subject matter of the action is a matter of law.4 Consequently, issues which deal with the JURISDICTION of a court over the subject matter of a case are pure questions of law. As petitioners’ appeal solely involves a question of law, they should have directly taken their appeal to this Court by filing a petition for review on certiorari under Rule 45, not an ordinary appeal with the Court of Appeals under Rule 41. Clearly, the appellate court did not err in holding that petitioners pursued the wrong mode of appeal.

22

Indeed, the Court of Appeals did not err in dismissing petitioners’ appeal. Section 2, Rule 50 of the same Rules provides that an appeal from the RTC to the Court of Appeals raising only questions of law shall be dismissed; and that an appeal erroneously taken to the Court of Appeals shall be dismissed outright, thus:

Sec. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal under Rule 41 taken from the Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues of pure law not being reviewable by said court. Similarly, an appeal by notice of appeal instead of by petition for review from the appellate judgment of a Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed outright.

WHEREFORE, we DENY the petition. The questioned Resolution of the Court of Appeals (Third Division) in CA-G.R. CV No. 63608 is AFFIRMED. Costs against petitioners.

SO ORDERED.

RE: Essence of Court’s Adjudicatory Powers

HEIRS OF SPOUSES CRISPULO FERRER and ENGRACIA PUHAWAN, represented by ROMEO F. GAZA as Attorney-in-Fact, petitioners, vs. THE HONORABLE COURT OF APPEALS, NATIONAL POWER CORPORATION, GUIDO ALFREDO DELGADO, FERNANDO ROXAS, ALBERTO PANGCOG, SAMUEL PIEDAD, GREGORIO ALVAREZ, RAFAEL LAGOS, AUGUSTO GO, NAPOLEON EUFEMIO, MELITO SALAZAR, VIRGILIO ODI and MEHOLK SADAIN, respondents.

R E S O L U T I O N

BRION, J.:

Petitioners, the heirs of spouses Crispulo Ferrer and Engracia Puhawan, filed a petition for certiorari1 assailing the rulings2 of the Court of Appeals (CA) rendered in CA-G.R. CV No. 67923. The Court, acting through its Second Division, denied the certiorari petition through a Resolution dated January 18, 2010,3 which the petitioners sought to be reconsidered of on March 17, 2010.4 In a Resolution dated April 21, 2010,5 the Court denied the petitioners’ motion and reiterated the dismissal of the certiorari petition. Petitioners now request leave from the Court to file a second motion for reconsideration.6

Brief Background

The present case arose from an injunction suit7 instituted by the petitioners against respondent National Power Corporation (Napocor). Petitioners sought to enjoin Napocor from selling the Caliraya Hydroelectric Power Plant, as they claimed ownership over portions of the land where the power plant stood, specifically Lot 1873 and Lot 72.8 Additionally, the petitioners demanded payment of damages from Napocor as rentals for the use and occupation of the lots since 1936 – the year Napocor first occupied the lot and began construction of the power plant.

Napocor denied the petitioners’ allegations and claimed it acquired portions of Lot 18739 through purchase from the petitioners’ half sister, Oliva Ferrer. The sale was evidenced by two deeds dated August 31, 194010 and March 4, 1948, both duly notarized and registered under Act No. 3344 (System of Registration for Unregistered Real Estate). As for Lot 72, Napocor claimed that its right to occupy and use the lot stemmed from the Right of Way Agreement executed in its favor by the petitioners’ predecessors on April 22, 1940. The encumbrance was annotated on the title covering Lot 72.11

The petitioners opposed Napocor’s claims and contended that the sale of portions of Lot 1873 between Napocor and Oliva Ferrer was void. They alleged that Oliva Ferrer was a co-heir who owned, in common with the petitioners, Lot 1873 – a fact clearly indicated in both deeds of sale covering Lot 1873.12 As a co-heir, Oliva Ferrer inherited only 3,129.93 square meters of Lot 1873,13 and the sale to Napocor of an area in excess of this amount without authority from the other co-owners was, according to the pe`titioners, void. To further support their claim of ownership, the petitioners presented a Certification dated January 26, 1978, issued by the Bureau of Lands, stating that Lot 1873 was claimed by and surveyed for Crispulo Ferrer. They also relied on Original Certificate of Title (OCT) Nos. P-3898 and P-3899 issued on September 25, 1977 in the name of Emiliano Ferrer, son of Crispulo Ferrer and Engracia Puhawan and one of the petitioners herein.

On March 15, 2000, the Regional Trial Court (RTC) issued a decision,14 dismissing the petitioners’ action for injunction and damages after finding their claims over Lot 1873 and Lot 72 insufficient.15

23

The trial court ruled that the petitioners failed to present convincing proof of their claim of ownership of Lot 1873; other than the Bureau of Lands certificate, which by itself was not a proof of ownership, the petitioners had nothing to support their claim. In contrast, Napocor was able to present two deeds of sale covering 29,598 square meters of Lot 1873, which were duly notarized and registered under Act No. 3344. The RTC also took cognizance of the fact that Napocor has been in possession of Lot 1873 and constructed numerous structures thereon since 1936. Thus, it found it ridiculous for petitioners or their predecessors not to raise a restraining hand or shout of protest during Napocor’s long occupation and use of the lot.16

As for Lot 72, the RTC found that the certificate of title covering the lot contained an entry dated May 20, 1940, referring to an instrument dated April 22, 1940, by virtue of which the heirs of Bernabe Puhawan (which included Engracia Puhawan, one of the petitioners’ predecessors) granted Napocor a right of way over the lot. The entry was further classified as a waterway, an intake road, and a right of way, making the easement a legal encumbrance under Section 44 of Presidential Decree No. 152917 or the Property Registration Decree. In the absence of proof that this has been cancelled, the RTC said that the easement should be respected. Moreover, the RTC also found that Lot 72 had already been acquired by Hilaria and Victoria Puhawan through a deed of extrajudicial partition of Bernabe Puhawan’s estate executed on November 3, 1939. Hence, the petitioners, as heirs of Engracia Puhawan, have no legal claim over Lot 72.18

The petitioners assailed the RTC decision through a petition for certiorari filed with the CA. The CA found no reason to reverse the trial court’s decision and accordingly affirmed it through its decision of May 12, 2009.19 The CA likewise found unmeritorious the petitioners’ motion for reconsideration and denied it through its resolution of October 23, 2009,20 a copy of which was received by petitioners on November 3, 2009. Thirty-eight days later, on December 11, 2009, the petitioners filed with the Court a petition for certiorari under Rule 65 of the Rules of Court. Rejecting the petitioners’ arguments, we denied the petition and denied the subsequent motion for reconsideration in our Resolutions of January 18, 2010 and April 21, 2010, respectively.

Procedurally, the Court found that the petitioners, by resorting to a certiorari petition, erred in choosing the legal remedy against the CA rulings. We noted that the errors the petitioners raised were errors of law rather than errors of JURISDICTION, since "[t]he gist of [the] petitioners’ objections to the CA ruling was the appellate court’s failure to appreciate their arguments and evidence in support of their claims, but this does not amount to an error of JURISDICTION. A certiorari writ will not be issued to cure errors by the lower court in its appreciation of the evidence, its conclusions anchored on the said findings, and its conclusions of law. As long as the court acts within its JURISDICTION, any alleged errors committed in the exercise of its discretion will amount to nothing more than mere errors of judgment, correctible by an appeal x x x [by] certiorari filed under Rule 45 [of the Rules of Court]."21 We considered the resort to a certiorari petition under Rule 65 as a disingenuous move to circumvent the rule on the period for filing an appeal by certiorari under Rule 45 which allows only 15 days from notice of the judgment appealed from to file an appeal. As the petition was filed 38 days after receipt of the assailed CA resolution denying the motion for reconsideration, the petitioners used the certiorari petition as a substitute for the lost appeal, a move the Court has consistently reproved.

Despite these procedural lapses, the Court nevertheless reviewed the merits of the petitioners’ case, but as the RTC and the CA did, found nothing to support the petitioners’ claims. In seeking to enjoin Napocor from selling Lot 1873 and to claim damages for the use and occupation thereof, the petitioners relied on their claim of ownership which they contended was sufficiently proved by (1) the certification from the Bureau of Lands showing that their predecessor, Crispulo Ferrer, was a survey claimant, and (2) the OCTs covering the lot in the name of co-petitioner Emiliano Ferrer. We rejected these claims by ruling that:

The Bureau of Lands Certification] did not adequately establish their right to Lot 1873. All that the Certification proved was that Crispulo Ferrer was a survey claimant. The purpose of a survey plan is simply to identify and delineate the extent of the land. A survey plan, even if approved by the Bureau of Lands, is not a proof of ownership of the land covered by the plan. Even though the OCTs in Emiliano Ferrer’s name covering portions of Lot 1873 were never contested, the CA found that the portions of land covered by his certificates of title were not those on which Napocor’s power plant stood.22

We further ruled that any objection the petitioners might have against the sale of Lot 1873 between Napocor and Oliva Ferrer has already been barred by the principle of laches. We explained:

From 1936 when Napocor began construction of the power plant up to 1997 when the action for injunction and damages was instituted, the petitioners made no move to assert their claim over Lot 1873; for 61 long years, the petitioners have slept on their rights, but now ironically demand vigilance on the Court’s part to protect their rights.23

As for Lot 72, we declared that:

[T]he CA correctly pointed out that the petitioners never took any issue with the RTC’s ruling concerning the parties’ rights over [this lot]; the petitioners devoted most of their time discussing their claims over Lot 1873. At any rate, the parties’ rights with respect to these lots [this lot] have been carefully considered and resolved by the RTC and CA, and we agree with their findings and conclusions [that Napocor’s easement rights over Lot 72 subsists].24

24

Insisting that they have a rightful claim over Lot 1873 and Lot 72, the petitioners now request leave to file a second motion for reconsideration.

Petitioners’ Second Motion for Reconsideration

The petitioners insist that they have a better claim than Napocor over Lot 1873 and Lot 72. Believing that they have a strong and meritorious case against Napocor, the petitioners contend that the interest of justice should override the application of procedural rules and the principle of laches.

In support of their claim over Lot 1873, the petitioners reiterate the same allegations and arguments they raised before the RTC and the CA (specifically, the Bureau of Lands certificate in Crispulo Ferrer’s name). They also contend that they have acquired ownership over Lot 1873 through prescription, as their predecessors have taken possession of and occupied the lot since 1916. By the time Napocor purportedly purchased the lot from Oliva Ferrer in 1940 and 1948, the petitioners have already acquired ownership over Lot 1873 through extraordinary acquisitive prescription for over 30 years under Article 1137 of the Civil Code.

Additionally, the petitioners challenge the CA’s finding that they never raised any objection concerning Lot 72 before the CA. They point to the memorandum they filed before the CA where they alleged that despite the grant of a right of way, Napocor used an area that was more than what was granted to it by the petitioners’ predecessors. By alleging this matter, the petitioners claim to have timely raised the issue of whether Napocor should pay damages by way of rentals for the use and occupation of areas of Lot 72 in excess of what was granted to it.

The Court’s Ruling

We DENY the requested leave to file a second motion for reconsideration.

