FIRST DIVISION The first case was commenced on December 11, 1996, by
respondent Segundo Bautista, a registered owner of the parcel of
G.R. No. 137794 August 11, 2010
ERLINDA REYES and ROSEMARIE MATIENZO, Petitioners,
vs.
HON. JUDGE BELEN B. ORTIZ, Presiding, Branch 49, Metropolitan
Trial Court, Caloocan City; SPOUSES BERNARD and FLORENCIA
PERL, represented by Attorney-in-Fact BENJAMIN MUCIO; HON.
JUDGE VICTORIA ISABEL A. PAREDES, Presiding, Branch 124,
Regional Trial Court, Caloocan City and SEGUNDO
BAUTISTA, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 149664
SPS. ALBERTO EMBORES and LOURDES EMBORES, SPS. ROBERTO
AND EVELYN PALAD, DENNIS HENOSA and CORAZON
LAURENTE, Petitioners,
vs.
HON. RAYMUNDO G. VALLEGA, Presiding Judge, Branch 52,
Metropolitan Trial Court, Caloocan City; HON. ELEANOR R.
KWONG, Presiding Judge, Branch 51, Metropolitan Trial Court,
Caloocan City; HON. JUDGE BELEN B. ORTIZ, Presiding Judge,
Branch 49, Metropolitan Trial Court, Caloocan City; VICTORIA C.
SALIRE-ALBIS, represented by her attorney-in-fact MR. MENELIO C.
SALIRE; MA. FE R. ROCO, ALFREDO TAN, MANUELITO ESTRELLA;
and HON. JUDGE ANTONIO FINEZA, Presiding Judge, Branch 131,
Regional Trial Court, Caloocan City, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
The instant cases