Section 3, Rule 15 of the Internal Rules of the Supreme Court (IRSC) sets forth the rule when the Court may entertain a second motion for reconsideration. The rule states:

Sec. 3. Second motion for reconsideration. – The Court shall not entertain a second motion for reconsideration, and any exception to this rule can only be granted in the higher interest of justice by the Court en banc upon a vote of at least two-thirds of its actual membership. There is reconsideration "in the higher interest of justice" when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties. A second motion for reconsideration can only be entertained before the ruling sought to be reconsidered becomes final by operation of law or by the Court’s declaration.

In the Division, a vote of three Members shall be required to elevate a second motion for reconsideration to the Court En Banc.

Aside from meeting the voting requirements, a movant is required by the IRSC to substantially show that a reconsideration of the Court’s ruling is necessary in the higher interest of justice, which standard is satisfied upon proving that the assailed ruling is both (1) legally erroneous and (2) patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties.1avvphi1

In this case, petitioners’ reasons do not sufficiently establish that a reversal of the Court’s ruling will serve the higher interest of justice. On the contrary, for the Court to consider and find meritorious the petitioners’ argument will mean abandoning settled principles of law to accommodate the petitioners’ stale and clearly unsubstantiated claims.

The petitioners insist that the Bureau of Lands certificate, stating that their predecessor Crispulo Ferrer was a survey claimant of the property covered by Cadastral Survey No. 90 of Lumban, Laguna, sufficiently establishes their claim over Lot 1873, despite our consistent ruling that the certificate is no proof of title of ownership over the property.

A survey made in a cadastral proceeding merely identifies each lot preparatory to a judicial proceeding for adjudication of title to any of the lands upon claim of interested parties.25 The purpose of a survey plan is simply to identify and delineate the extent of the land.26 It is not a proof of ownership of the land covered by the plan.27 In the present case, the petitioners were not even able to present the actual survey plan approved by the Bureau of Lands; all that they relied on was the Bureau of Lands certificate that proved nothing more beyond than what was expressly stated therein: that Lot 1873 is in the name of Crispulo Ferrer, as a survey claimant.

Notably, nothing in the certificate indicated whether Crispulo Ferrer was actually in possession of Lot 1873 or for how long he had been in possession thereof. We find the matter and duration of the petitioners and their predecessors’ possession relevant in view of the petitioners’ contention that they acquired ownership of Lot 1873 through prescription, i.e., the lapse of the requisite 30-year period provided in Article 1137 of the Civil Code. Article 1137 states:

25

Article 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith.

The petitioners’ reliance on Article 1137 of the Civil Code is not entirely accurate. The petitioners alleged that Lot 1873 is an alienable and disposable land of the public domain. However, acquisition of ownership over alienable public lands is governed, not by the general provisions on prescription in the Civil Code, but more particularly, by Commonwealth Act No. 141 (CA 141) or the Public Land Act. Article 1137 of the Civil Code authorizes acquisition by prescription only of private lands, not of public lands even though these may have been decreed as alienable and disposable.

Alienable and disposable lands of the public domain may be acquired by private persons, not by virtue of prescription but, through adverse possession, upon compliance with the requirements of Section 48(b) of CA 141, which states:

Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

x x x x

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

Verily, it is not the mere lapse of time that vests title over the land to the claimant; it is also necessary that the land be an alienable and disposable land of the public domain and that the claimant be in open, continuous, exclusive, and notorious possession of the land. Listed down, the acquisition through adverse possession of public lands requires the following:

1. the land applied for must be an alienable and disposable public land; and

2. the claimants, by themselves or through their predecessors-in-interest, have been in open, continuous, exclusive, and notorious possession and occupation of the land since June 12, 1945 or earlier.28

Upon an exhaustive review of the records and a thorough evaluation of the petitioners’ allegations and arguments, we are unconvinced that the petitioners have satisfied these requirements.

First, no conclusive proof appears in the records showing that Lot 1873 has been officially decreed to be an alienable and disposable public land at the time the petitioners’ predecessors supposedly occupied the lot in 1916 or at anytime thereafter. That petitioners’ predecessor, Crispulo Ferrer, was a claimant and, purportedly, had a survey plan of Lot 1873 does not necessarily imply that the lot is an alienable land.29

Second, we similarly found nothing in the records that would support the petitioners’ allegation that their predecessors had occupied Lot 1873 since 1916 or at anytime before the cut-off date of June 12, 1945. As mentioned, the Bureau of Lands certificate, issued on January 26, 1978, simply stated that Crispulo Ferrer was a survey claimant of Lot 1873, without indicating the nature and duration of his possession. The requirement of an open, continuous, exclusive, and notorious occupation of alienable public land must be conclusively established to avoid the erroneous validation of actually fictitious claims of possession over the property.30

Even supposing that the petitioners, through their predecessors, have held possession of Lot 1873 since 1916, this condition only works to their disadvantage. As early as 1936, Napocor occupied portions of Lot 1873 and began construction of the power plant. On May 30, 1940,31 Oliva Ferrer granted Napocor the right of way over the lot. Then, on August 31, 1940 and March 4, 1948, she sold portions of the lot to Napocor. In all of these instances, no word of protest was heard from the petitioners and their predecessors, at least until April 1997, when they demanded payment of rent from Napocor for the use and occupation of Lot 1873. The petitioners’ inaction establishes the fact that they were never in open, continuous, exclusive, and notorious possession of Lot 1873. More importantly, the petitioners’ inaction from 1936 to 1997, or for 61 long years, makes the application of the principle of laches more than justified to defeat their claim over Lot 1873.

The application of the principle of laches requires the presence of the following elements – all of which are present in this case:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complainant seeks a remedy;

26

(2) delay in asserting the complainant’s right, the complainant having had knowledge or notice, of defendant’s conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.32

Napocor executed acts that were contrary to the petitioners’ asserted claim of ownership over Lot 1873, yet until 1997, the petitioners made no move to vindicate their claimed right and resist Napocor’s intrusion. Napocor certainly could not be blamed if it considered itself the true owner of Lot 1873 and expected no adverse claims thereto, as it had acquired the lot by purchase as early as 1940 and had constructed numerous structures ther eon. To recognize the petitioners’ belated and legally baseless claim over Lot 1873 would mean requiring Napocor to pay rentals and interest from 1936 to the present, a move that could possibly bleed Napocor’s coffers dry to the detriment of the public. Vigilantibus et non dormientibus jura subveniunt – the laws serve the vigilant, not those who sleep. Quoting the Court’s ruling in Vda. de Rigonan v. Derecho, our resolution of April 21, 2010 said:

x x x The Court aptly stated in Miguel v. Catalino:

Courts cannot look with favor at parties who, by their silence, delay, and inaction, knowingly induce another to spend time, effort, and expense in cultivating the land, paying taxes and making improvements thereon x x x only to spring from ambush and claim title when the possessor’s efforts and the rise of land values offer an opportunity to make easy profit at his expense.

To grant respondents relief when they have not even offered any justifiable excuse for their inaction would be unjust. It is certainly beyond our comprehension how they could have remained silent for more than 50 years. They have only themselves to blame if the Court at this late hour can no longer afford them relief against the inequities they allegedly suffered.33

The principle of laches applies with equal force to defeat the petitioners’ claim over Lot 72 which was occupied by Napocor way back in 1937. Also, we find no reason to disagree with the RTC’s finding that Lot 72 had already been adjudicated in favor of, and for which the property was in fact titled in the names of, Hilaria and Victoria Puhawan. As the heirs of Engracia Puhawan, the petitioners likewise have no valid claim over Lot 72.

The essence of the Court’s adjudicatory function is to apply the law to facts, as supported by the evidence and the records. The petitioners have already exhausted all possible legal arguments and, as we have discussed, none of which are compelling enough to require reconsideration of our past ruling. To be sure, repetitive filing of legally useless submissions cannot pressure this Court into taking another look at an unmeritorious case; they can only increase the petitioners’ legal expenses, as in this case, where we are ordering the payment of double costs for the act of unnecessarily and stubbornly wasting the Court’s time.

WHEREFORE, we DENY the petitioners’ motion for leave to file a second motion for reconsideration of our April 21, 2010 Resolution. We hereby declare our Resolutions of January 18, 2010 and April 21, 2010 final and executory. No further pleadings shall be entertained. We accordingly direct that entry of judgment be immediately made. Double costs against petitioners.

SO ORDERED.

RE: Adherence to JURISDICTION: Exceptions

LUCIA BARRAMEDA VDA. DE BALLESTEROS, petitioner, vs. RURAL BANK OF CANAMAN, INC., represented by its Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, respondent.

Remedial Law; Courts; JURISDICTION; Doctrine on Adherence of JURISDICTION; Court recognizes the doctrine on adherence of 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 Decision1 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.

27

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. Attorney’s fees were pleaded as counterclaim.

The case was then set for pre-trial conference. During the pre-trial, RBCI’s 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 order2 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

28

Lucia filed a motion for reconsideration4 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.

Lucia’s 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]).

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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. In Manalo 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 Lucia’s 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 Rizal10 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 case11 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 Lucia’s 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. Lucia’s 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

30

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 claims against 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 Lucia’s 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 Revenue13 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.1avvphi1

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

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In sum, this Court holds that the consolidation is proper considering that the liquidation court has JURISDICTION over Lucia’s action. It would be more in keeping with law and equity if Lucia’s 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.

RE: Venue and JURISDICTION Criminal Case

TEOFILO EVANGELISTA, petitioner, vs. THE PEOPLE OF THE PHILIPPINES, respondent.

D E C I S I O N

DEL CASTILLO, J.:

To be guilty of the crime of illegal possession of firearms and ammunition, one does not have to be in actual physical possession thereof. The law does not punish physical possession alone but possession in general, which includes constructive possession or the subjection of the thing to the owner’s control.1

This Petition for Review on Certiorari2 assails the October 15, 2003 Decision3 of the Court of Appeals (CA) in CA-G.R. CR No. 21805 which affirmed the January 23, 1998 Decision4 of the Regional Trial Court (RTC) of Pasay City, Branch 109 convicting petitioner Teofilo Evangelista for violation of Section 1, Presidential Decree (PD) No. 1866,5 as amended, as well as the April 16, 2004 Resolution which denied petitioner’s Motion for Reconsideration.

Factual Antecedents

In an Information6 dated January 31, 1996, petitioner was charged with violation of Section 1 of PD 1866 allegedly committed as follows:

That on or about the 30th day of January 1996, at the Ninoy Aquino International Airport, Pasay City, Philippines, and within the JURISDICTION of this Honorable Court, the above-named accused, did, then and there, wilfully, unlawfully and feloniously have in his possession, custody and control the following items:

1. One (1) Unit 9mm Jericho Pistol, Israel with SN F-36283 with one (1) magazine;

2. One (1) Unit Mini-Uzi 9mm Israel Submachine gun with SN 931864 with two (2) magazines;

3. Nineteen (19) 9mm bullets.

without the corresponding permit or license from competent authority.

CONTRARY TO LAW.

After posting his bail, petitioner filed on February 14, 1996 an Urgent Motion for (a) Suspension of Proceedings and (b) the Holding of A Preliminary Investigation.7 The RTC granted the motion and, accordingly, the State Prosecutor conducted the preliminary investigation.

In a Resolution8 dated March 6, 1996, the State Prosecutor found no probable cause to indict petitioner and thus recommended the reversal of the resolution finding probable cause and the dismissal of the complaint. Thereafter, a Motion to Withdraw Information9 was filed but it was denied by the trial court in an Order10 dated March 26, 1996, viz:

Acting on the "Motion to Withdraw Information" filed by State Prosecutor Aida Macapagal on the ground that [there exists] no probable cause to indict the accused, the Information having been already filed in Court, the matter should be left to the discretion of the Court to assess the evidence, hence, for lack of merit, the same is hereby denied. Let the arraignment of the accused proceed.

When arraigned on March 26, 1996, petitioner pleaded not guilty to the charge. Thereafter, trial ensued.

Version of the Prosecution

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In the morning of January 30, 1996, Maximo Acierto, Jr. (Acierto), a Customs Police assigned at the Ninoy Aquino International Airport (NAIA) District Command, was informed by his superior that a certain passenger of Philippine Airlines (PAL) Flight No. 657 would be arriving from Dubai bringing with him firearms and ammunitions. Shortly after lunch, Acierto, together with Agents Cuymo and Fuentabella, proceeded to the tube area where they were met by a crewmember who introduced to them herein petitioner. Acierto asked petitioner if he brought firearms with him and the latter answered in the affirmative adding that the same were bought in Angola. Thereupon, Acierto was summoned to the cockpit by the pilot, Capt. Edwin Nadurata (Capt. Nadurata), where the firearms and ammunitions were turned over to him. Petitioner was then escorted to the arrival area to get his luggage and thereafter proceeded to the examination room where the luggage was examined and petitioner was investigated. In open court, Acierto identified the firearms and ammunitions.

During the investigation, petitioner admitted before Special Agent Apolonio Bustos (Bustos) that he bought the subject items in Angola but the same were confiscated by the Dubai authorities, which turned over the same to a PAL personnel in Dubai. Upon inquiry, the Firearms and Explosive Office (FEO) in Camp Crame certified that petitioner is neither registered with said office11 nor licensed holder of aforesaid firearms and ammunitions. Bustos likewise verified from the Bureau of Customs, but his effort yielded no record to show that the firearms were legally purchased. Among the documents Bustos had gathered during his investigation were the Arrival Endorsement Form12 and Customs Declaration Form.13 A referral letter14 was prepared endorsing the matter to the Department of Justice. Bustos admitted that petitioner was not assisted by counsel when the latter admitted that he bought the firearms in Angola.

SPO4 Federico Bondoc, Jr. (SPO4 Bondoc), a member of the Philippine National Police (PNP) and representative of the FEO, upon verification, found that petitioner is not a licensed/registered firearm holder. His office issued a certification15 to that effect which he identified in court as Exhibit "A".

After the prosecution rested its case, petitioner, with leave of court, filed his Demurrer to Evidence,16 the resolution of which was deferred pending submission of petitioner’s evidence.17

Version of the Defense

The defense presented Capt. Nadurata whose brief but candid and straightforward narration of the event was synthesized by the CA as follows:

x x x On January 30, 1996, he was approached by the PAL Station Manager in Dubai, who informed him that a Filipino contract worker from Angola who is listed as a passenger of PAL flight from Dubai to Manila, was being detained as he was found in possession of firearms; that if said passenger will not be able to board the airplane, he would be imprisoned in Dubai; and that the Arabs will only release the passenger if the Captain of PAL would accept custody of the passenger [herein petitioner] and the firearms. Capt. Nadurata agreed to take custody of the firearms and the passenger, herein appellant, so that the latter could leave Dubai. The firearms were deposited by the Arabs in the cockpit of the airplane and allowed the appellant to board the airplane. Upon arrival in Manila, Capt. Nadurata surrendered the firearms to the airport authorities.

Meanwhile, in view of the unavailability of the defense’s intended witness, Nilo Umayaw (Umayaw), the PAL Station Manager in Dubai, the prosecution and the defense agreed and stipulated on the following points:

1. That PAL Station Manager Mr. Nilo Umayaw was told by a Dubai Police that firearms and ammunitions were found in the luggage of a Filipino passenger coming from Angola going to the Philippines;

2. That he was the one who turned over the subject firearms to Captain Edwin Nadurata, the Pilot in command of PAL Flight 657;

3. That the subject firearms [were] turned over at Dubai;

4. That the said firearms and ammunitions were confiscated from the accused Teofilo Evangelista and the same [were] given to the PAL Station Manager who in turn submitted [them] to the PAL Pilot, Capt. Edwin Nadurata who has already testified;

5. That [these are] the same firearms involved in this case.18

Ruling of the Regional Trial Court

On February 4, 1997, the RTC rendered its Decision, the dispositive portion of which reads:

In view of all the foregoing, the Court finds accused TEOFILO E. EVANGELISTA guilty beyond reasonable doubt for violation of Sec. 1, P.D. 1866 as amended (Illegal Possession of Firearms and Ammunitions: (One (1) Unit Mini-Uzi 9mm Israel submachine gun with SN-931864 with two (2) magazines and nineteen (19) 9mm bullets) and hereby sentences him to imprisonment of Seventeen (17) Years and Four (4) Months to Twenty (20) Years.

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The above-mentioned firearms are hereby ordered forfeited in favor of the government and is ordered transmitted to the National Bureau of Investigation, Manila for proper disposition.

SO ORDERED.19

On April 4, 1997, petitioner filed a Motion for New Trial20 which the RTC granted.21 Forthwith, petitioner took the witness stand narrating his own version of the incident as follows:

On January 28, 1996, he was at Dubai International Airport waiting for his flight to the Philippines. He came from Luwanda, Angola where he was employed as a seaman at Oil International Limited. While at the airport in Dubai, Arab policemen suddenly accosted him and brought him to their headquarters where he saw guns on top of a table. The Arabs maltreated him and forced him to admit ownership of the guns. At this point, PAL Station Manager Umayaw came and talked to the policemen in Arabian dialect. Umayaw told him that he will only be released if he admits ownership of the guns. When he denied ownership of the same, Umayaw reiterated that he (petitioner) will be released only if he will bring the guns with him to the Philippines. He declined and insisted that the guns are not his. Upon the request of Umayaw, petitioner was brought to the Duty Free area for his flight going to the Philippines. When he was inside the plane, he saw the Arab policemen handing the guns to the pilot. Upon arrival at the NAIA, he was arrested by the Customs police and brought to the arrival area where his passport was stamped and he was made to sign a Customs Declaration Form without reading its contents. Thereafter, he was brought to a room at the ground floor of the NAIA where he was investigated. During the investigation, he was not represented by counsel and was forced to accept ownership of the guns. He denied ownership of the guns and the fact that he admitted having bought the same in Angola.

Ruling of the Regional Trial Court

After new trial, the RTC still found petitioner liable for the offense charged but modified the penalty of imprisonment. The dispositive portion of the Decision dated January 23, 1998 reads:

In view of all the foregoing, the Court finds accused TEOFILO E. EVANGELISTA guilty beyond reasonable doubt for violation of Sec. 1, P.D. 1866 as amended (Illegal Possession of Firearms and Ammunitions: One (1) Unit 9mm Jerico Pistol, Israel with SN F-36283 with one (1) magazine; One (1) Unit Mini-Uzi 9mm Israel submachine gun with SN-931864 with two (2) magazines and nineteen (19) 9mm bullets and hereby sentences him to imprisonment of Six (6) Years and One (1) Day to Eight (8) Years and a fine of P30,000.00.

The above-mentioned firearms are hereby ordered forfeited in favor of the government and [are] ordered transmitted to the National Bureau of Investigation, Manila for proper disposition.

SO ORDERED.22

Ruling of the Court of Appeals

On appeal, the CA affirmed the findings of the trial court in its Decision dated October 15, 2003. It ruled that the stipulations during the trial are binding on petitioner. As regards possession of subject firearms, the appellate court ruled that Capt. Nadurata’s custody during the flight from Dubai to Manila was for and on behalf of petitioner. Thus, there was constructive possession.

Petitioner moved for reconsideration23 but it was denied by the appellate court in its April 16, 2004 Resolution.

Hence, this petition.

Issues

Petitioner assigns the following errors:

a. The Court of Appeals gravely erred in not acquitting Evangelista from the charge of Presidential Decree No. 1866, Illegal Possession of Firearms.

b. The Court of Appeals gravely erred in not holding that Evangelista was never in possession of any firearm or ammunition within Philippine JURISDICTION and he therefore could not have committed the crime charged against him.

c. The Court of Appeals gravely erred in holding that Evangelista committed a continuing crime.

d. The Court of Appeals gravely erred in disregarding the results of the preliminary investigation.24

We find the appeal devoid of merit.

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At the outset, we emphasize that under Rule 45 of the Rules of Court, a petition for review on certiorari shall only raise questions of law considering that the findings of fact of the CA are, as a general rule, conclusive upon and binding on the Supreme Court.25 In this recourse, petitioner indulges us to calibrate once again the evidence adduced by the parties and to re-evaluate the credibility of their witnesses. On this ground alone, the instant petition deserves to be denied outright. However, as the liberty of petitioner is at stake and following the principle that an appeal in a criminal case throws the whole case wide open for review, we are inclined to delve into the merits of the present petition.

In his bid for acquittal, petitioner argues that he could not have committed the crime imputed against him for he was never in custody and possession of any firearm or ammunition when he arrived in the Philippines. Thus, the conclusion of the appellate court that he was in constructive possession of the subject firearms and ammunitions is erroneous.

We are not persuaded. As correctly found by the CA:

Appellant’s argument that he was never found in possession of the subject firearms and ammunitions within Philippine JURISDICTION is specious. It is worthy to note that at the hearing of the case before the court a quo on October 8, 1996, the defense counsel stipulated that the subject firearms and ammunitions were confiscated from appellant and the same were given to PAL Station Manager Nilo Umayaw who, in turn, turned over the same to Capt. Edwin Nadurata. Such stipulation of fact is binding on appellant, for the acts of a lawyer in the defense of a case are the acts of his client. Granting that Nilo Umayaw was merely told by the Dubai authorities that the firearms and ammunitions were found in the luggage of appellant and that Umayaw had no personal knowledge thereof, however, appellant’s signature on the Customs Declaration Form, which contains the entry "2 PISTOL guns SENT SURRENDER TO PHILIPPINE AIRLINE," proves that he was the one who brought the guns to Manila. While appellant claims that he signed the Customs Declaration Form without reading it because of his excitement, however, he does not claim that he was coerced or persuaded in affixing his signature thereon. The preparation of the Customs Declaration Form is a requirement for all arriving passengers in an international flight. Moreover, it cannot be said that appellant had already been arrested when he signed the Customs Declaration Form. He was merely escorted by Special Agent Acierto to the arrival area of the NAIA. In fact, appellant admitted that it was only after he signed the Customs Declaration Form that he was brought to the ground floor of NAIA for investigation. Consequently, appellant was in constructive possession of the subject firearms. As held in People v. Dela Rosa, the kind of possession punishable under PD 1866 is one where the accused possessed a firearm either physically or constructively with animus possidendi or intention to possess the same. Animus possidendi is a state of mind. As such, what goes on into the mind of the accused, as his real intent, could be determined solely based on his prior and coetaneous acts and the surrounding circumstances explaining how the subject firearm came to his possession.

Appellant’s witness, Capt. Nadurata, the PAL pilot of Flight No. PR 657 from Dubai to Manila on January 30, 1996, testified that he accepted custody of the firearms and of appellant in order that the latter, who was being detained in Dubai for having been found in possession of firearms, would be released from custody. In other words, Capt. Nadurata’s possession of the firearm during the flight from Dubai to Manila was for and on behalf of appellant.26

We find no cogent reason to deviate from the above findings, especially considering petitioner’s admission during the clarificatory questioning by the trial court:

Court: So, it is clear now in the mind of the Court, that the firearms and ammunitions will also be with you on your flight to Manila, is that correct?

A: Yes, your honor.

Court: [You] made mention of that condition, that the Dubai police agreed to release you provided that you will bring the guns and ammunitions with you? Is that the condition of the Dubai Police?

A: Yes, your honor.

Court: The condition of his release was that he will have to bring the guns and ammunitions to the Philippines and this arrangement was made by the PAL Supervisor at Dubai and it was Mr. Umayaw the PAL Supervisor, who interceded in his behalf with the Dubai Police for his flight in the Philippines.27

To us, this constitutes judicial admission of his possession of the subject firearms and ammunitions. This admission, the veracity of which requires no further proof, may be controverted only upon a clear showing that it was made through palpable mistake or that no admission was made.28 No such controversion is extant on record.

Moreover, we cannot ignore the Customs Declaration Form wherein it appeared that petitioner brought the firearms with him upon his arrival in the Philippines. While there was no showing that he was forced to sign the form, petitioner can only come up with the excuse that he was excited. Hardly can we accept such pretension.

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We are likewise not swayed by petitioner’s contention that the lower court erroneously relied on the Customs Declaration Form since it is not admissible in evidence because it was accomplished without the benefit of counsel while he was under police custody.

The accomplishment of the Customs Declaration Form was not elicited through custodial investigation. It is a customs requirement which petitioner had a clear obligation to comply. As correctly observed by the CA, the preparation of the Customs Declaration Form is a requirement for all arriving passengers in an international flight. Petitioner was among those passengers. Compliance with the constitutional procedure on custodial investigation is, therefore, not applicable in this case. Moreover, it is improbable that the customs police were the ones who filled out the declaration form. As will be noted, it provides details that only petitioner could have possibly known or supplied. Even assuming that there was prior accomplishment of the form which contains incriminating details, petitioner could have easily taken precautionary measures by not affixing his signature thereto. Or he could have registered his objection thereto especially when no life threatening acts were being employed against him upon his arrival in the country.

Obviously, it was not only the Customs Declaration Form from which the courts below based their conclusion that petitioner was in constructive possession of subject firearms and ammunitions. Emphasis was also given on the stipulations and admissions made during the trial. These pieces of evidence are enough to show that he was the owner and possessor of these items.

Petitioner contends that the trial court has no JURISDICTION over the case filed against him. He claims that his alleged possession of the subject firearms transpired while he was at the Dubai Airport and his possession thereof has ceased when he left for the Philippines. He insists that since Dubai is outside the territorial JURISDICTION of the Philippines and his situation is not one of the exceptions provided in Article 2 of the Revised Penal Code, our criminal laws are not applicable. In short, he had not committed a crime within the Philippines.1avvphi1

Indeed it is fundamental that the place where the crime was committed determines not only the venue of the action but is an essential element of JURISDICTION.29 In order for the courts to acquire JURISDICTION in criminal cases, the offense should have been committed or any one of its essential ingredients should have taken place within the territorial JURISDICTION of the court. If the evidence adduced during the trial shows that the offense was committed somewhere else, the court should dismiss the action for want of JURISDICTION.30

Contrary to the arguments put forward by petitioner, we entertain no doubt that the crime of illegal possession of firearms and ammunition for which he was charged was committed in the Philippines. The accomplishment by petitioner of the Customs Declaration Form upon his arrival at the NAIA is very clear evidence that he was already in possession of the subject firearms in the Philippines.

And more than mere possession, the prosecution was able to ascertain that he has no license or authority to possess said firearms. It bears to stress that the essence of the crime penalized under PD 1866, as amended, is primarily the accused’s lack of license to possess the firearm. The fact of lack or absence of license constitutes an essential ingredient of the offense of illegal possession of firearm. Since it has been shown that petitioner was already in the Philippines when he was found in possession of the subject firearms and determined to be without any authority to possess them, an essential ingredient of the offense, it is beyond reasonable doubt that the crime was perpetrated and completed in no other place except the Philippines.

Moreover, the JURISDICTION of a court over the criminal case is determined by the allegations in the complaint or information. In this case, the information specifically and categorically alleged that on or about January 30, 1996 petitioner was in possession, custody and control of the subject firearms at the Ninoy Aquino International Airport, Pasay City, Philippines, certainly a territory within the JURISDICTION of the trial court.

In contrast, petitioner failed to establish by sufficient and competent evidence that the present charge happened in Dubai. It may be well to recall that while in Dubai, petitioner, even in a situation between life and death, firmly denied possession and ownership of the firearms. Furthermore, there is no record of any criminal case having been filed against petitioner in Dubai in connection with the discovered firearms. Since there is no pending criminal case when he left Dubai, it stands to reason that there was no crime committed in Dubai. The age-old but familiar rule that he who alleges must prove his allegation applies.31

Petitioner finally laments the trial court’s denial of the Motion to Withdraw Information filed by the investigating prosecutor due to the latter’s finding of lack of probable cause to indict him. He argues that such denial effectively deprived him of his substantive right to a preliminary investigation.

Still, petitioner’s argument fails to persuade. There is nothing procedurally improper on the part of the trial court in disregarding the result of the preliminary investigation it itself ordered. Judicial action on the motion rests in the sound exercise of judicial discretion. In denying the motion, the trial court just followed the jurisprudential rule laid down in Crespo v. Judge Mogul32 that once a complaint or information is filed in court, any disposition of the case as to its dismissal or the conviction or acquittal of the accused rests on the sound discretion of the court. The court is not dutifully bound by such finding of the investigating prosecutor. In Solar Team Entertainment, Inc v. Judge How33 we held:

36

It bears stressing that the court is however not bound to adopt the resolution of the Secretary of Justice since the court is mandated to independently evaluate or assess the merits of the case, and may either agree or disagree with the recommendation of the Secretary of Justice. Reliance alone on the resolution of the Secretary of Justice would be an abdication of the trial court’s duty and JURISDICTION to determine prima facie case.

Consequently, petitioner has no valid basis to insist on the trial court to respect the result of the preliminary investigation it ordered to be conducted.

In fine, we find no reason not to uphold petitioner’s conviction. The records substantiate the RTC and CA’s finding that petitioner possessed, albeit constructively, the subject firearms and ammunition when he arrived in the Philippines on January 30, 1996. Moreover, no significant facts and circumstances were shown to have been overlooked or disregarded which if considered would have altered the outcome of the case.

In the prosecution for the crime of illegal possession of firearm and ammunition, the Court has reiterated the essential elements in People v. Eling34 to wit: (1) the existence of subject firearm; and, (2) the fact that the accused who possessed or owned the same does not have the corresponding license for it.

In the instant case, the prosecution proved beyond reasonable doubt the elements of the crime. The existence of the subject firearms and the ammunition were established through the testimony of Acierto. Their existence was likewise admitted by petitioner when he entered into stipulation and through his subsequent judicial admission. Concerning petitioner’s lack of authority to possess the firearms, SPO4 Bondoc, Jr. testified that upon verification, it was ascertained that the name of petitioner does not appear in the list of registered firearm holders or a registered owner thereof. As proof, he submitted a certification to that effect and identified the same in court. The testimony of SPO4 Bondoc, Jr. or the certification from the FEO would suffice to prove beyond reasonable doubt the second element.35

A final point. Republic Act (RA) No. 829436 took effect on June 6, 1997 or after the commission of the crime on January 30, 1996. However, since it is advantageous to the petitioner, it should be given retrospective application insofar as the penalty is concerned.

Section 1 of PD 1866, as amended by RA 8294 provides:

Section 1. Unlawful Manufacture, Sale, Acquisition, Disposition or Possession of Firearms or Ammunition or Instruments Used or Intended to be Used in the Manufacture of Firearms or Ammunition. x x x

The penalty of prision mayor in its minimum period and a fine of Thirty thousand pesos (P30,000.00) shall be imposed if the firearm is classified as high powered firearm which includes those with bores bigger in diameter than .38 caliber and 9 millimeter such as caliber .40, .41, .44, .45 and also lesser calibered firearms but considered powerful such as caliber .357 and caliber .22 center-fire magnum and other firearms with firing capability of full automatic and by burst of two or three: Provided, however, That no other crime was committed by the person arrested.

Prision mayor in its minimum period ranges from six years and one day to eight years. Hence, the penalty imposed by the RTC as affirmed by the CA is proper.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CR No. 21805 affirming the January 23, 1998 Decision of the Regional Trial Court of Pasay City, Branch 109 dated January 23, 1998, convicting petitioner Teofilo Evangelista of violation of Section 1 of Presidential Decree No. 1866, as amended, and sentencing him to suffer the penalty of imprisonment of six years and one day to eight years and to pay a fine of P30,000.00 is AFFIRMED.

SO ORDERED.

WONINA M. BONIFACIO, JOCELYN UPANO, VICENTE ORTUOSTE AND JOVENCIO PERECHE, SR., petitioners, vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 149, and JESSIE JOHN P. GIMENEZ, respondents.

CARPIO MORALES, J.:

Via a petition for Certiorari and Prohibition, petitioners Wonina M. Bonifacio, et al. assail the issuances of Branch 149 of the Regional Trial Court (RTC) of Makati (public respondent) – Order1 of April 22, 2008 which denied their motion to quash the Amended Information indicting them for libel, and Joint Resolution2 of August 12, 2008 denying reconsideration of the first issuance.

Private respondent Jessie John P. Gimenez3 (Gimenez) filed on October 18, 2005, on behalf of the Yuchengco Family ("in particular," former Ambassador Alfonso Yuchengco and Helen Y. Dee (Helen) and of the Malayan Insurance Co., Inc. (Malayan),4 a criminal complaint,5 before the Makati City Prosecutor’s Office, for thirteen (13) counts of libel under Article 355 in relation to Article 353 of

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the Revised Penal Code (RPC) against Philip Piccio, Mia Gatmaytan and Ma. Anabella Relova Santos, who are officers of Parents Enabling Parents Coalition, Inc. (PEPCI), John Joseph Gutierrez, Jeselyn Upano, Jose Dizon, Rolanda Pareja, Wonina Bonifacio, Elvira Cruz, Cornelio Zafra, Vicente Ortueste, Victoria Gomez Jacinto, Jurencio Pereche, Ricardo Loyares and Peter Suchianco, who are trustees of PEPCI, Trennie Monsod, a member of PEPCI (collectively, the accused), and a certain John Doe, the administrator of the website www.pepcoalition.com.

PEPCI appears to have been formed by a large group of disgruntled planholders of Pacific Plans, Inc. (PPI) - a wholly owned subsidiary of Great Pacific Life Assurance Corporation, also owned by the Yuchengco Group of Companies (YGC) - who had previously purchased traditional pre-need educational plans but were unable to collect thereon or avail of the benefits thereunder after PPI, due to liquidity concerns, filed for corporate rehabilitation with prayer for suspension of payments before the Makati RTC.

Decrying PPI’s refusal/inability to honor its obligations under the educational pre-need plans, PEPCI sought to provide a forum by which the planholders could seek redress for their pecuniary loss under their policies by maintaining a website on the internet under the address of www.pepcoalition.com.

Gimenez alleged that PEPCI also owned, controlled and moderated on the internet a blogspot6 under the website address www.pacificnoplan.blogspot.com, as well as a yahoo e-group7 at no2pep2010@yahoogroups.com. These websites are easily accessible to the public or by anyone logged on to the internet.

Gimenez further alleged that upon accessing the above-stated websites in Makati on various dates from August 25 to October 2, 2005, he "was appalled to read numerous articles [numbering 13], maliciously and recklessly caused to be published by [the accused] containing highly derogatory statements and false accusations, relentlessly attacking the Yuchengco Family, YGC, and particularly, Malayan."8 He cited an article which was posted/published on www.pepcoalition.com on August 25, 2005 which stated:

Talagang naisahan na naman tayo ng mga Yuchengcos. Nangyari na ang mga kinatatakutan kong pagbagsak ng negotiation because it was done prematurely since we had not file any criminal aspect of our case. What is worse is that Yuchengcos benefited much from the nego. x x x . That is the fact na talagang hindi dapat pagtiwalaan ang mga Yuchengcos.

LET’S MOVE TO THE BATTLEFIELD. FILE THE CRIMINAL CASES IN COURT, BSP AND AMLC AND WHEREVER. Pumunta tayong muli sa senado, congreso, RCBC Plaza, and other venues to air our grievances and call for boycott ng YGC. Let us start within ourselves. Alisin natin ang mga investments and deposits natin sa lahat ng YGC and I mean lahat and again convince friends to do the same. Yung mga nanonood lang noon ay dapat makisali na talaga ngayon specially those who joined only after knowing that there was a negotiation for amicable settlements.

FOR SURE MAY TACTICS PA SILANG NAKABASTA SA ATIN. LET US BE READY FOR IT BECAUSE THEY HAD SUCCESSFULLY LULL US AND THE NEXT TIME THEY WILL TRY TO KILL US NA. x x x 9 (emphasis in the original)

By Resolution of May 5, 2006,10 the Makati City Prosecutor’s Office, finding probable cause to indict the accused, filed thirteen (13) separate Informations11 charging them with libel. The accusatory portion of one Information, docketed as Criminal Case No. 06-876, which was raffled off to public respondent reads:

That on or about the 25th day of August 2005 in Makati City, Metro Manila, Philippines, a place within the JURISDICTION of the Honorable Court, the above-named accused, being then the trustees of Parents Enabling Parents Coalition and as such trustees they hold the legal title to the website www.pepcoalition.com which is of general circulation, and publication to the public conspiring, confederating and mutually helping with one another together with John Does, did then and there willfully, unlawfully and feloniously and publicly and maliciously with intention of attacking the honesty, virtue, honor and integrity, character and reputation of complainant Malayan Insurance Co. Inc., Yuchengco Family particularly Ambassador Alfonso Yuchengco and Helen Dee and for further purpose exposing the complainant to public hatred and contempt published an article imputing a vice or defect to the complainant and caused to be composed, posted and published in the said website www.pepcoalition.com and injurious and defamatory article as follows:

Talagang naisahan na naman tayo ng mga Yuchengcos. Nangyari na ang mga kinatatakutan kong pagbagsak ng negotiation. x x x x x x x x x

For sure may tactics pa silang nakabasta sa atin. Let us be ready for it because they had successfully lull us and the next time they will try to kill us na. x x x

A copy of the full text of the foregoing article as published/posted in www.pepcoalition.com is attached as Annex "F" of the complaint.

That the keyword and password to be used in order to post and publish the above defamatory article are known to the accused as trustees holding legal title to the above-cited website and that the accused are the ones responsible for the posting and publication of

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the defamatory articles that the article in question was posted and published with the object of the discrediting and ridiculing the complainant before the public.

CONTRARY TO LAW.12

Several of the accused appealed the Makati City Prosecutor’s Resolution by a petition for review to the Secretary of Justice who, by Resolution of June 20, 2007,13 reversed the finding of probable cause and accordingly directed the withdrawal of the Informations for libel filed in court. The Justice Secretary opined that the crime of "internet libel" was non-existent, hence, the accused could not be charged with libel under Article 353 of the RPC.14

Petitioners, as co-accused,15 thereupon filed on June 6, 2006, before the public respondent, a Motion to Quash16 the Information in Criminal Case No. 06-876 on the grounds that it failed to vest JURISDICTION on the Makati RTC; the acts complained of in the Information are not punishable by law since internet libel is not covered by Article 353 of the RPC; and the Information is fatally defective for failure to designate the offense charged and the acts or omissions complained of as constituting the offense of libel.

Citing Macasaet v. People,17 petitioners maintained that the Information failed to allege a particular place within the trial court’s JURISDICTION where the subject article was printed and first published or that the offended parties resided in Makati at the time the alleged defamatory material was printed and first published.

By Order of October 3, 2006,18 the public respondent, albeit finding that probable cause existed, quashed the Information, citing Agustin v. Pamintuan.19 It found that the Information lacked any allegations that the offended parties were actually residing in Makati at the time of the commission of the offense as in fact they listed their address in the complaint-affidavit at Yuchengco Tower in Binondo, Manila; or that the alleged libelous article was printed and first published in Makati.

The prosecution moved to reconsider the quashal of the Information,20 insisting that the Information sufficiently conferred JURISDICTION on the public respondent. It cited Banal III v. Panganiban21 which held that the Information need not allege verbatim that the libelous publication was "printed and first published" in the appropriate venue. And it pointed out that Malayan has an office in Makati of which Helen is a resident. Moreover, the prosecution alleged that even assuming that the Information was deficient, it merely needed a formal amendment.

Petitioners opposed the prosecution’s motion for reconsideration, contending, inter alia, that since venue is JURISDICTIONal in criminal cases, any defect in an information for libel pertaining to JURISDICTION is not a mere matter of form that may be cured by amendment.22

By Order of March 8, 2007,23 the public respondent granted the prosecution’s motion for reconsideration and accordingly ordered the public prosecutor to "amend the Information to cure the defect of want of venue."

The prosecution thereupon moved to admit the Amended Information dated March 20, 2007,24 the accusatory portion of which reads:

That on or about the 25th day of August 2005 in Makati City, Metro Manila, Philippines, a place within the JURISDICTION of the Honorable Court, the above-named accused, being then the trustees of Parents Enabling Parents Coalition and as such trustees they hold the legal title to the website www.pepcoalition.com which is of general circulation, and publication to the public conspiring, confederating together with John Does, whose true names, identities and present whereabouts are still unknown and all of them mutually helping and aiding one another, did then and there willfully, unlawfully and feloniously and publicly and maliciously with intention of attacking the honesty, virtue, honor and integrity, character and reputation of complainant Malayan Insurance Co. Inc., Yuchengco Family particularly Ambassador Alfonso Yuchengco and Helen Dee and for further purpose exposing the complainant to public hatred and contempt published an article imputing a vice or defect to the complainant and caused to be composed, posted and published in the said website www.pepcoalition.com, a website accessible in Makati City, an injurious and defamatory article, which was first published and accessed by the private complainant in Makati City, as follows:

x x x x (emphasis and underscoring in the original; italics supplied)

Petitioners moved to quash the Amended Information25 which, they alleged, still failed to vest JURISDICTION upon the public respondent because it failed to allege that the libelous articles were "printed and first published" by the accused in Makati; and the prosecution erroneously laid the venue of the case in the place where the offended party accessed the internet-published article.

By the assailed Order of April 22, 2008, the public respondent, applying Banal III, found the Amended Information to be sufficient in form.

Petitioners’ motion for reconsideration26 having been denied by the public respondent by Joint Resolution of August 12, 2008, they filed the present petition for Certiorari and Prohibition faulting the public respondent for:

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1. NOT FINDING THAT THE ACTS ALLEGED IN THE INFORMATION ARE NOT PUNISHABLE BY LAW;

2. ADMITTING AN AMENDED INFORMATION WHOSE JURISDICTIONAL ALLEGATIONS CONTINUES TO BE DEFICIENT; and

3. NOT RULING THAT AN AMENDMENT IN THE INFORMATION FOR THE PURPOSE OF CURING JURISDICTIONAL DEFECTS IS ILLEGAL.27

With the filing of Gimenez’s Comment28 to the petition, the issues are: (1) whether petitioners violated the rule on hierarchy of courts to thus render the petition dismissible; and (2) whether grave abuse of discretion attended the public respondent’s admission of the Amended Information.

The established policy of strict observance of the judicial hierarchy of courts,29 as a rule, requires that recourse must first be made to the lower-ranked court exercising concurrent JURISDICTION with a higher court.30 A regard for judicial hierarchy clearly indicates that petitions for the issuance of extraordinary writs against first level courts should be filed in the RTC and those against the latter should be filed in the Court of Appeals.31 The rule is not iron-clad, however, as it admits of certain exceptions.

Thus, a strict application of the rule is unnecessary when cases brought before the appellate courts do not involve factual but purely legal questions.32

In the present case, the substantive issue calls for the Court’s exercise of its discretionary authority, by way of exception, in order to abbreviate the review process as petitioners raise a pure question of law involving JURISDICTION in criminal complaints for libel under Article 360 of the RPC –whether the Amended Information is sufficient to sustain a charge for written defamation in light of the requirements under Article 360 of the RPC, as amended by Republic Act (RA) No. 4363, reading:

Art. 360. Persons responsible.—Any person who shall publish, exhibit or cause the publication or exhibition of any defamation in writing or by similar means, shall be responsible for the same.

The author or editor of a book or pamphlet, or the editor or business manager of a daily newspaper, magazine or serial publication, shall be responsible for the defamations contained therein to the same extent as if he were the author thereof.

The criminal action and civil action for damages in cases of written defamations, as provided for in this chapter shall be filed simultaneously or separately with the Court of First Instance of the province or city where the libelous article is printed and first published or where any of the offended parties actually resides at the time of the commission of the offense: Provided, however, That where one of the offended parties is a public officer whose office is in the City of Manila at the time of the commission of the offense, the action shall be filed in the Court of First Instance of the City of Manila or of the city or province where the libelous article is printed and first published, and in case such public officer does not hold office in the City of Manila, the action shall be filed in the Court of First Instance of the province or city where he held office at the time of the commission of the offense or where the libelous article is printed and first published and in case one of the offended parties is a private individual, the action shall be filed in the Court of First Instance of the province or city where he actually resides at the time of the commission of the offense or where the libelous matter is printed and first published x x x. (emphasis and underscoring supplied)

Venue is JURISDICTIONal in criminal actions such that the place where the crime was committed determines not only the venue of the action but constitutes an essential element of JURISDICTION.33 This principle acquires even greater import in libel cases, given that Article 360, as amended, specifically provides for the possible venues for the institution of the criminal and civil aspects of such cases.

In Macasaet,34 the Court reiterated its earlier pronouncements in Agbayani v. Sayo35 which laid out the rules on venue in libel cases, viz:

For the guidance, therefore, of both the bench and the bar, this Court finds it appropriate to reiterate our earlier pronouncement in the case of Agbayani, to wit:

In order to obviate controversies as to the venue of the criminal action for written defamation, the complaint or information should contain allegations as to whether, at the time the offense was committed, the offended party was a public officer or a private individual and where he was actually residing at that time. Whenever possible, the place where the written defamation was printed and first published should likewise be alleged. That allegation would be a sine qua non if the circumstance as to where the libel was printed and first published is used as the basis of the venue of the action. (emphasis and underscoring supplied)

It becomes clear that the venue of libel cases where the complainant is a private individual is limited to only either of two places, namely: 1) where the complainant actually resides at the time of the commission of the offense; or 2) where the alleged defamatory article was printed and first published. The Amended Information in the present case opted to lay the venue by availing of the

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second. Thus, it stated that the offending article "was first published and accessed by the private complainant in Makati City." In other words, it considered the phrase to be equivalent to the requisite allegation of printing and first publication.

The insufficiency of the allegations in the Amended Information to vest JURISDICTION in Makati becomes pronounced upon an examination of the rationale for the amendment to Article 360 by RA No. 4363. Chavez v. Court of Appeals36 explained the nature of these changes:

Agbayani supplies a comprehensive restatement of the rules of venue in actions for criminal libel, following the amendment by Rep. Act No. 4363 of the Revised Penal Code:

"Article 360 in its original form provided that the venue of the criminal and civil actions for written defamations is the province wherein the libel was published, displayed or exhibited, regardless of the place where the same was written, printed or composed. Article 360 originally did not specify the public officers and the courts that may conduct the preliminary investigation of complaints for libel.

Before article 360 was amended, the rule was that a criminal action for libel may be instituted in any JURISDICTION where the libelous article was published or circulated, irrespective of where it was written or printed (People v. Borja, 43 Phil. 618). Under that rule, the criminal action is transitory and the injured party has a choice of venue.

Experience had shown that under that old rule the offended party could harass the accused in a libel case by laying the venue of the criminal action in a remote or distant place.

Thus, in connection with an article published in the Daily Mirror and the Philippine Free Press, Pio Pedrosa, Manuel V. Villareal and Joaquin Roces were charged with libel in the justice of the peace court of San Fabian, Pangasinan (Amansec v. De Guzman, 93 Phil. 933).

To forestall such harassment, Republic Act No. 4363 was enacted. It lays down specific rules as to the venue of the criminal action so as to prevent the offended party in written defamation cases from inconveniencing the accused by means of out-of-town libel suits, meaning complaints filed in remote municipal courts (Explanatory Note for the bill which became Republic Act No. 4363, Congressional Record of May 20, 1965, pp. 424-5; Time, Inc. v. Reyes, L-28882, May 31, 1971, 39 SCRA 303, 311).

x x x x (emphasis and underscoring supplied)

Clearly, the evil sought to be prevented by the amendment to Article 360 was the indiscriminate or arbitrary laying of the venue in libel cases in distant, isolated or far-flung areas, meant to accomplish nothing more than harass or intimidate an accused. The disparity or unevenness of the situation becomes even more acute where the offended party is a person of sufficient means or possesses influence, and is motivated by spite or the need for revenge.

If the circumstances as to where the libel was printed and first published are used by the offended party as basis for the venue in the criminal action, the Information must allege with particularity where the defamatory article was printed and first published, as evidenced or supported by, for instance, the address of their editorial or business offices in the case of newspapers, magazines or serial publications. This pre-condition becomes necessary in order to forestall any inclination to harass.

The same measure cannot be reasonably expected when it pertains to defamatory material appearing on a website on the internet as there would be no way of determining the situs of its printing and first publication. To credit Gimenez’s premise of equating his first access to the defamatory article on petitioners’ website in Makati with "printing and first publication" would spawn the very ills that the amendment to Article 360 of the RPC sought to discourage and prevent. It hardly requires much imagination to see the chaos that would ensue in situations where the website’s author or writer, a blogger or anyone who posts messages therein could be sued for libel anywhere in the Philippines that the private complainant may have allegedly accessed the offending website.

For the Court to hold that the Amended Information sufficiently vested JURISDICTION in the courts of Makati simply because the defamatory article was accessed therein would open the floodgates to the libel suit being filed in all other locations where the pepcoalition website is likewise accessed or capable of being accessed.1avvphi1

Respecting the contention that the venue requirements imposed by Article 360, as amended, are unduly oppressive, the Court’s pronouncements in Chavez37 are instructive:

For us to grant the present petition, it would be necessary to abandon the Agbayani rule providing that a private person must file the complaint for libel either in the place of printing and first publication, or at the complainant’s place of residence. We would also have to abandon the subsequent cases that reiterate this rule in Agbayani, such as Soriano, Agustin, and Macasaet. There is no convincing reason to resort to such a radical action. These limitations imposed on libel actions filed by private persons are hardly onerous, especially as they still allow such persons to file the civil or criminal complaint in their respective places of residence, in which

41

situation there is no need to embark on a quest to determine with precision where the libelous matter was printed and first published.

(Emphasis and underscoring supplied.)

IN FINE, the public respondent committed grave abuse of discretion in denying petitioners’ motion to quash the Amended Information.

WHEREFORE, the petition is GRANTED. The assailed Order of April 22, 2008 and the Joint Resolution of August 12, 2008 are hereby SET ASIDE. The Regional Trial Court of Makati City, Br. 149 is hereby DIRECTED TO QUASH the Amended Information in Criminal Case No. 06-876 and DISMISS the case.

SO ORDERED.

RE: Venue Nature of the Action

GENEROSA ALMEDA LATORRE, petitioner, vs. LUIS ESTEBAN LATORRE, respondent.

R E S O L U T I O N

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45, in relation to Rule 41, of the Rules of Civil Procedure, assailing the decision2 of the Regional Trial Court (RTC) of Muntinlupa City, Branch 256, dated April 29, 2008.

The facts of the case are as follows:

In October 2000, petitioner Generosa Almeda Latorre (petitioner) filed before the RTC of Muntinlupa City a Complaint3 for Collection and Declaration of Nullity of Deed of Absolute Sale with application for Injunction against her own son, herein respondent Luis Esteban Latorre (respondent), and one Ifzal Ali (Ifzal).

Petitioner averred that, on September 28, 1999, respondent and Ifzal entered into a Contract of Lease4 over a 1,244-square meter real property, situated at No. 1366 Caballero St., Dasmariñas Village, Makati City (subject property). Under the said contract, respondent, as lessor, declared that he was the absolute and registered owner of the subject property. Petitioner alleged that respondent's declaration therein was erroneous because she and respondent were co-owners of the subject property in equal shares.

Petitioner narrated that, on March 14, 1989, she and respondent executed their respective Deeds of Donation, conveying the subject property in favor of The Porfirio D. Latorre Memorial & Fr. Luis Esteban Latorre Foundation, Inc. (the Foundation). Thus, Transfer Certificate of Title (TCT) No. 1619635 was issued in the name of the Foundation. Subsequently, on September 2, 1994, petitioner and respondent executed separate Deeds of Revocation of Donation and Reconveyance of the subject property, consented to by the Foundation, through the issuance of appropriate corporate resolutions. However, the Deeds of Revocation were not registered; hence, the subject property remained in the name of the Foundation. Petitioner insisted, however, that respondent was fully aware that the subject property was owned in common by both of them. To protect her rights as co-owner, petitioner formally demanded from Ifzal the payment of her share of the rentals, which the latter, however, refused to heed.

Moreover, petitioner averred that, on or about August 16, 2000, she discovered that respondent caused the annotation of an adverse claim on the TCT of the subject property, claiming full ownership over the same by virtue of a Deed of Absolute Sale6 dated March 21, 2000, allegedly executed by petitioner in favor of respondent. Petitioner claimed that the deed was a falsified document; that her signature thereon was forged by respondent; and that she never received P21 Million or any other amount as consideration for her share of the subject property. Thus, petitioner prayed that Ifzal be enjoined from paying the rentals to respondent, and the latter from receiving said rentals; that both Ifzal and respondent be ordered to pay petitioner her share of the rentals; and that respondent be enjoined from asserting full ownership over the subject property and from committing any other act in derogation of petitioner's interests therein. Petitioner also prayed for the payment of moral and exemplary damages, litigation expenses, and costs of the suit.

Respondent immediately filed a Motion to Dismiss7 on the sole ground that the venue of the case was improperly laid. He stressed that while the complaint was denominated as one for Collection and Declaration of Nullity of Deed of Absolute Sale with application for Injunction, in truth the case was a real action affecting title to and interest over the subject property. Respondent insisted that all of petitioner's claims were anchored on her claim of ownership over one-half (½) portion of the subject property. Since the subject property is located in Makati City, respondent argued that petitioner should have filed the case before the RTC of Makati City and not of Muntinlupa City.

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Ifzal also filed his motion to dismiss on the ground of want of JURISDICTION, asserting that he was immune from suit because he was an officer of the Asian Development Bank, an international organization.

The RTC issued a Temporary Restraining Order dated November 6, 2000, restraining Ifzal from paying his rentals to respondent and enjoining the latter from receiving from the former the aforesaid rentals. The RTC also directed both Ifzal and respondent to pay petitioner her share of the rentals, with the corresponding order against respondent not to commit any act in derogation of petitioner's interest over the subject property.

In its Order dated January 2, 2001, the RTC denied respondent's motion to dismiss. The RTC ruled that the nature of an action whether real or personal was determined by the allegations in the complaint, irrespective of whether or not the plaintiff was entitled to recover upon the claims asserted - a matter resolved only after, and as a result of, a trial. Thus, trial on the merits ensued.

Undaunted, respondent filed an Answer Ad Cautelam8 dated March 19, 2001, insisting, among others, that the case was a real action and that the venue was improperly laid.9 Respondent narrated that he was a former Opus Dei priest but he left the congregation in 1987 after he was maltreated by his Spanish superiors. Respondent alleged that petitioner lived with him and his family from 1988 to 2000, and that he provided for petitioner's needs. Respondent also alleged that, for almost 20 years, the Opus Dei divested the Latorre family of several real properties. Thus, in order to spare the subject property from the Opus Dei, both petitioner and respondent agreed to donate it to the Foundation. In 1994, when respondent got married and sired a son, both petitioner and respondent decided to revoke the said donation. The Foundation consented to the revocation. However, due to lack of funds, the title was never transferred but remained in the name of the Foundation.

Respondent asseverated that he and his wife took good care of petitioner and that they provided for her needs, spending a substantial amount of money for these needs; that because of this, and the fact that the rentals paid for the use of the subject property went to petitioner, both parties agreed that petitioner would convey her share over the subject property to respondent; and that, on March 21, 2000, petitioner executed a Deed of Absolute Sale in favor of respondent.

Respondent further alleged that sometime in March to May 2000, the relationship of the parties, as mother and son, deteriorated. Petitioner left respondent's house because he and his wife allegedly ignored, disrespected, and insulted her.10 Respondent claimed, however, that petitioner left because she detested his act of firing their driver.11 It was then that this case was filed against him by petitioner.

In the meantime, in its Order dated May 15, 2003, the RTC dismissed petitioner's claim against Ifzal because the dispute was clearly between petitioner and respondent.

On April 29, 2008, the RTC ruled in favor of respondent, disposing of the case in this wise:

While the case herein filed by the plaintiff involves recovery of possession of a real property situated at 1366 Caballero St., Dasmariñas Village, Makati City, the same should have been filed and tried in the Regional Trial Court of Makati City who, undoubtedly, has JURISDICTION to hear the matter as aforementioned the same being clearly a real action.

WHEREFORE, in view of the foregoing, the above-entitled case is hereby DISMISSED for want of JURISDICTION, all in pursuance to the above-cited jurisprudence and Rule 4 of the Rules of Court.

SO ORDERED.12

Aggrieved, petitioner filed her Motion for Reconsideration,13 which the RTC denied in its Order14 dated July 24, 2008 for lack of merit.

Hence, this Petition, claiming that the RTC erred in treating the venue as JURISDICTION and in treating petitioner's complaint as a real action.

While the instant case was pending resolution before this Court, petitioner passed away on November 14, 2009. Thus, petitioner's counsel prayed that, pending the appointment of a representative of petitioner's estate, notices of the proceedings herein be sent to petitioner’s other son, Father Roberto A. Latorre.15

As early as the filing of the complaint, this case had been marred by numerous procedural infractions committed by petitioner, by respondent, and even by the RTC, all of which cannot be disregarded by this Court.

First. Petitioner filed her complaint with the RTC of Muntinlupa City instead of the RTC of Makati City, the latter being the proper venue in this case.

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Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure provide an answer to the issue of venue.16 Actions affecting title to or possession of real property or an interest therein (real actions) shall be commenced and tried in the proper court that has territorial JURISDICTION over the area where the real property is situated. On the other hand, all other actions (personal actions) shall be commenced and tried in the proper courts where the plaintiff or any of the principal plaintiffs resides or where the defendant or any of the principal defendants resides.17 The action in the RTC, other than for Collection, was for the Declaration of Nullity of the Deed of Absolute Sale involving the subject property, which is located at No. 1366 Caballero St., Dasmariñas Village, Makati City. The venue for such action is unquestionably the proper court of Makati City, where the real property or part thereof lies, not the RTC of Muntinlupa City.18

In this JURISDICTION, we adhere to the principle that the nature of an action is determined by the allegations in the Complaint itself, rather than by its title or heading.19 It is also a settled rule that what determines the venue of a case is the primary objective for the filing of the case.20 In her Complaint, petitioner sought the nullification of the Deed of Absolute Sale on the strength of two basic claims that (1) she did not execute the deed in favor of respondent; and (2) thus, she still owned one half (½) of the subject property. Indubitably, petitioner's complaint is a real action involving the recovery of the subject property on the basis of her co-ownership thereof.

Second. The RTC also committed a procedural blunder when it denied respondent's motion to dismiss on the ground of improper venue.

The RTC insisted that trial on the merits be conducted even when it was awfully glaring that the venue was improperly laid, as pointed out by respondent in his motion to dismiss. After trial, the RTC eventually dismissed the case on the ground of lack of JURISDICTION, even as it invoked, as justification, the rules and jurisprudence on venue. Despite the conduct of trial, the RTC failed to adjudicate this case on the merits.

Third. Respondent also did not do very well, procedurally. When the RTC denied his Motion to Dismiss, respondent could have filed a petition for certiorari and/or prohibition inasmuch as the denial of the motion was done without JURISDICTION or in excess of JURISDICTION or with grave abuse of discretion amounting to lack of JURISDICTION.21 However, despite this lapse, it is clear that respondent did not waive his objections to the fact of improper venue, contrary to petitioner's assertion. Notably, after his motion to dismiss was denied, respondent filed a Motion for Reconsideration to contest such denial. Even in his Answer Ad Cautelam, respondent stood his ground that the case ought to be dismissed on the basis of improper venue.

Finally, petitioner came directly to this Court on a Petition for Review on Certiorari under Rule 45, in relation to Rule 41, of the Rules of Civil Procedure on alleged pure questions of law. In Murillo v. Consul,22 we laid down a doctrine that was later adopted by the 1997 Revised Rules of Civil Procedure. In that case, this Court had the occasion to clarify the three (3) modes of appeal from decisions of the RTC, namely: (1) ordinary appeal or appeal by writ of error, where judgment was rendered in a civil or criminal action by the RTC in the exercise of its original JURISDICTION; (2) petition for review, where judgment was rendered by the RTC in the exercise of its appellate JURISDICTION; and (3) petition for review to the Supreme Court.

The first mode of appeal, governed by Rule 41, is brought to the Court of Appeals (CA) on questions of fact or mixed questions of fact and law. The second mode of appeal, covered by Rule 42, is brought to the CA on questions of fact, of law, or mixed questions of fact and law. The third mode of appeal, provided in Rule 45, is filed with the Supreme Court only on questions of law.1avvphi1

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts.23 Our ruling in Velayo-Fong v. Velayo24 is instructive:

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.25

In her Reply to respondent’s Comment,26 petitioner prayed that this Court decide the case on the merits. To do so, however, would require the examination by this Court of the probative value of the evidence presented,

taking into account the fact that the RTC failed to adjudicate this controversy on the merits. This, unfortunately, we cannot do. It thus becomes exceedingly clear that the filing of the case directly with this Court ran afoul of the doctrine of hierarchy of courts. Pursuant to this doctrine, direct resort from the lower courts to the Supreme Court will not be entertained unless the appropriate remedy sought cannot be obtained in the lower tribunals. This Court is a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by the Constitution and by immemorial tradition.27

44

Accordingly, we find no merit in the instant petition. Neither do we find any reversible error in the trial court’s dismissal of the case ostensibly for want of JURISDICTION, although the trial court obviously meant to dismiss the case on the ground of improper venue.

WHEREFORE, the instant Petition is DENIED. No costs.

SO ORDERED.

RE: Equity JURISDICTION

JACOBUS BERNHARD HULST, petitioner, vs. PR BUILDERS, INC., respondent.

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision2 in favor of spouses Hulst, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding the Contract to Sell and ordering respondent to:

1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the time complaint was filed;

2) Pay complainant the sum of P297,000.00 as actual damages;

3) Pay complainant the sum of P100,000.00 by way of moral damages;

4) Pay complainant the sum of P150,000.00 as exemplary damages;

5) P50,000.00 as attorney's fees and for other litigation expenses; and

6) Cost of suit.

SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then on, petitioner alone pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned unsatisfied.7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

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On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title (TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after deducting the legal fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied properties is only around PhP6,000,000.00. The disparity between the two valuations are [sic] so egregious that the Sheriff should have looked into the matter first before proceeding with the execution sale of the said properties, especially when the auction sale proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding is the amount for which the properties were bidded and sold during the public auction and that, mere inadequacy of the price is not a sufficient ground to annul the sale, the court is justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had especially so when there was only one bidder, the HOLLY PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed prior to the execution sale.

Besides, what is at issue is not the value of the subject properties as determined during the auction sale, but the determination of the value of the properties levied upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x.

x x x x

It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in excess of the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real properties that are reasonably sufficient to enforce its final and executory judgment, this time, taking into consideration not only the value of the properties as indicated in their respective tax declarations, but also all the other determinants at arriving at a fair market value, namely: the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape or location, and the tax declarations thereon.

SO ORDERED.19

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A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held that petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to redeem inadequacy of price should not be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses; that Buan v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment debt of only around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made by the sheriff, it behooves this Court to address a matter of public and national importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals who are disqualified under the Constitution from owning real property in their names.

Section 7 of Article XII of the 1987 Constitution provides:

Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.28 It does not create, modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413, Civil Code);34 (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code);35 (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);36 (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside.40 On the other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.41 In other words, in a contract to sell, the prospective seller agrees to transfer ownership

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of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral and exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of the land.45 The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with JURISDICTION over the subject matter of the complaint.47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of another's injury), states:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice.48 There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into a contract to sell that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is exercised in this case "as the complement of legal JURISDICTION [that] seeks to reach and to complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity JURISDICTION in this case is to prevent unjust enrichment and to ensure restitution. Equity JURISDICTION aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal JURISDICTION.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount is P5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only entitled to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise of its equity JURISDICTION may validly order petitioner to return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties.

48

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced since the appraisal was based on the value of land in neighboring developed subdivisions and on the assumption that the residential unit appraised had already been built; that the Sheriff need not determine the fair market value of the subject properties before levying on the same since what is material is the amount for which the properties were bidded and sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding with the execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:

Sec. 9. Execution of judgments for money, how enforced. –

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution, giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied upon in like manner and with like effect as under a writ of attachment (Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a judgment debtor's property for the purpose of satisfying the command of the writ of execution.55 The object of a levy is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of execution of the levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and academic the motion to quash the levy. The HLURB Arbiter lost JURISDICTION to act on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal fees had already been remitted to the HLURB. The judgment award had already been turned over to the judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder. In fact, only the signature of the HLURB Director for that purpose was needed58 – a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment upon the propriety or

49

impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor judgment.59 In the present case, all the requirements of auction sale under the Rules have been fully complied with to warrant the issuance of the corresponding certificates of sale.

And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v. Court of Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court in Barrozo, to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the conscience of the court. Supposing that this issue is open even after the one-year period has expired and after the properties have passed into the hands of third persons who may have paid a price higher than the auction sale money, the first thing to consider is that the stipulation contains no statement of the reasonable value of the properties; and although defendant' answer avers that the assessed value was P3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price – which was the complaint' allegation – is not sufficient ground to annul the sale. It is only where such inadequacy shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the conscience is not shocked upon examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed by this Court.

Furthermore, where there is the right to redeem – as in this case – inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the theory that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that the levy and attempted execution of the second parcel of land was declared void for being in excess of and beyond the original judgment award granted in favor of the judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees." Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and bought each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with the description of the levied property and notice of execution; and (b) leave with the occupant of the property copy of the same order, description and notice.68 Records do not show that respondent alleged non-compliance by the Sheriff of said requisites.

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Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must exercise the care which a reasonably prudent person would exercise under like conditions and circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is impossible to know the precise quantity of land or other property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the value of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of justice and the like would be futile.71 It is not within the JURISDICTION of the Sheriff to consider, much less resolve, respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention.72 In the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that the residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report is not the best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is declared NULL and VOID. HLURB Arbiter Aquino and Director Ceniza are directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

RE: Action in remL Action in Personam

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, petitioner, vs. JOSEPH ANTHONY M. ALEJANDRO, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision1 of the Court of Appeals in CA-G.R. CV No. 78200 affirming the August 30, 2000 Decision2 of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M. Alejandro’s claim for damages arising from petitioner Philippine Commercial International Bank’s (PCIB) invalid garnishment of respondent’s deposits.

On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits assigned by respondent as security for the loan, petitioner requested the latter to put up additional security for the loan. Respondent, however, sought a reconsideration of said request pointing out petitioner’s alleged mishandling of his account due to its failure to carry out his instruction to close his account as early

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as April 1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50.4 It appears that the amount of P249,828,588.90 was the consolidated amount of a series of yen loans granted by petitioner to respondent during the months of February and April 1997.5

In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his unassigned deposits notwithstanding his verbal promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the same prior to their assignment as security for the loan; and (2) that respondent is not a resident of the Philippines. The application for the issuance of a writ was supported with the affidavit of Nepomuceno.6

On October 24, 1997, the trial court granted the application and issued the writ ex parte7 after petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were garnished. On October 27, 1997, respondent, through counsel, filed a manifestation informing the court that he is voluntarily submitting to its JURISDICTION.8

Subsequently, respondent filed a motion to quash9 the writ contending that the withdrawal of his unassigned deposits was not fraudulent as it was approved by petitioner. He also alleged that petitioner knew that he maintains a permanent residence at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In both addresses, petitioner regularly communicated with him through its representatives. Respondent added that he is the managing partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to the Philippines.

On December 24, 1997, the trial court issued an order quashing the writ and holding that the withdrawal of respondent’s unassigned deposits was not intended to defraud petitioner. It also found that the representatives of petitioner personally transacted with respondent through his home address in Quezon City and/or his office in Makati City. It thus concluded that petitioner misrepresented and suppressed the facts regarding respondent’s residence considering that it has personal and official knowledge that for purposes of service of summons, respondent’s residence and office addresses are located in the Philippines. The dispositive portion of the court’s decision is as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED.

SO ORDERED.11

With the denial12 of petitioner’s motion for reconsideration, it elevated the case to the Court of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition was dismissed for failure to prove that the trial court abused its discretion in issuing the aforesaid order.13 Petitioner filed a motion for reconsideration but was denied on October 28, 1999.14 On petition with this Court, the case was dismissed for late filing in a minute resolution (G.R. No. 140605) dated January 19, 2000.15 Petitioner filed a motion for reconsideration but was likewise denied with finality on March 6, 2000.16

Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25 Million17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his deposits. He presented evidence showing that his P150,000.00 RCBC check payable to his counsel as attorney’s fees, was dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of the Ateneo de Manila University in 1982 with a double degree of Economics and Management Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove that he is a well known lawyer in the business community both in the Philippines and in Hong Kong.18 For its part, the lone witness presented by petitioner was Nepomuceno who claimed that she acted in good faith in alleging that respondent is a resident of Hong Kong.19

On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his claim in the amount of P25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And, considering that the amount of the bond is insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant the amount of P6,201,265.31.

SO ORDERED.20

The trial court denied petitioner’s motion for reconsideration on October 24, 2000.21

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Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial court. It held that in claiming that respondent was not a resident of the Philippines, petitioner cannot be said to have been in good faith considering that its knowledge of respondent’s Philippine residence and office address goes into the very issue of the trial court’s JURISDICTION which would have been defective had respondent not voluntarily appeared before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner and specified their basis. The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted. In lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with appellant [herein petitioner], is ORDERED to pay appellee [herein respondent] P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages; and P1,000,000.00 as attorney’s fees, to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.22

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioner’s motion for reconsideration but granted that of respondent’s by ordering petitioner to pay additional P5Million as exemplary damages.23

Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a writ of attachment because respondent is a resident of the Philippines and that his act of withdrawing his deposits with petitioner was without intent to defraud, can no longer be passed upon by this Court. More importantly, the conclusions of the court that petitioner bank misrepresented that respondent was residing out of the Philippines and suppressed the fact that respondent has a permanent residence in Metro Manila where he may be served with summons, are now beyond the power of this Court to review having been the subject of a final and executory order. Said findings were sustained by the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness of judgment, which obtains under the premises, precludes the relitigation of a particular fact or issue in another action between the same parties even if based on a different claim or cause of action. The judgment in the prior action operates as estoppel as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. The previous judgment is conclusive in the second case, as to those matters actually and directly controverted and determined.24 Hence, the issues of misrepresentation by petitioner and the residence of respondent for purposes of service of summons can no longer be questioned by petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the improper issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and suppression of a material fact, the latter contends that it acted in good faith. Petitioner also contends that even if respondent is considered a resident of the Philippines, attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he (respondent) is a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication.

Petitioner’s contentions are without merit.

While the final order of the trial court which quashed the writ did not categorically use the word "bad faith" in characterizing the representations of petitioner, the tenor of said order evidently considers the latter to have acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus –

In the hearings of the motion, and oral arguments of counsels before the Court, it appears that plaintiff BANK through its contracting officers Vice President Corazon B. Nepomuceno and Executive Vice President Jose Ramon F. Revilla, personally transacted with defendant mainly through defendant’s permanent residence in METRO-MANILA, either in defendant’s home address in Quezon City or his main business address at the Romulo Mabanta Buenaventura Sayoc & Delos Angeles in MAKATI and while at times follow ups were made through defendant’s temporary home and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge that defendant’s permanent and official residence for purposes of service of summons is in the Philippines. In fact, this finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK, in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm was addressed to the ROMULO LAW FIRM in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn was not part of defendant’s peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor

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is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendant’s permanent residence is in METRO MANILA where he could be served with summons.

On the above findings, and mainly on the misrepresentations made by plaintiff on the grounds for the issuance of the attachment in the verified complaint, the Court concludes that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled to the attachment.25

Petitioner is therefore barred by the principle of conclusiveness of judgment from again invoking good faith in the application for the issuance of the writ. Similarly, in the case of Hanil Development Co., Ltd. v. Court of Appeals,26 the Court debunked the claim of good faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of said party having been previously determined in a final decision which voided the assailed writ. Thus –

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the award of attorney’s fees and injunction bond premium in favor of Hanil is [contrary] to law and jurisprudence. It contends that no malice or bad faith may be imputed to it in procuring the writ.

Escobar’s protestation is now too late in the day. The question of the illegality of the attachment and Escobar’s bad faith in obtaining it has long been settled in one of the earlier incidents of this case. The Court of Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with grave abuse of discretion. Escobar’s bad faith in procuring the writ cannot be doubted. Its Petition for the Issuance of Preliminary Attachment made such damning allegations that: Hanil was already able to secure a complete release of its final collection from the MPWH; it has moved out some of its heavy equipments for unknown destination, and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that "after personal verification by (Escobar) of (Hanil’s) equipment in Cagayan de Oro City, it appears that the equipments were no longer existing from their compound." All these allegations of Escobar were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of misrepresentation and suppression of material facts on the part of petitioner, the factual backdrop of this case does not support petitioner’s claim of good faith. The facts and circumstances omitted are highly material and relevant to the grant or denial of writ of attachment applied for.

Finally, there is no merit in petitioner’s contention that respondent can be considered a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication, and therefore qualifies as among those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court which provides:

(f) In an action against a party x x x on whom summons may be served by publication.

In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of attachment.

The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. — At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

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(c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person;

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire JURISDICTION over the action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same provision.27

Corollarily, in actions in personam, such as the instant case for collection of sum of money,28 summons must be served by personal or substituted service, otherwise the court will not acquire JURISDICTION over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire JURISDICTION to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.29 Thus, in order to acquire JURISDICTION in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendant’s property. The service of summons in this case (which may be by publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant), is no longer for the purpose of acquiring JURISDICTION but for compliance with the requirements of due process.30

However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in an action in personam, is not always necessary in order for the court to acquire JURISDICTION to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section.

The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service – (a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant; or (c) in any other manner which the court may deem sufficient.

In Montalban v. Maximo,31 however, the Court held that substituted service of summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer JURISDICTION on the court over the person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a) leaving copies of the summons at the defendant’s residence with some person of suitable discretion residing therein, or (b) by leaving copies at the defendant’s office or regular place of business with some competent person in charge thereof.32 Hence, the court may acquire JURISDICTION over an action in personam by mere substituted service without need of attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for residents temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in this wise:

A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one who may be reasonably expected to act in his place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in the event a question that affects him crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the court need not always attach the defendant’s property in order to have authority to try the case. Where the plaintiff seeks to attach the defendant’s property and to resort to the concomitant service of summons by publication, the same must be with prior leave, precisely because, if the sole purpose of the attachment is for the court to acquire JURISDICTION, the latter must determine whether from the allegations in the complaint,

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substituted service (to persons of suitable discretion at the defendant’s residence or to a competent person in charge of his office or regular place of business) will suffice, or whether there is a need to attach the property of the defendant and resort to service of summons by publication in order for the court to acquire JURISDICTION over the case and to comply with the requirements of due process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly on the representation of petitioner that respondent is not a resident of the Philippines.34 Obviously, the trial court’s issuance of the writ was for the sole purpose of acquiring JURISDICTION to hear and decide the case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring JURISDICTION, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to humiliation and annoyance.35 It should be resorted to only when necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire JURISDICTION over the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting in the present case.36

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are damages in name only and not in fact.37 They are recoverable where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus subject to the discretion of the court according to the circumstances of the case.38

In this case, the award of nominal damages is proper considering that the right of respondent to use his money has been violated by its garnishment. The amount of nominal damages must, however, be reduced from P2 million to P50,000.00 considering the short period of 2 months during which the writ was in effect as well as the lack of evidence as to the amount garnished.1âwphi1

Likewise, the award of attorney’s fees is proper when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is also the amount of money garnished, and the length of time respondents have been deprived of the use of their money by reason of the wrongful attachment.39 It may also be based upon (1) the amount and the character of the services rendered; (2) the labor, time and trouble involved; (3) the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the employment; (6) the skill and the experience called for in the performance of the services; (7) the professional character and the social standing of the attorney; (8) the results secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is contingent than when it is not.40

All the aforementioned weighed, and considering the short period of time it took to have the writ lifted, the favorable decisions of the courts below, the absence of evidence as to the professional character and the social standing of the attorney handling the case and the amount garnished, the award of attorney’s fees should be fixed not at P1 Million, but only at P200,000.00.

The courts below correctly awarded moral damages on account of petitioner’s misrepresentation and bad faith; however, we find the award in the amount of P5 Million excessive. Moral damages are to be fixed upon the discretion of the court taking into consideration the educational, social and financial standing of the parties.41 Moral damages are not intended to enrich a complainant at the expense of a defendant.42 They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of petitioner’s culpable action. Moral damages must be commensurate with the loss or injury suffered. Hence, the award of moral damages is reduced to P500,000.00.

Considering petitioner’s bad faith in securing the writ of attachment, we sustain the award of exemplary damages by way of example or correction for public good. This should deter parties in litigations from resorting to baseless and preposterous allegations to obtain writs of attachments. While as a general rule, the liability on the attachment bond is limited to actual (or in some cases,

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temperate or nominal) damages, exemplary damages may be recovered where the attachment was established to be maliciously sued out.43 Nevertheless, the award of exemplary damages in this case should be reduced from P5M to P500,000.00.

Finally, contrary to the claim of petitioner, the instant case for damages by reason of the invalid issuance of the writ, survives the dismissal of the main case for sum of money. Suffice it to state that the claim for damages arising from such wrongful attachment may arise and be decided separately from the merits of the main action.44

WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As modified, petitioner Philippine Commercial International Bank is ordered to pay respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal damages, P200,000.00 as attorney’s fees; and P500,000.00 as moral damages, and P500,000.00 as exemplary damages, to be satisfied against the attachment bond issued by Prudential Guarantee & Assurance Inc.,45 under JCL (4) No. 01081, Bond No. HO-46764-97.

No pronouncement as to costs.

SO ORDERED.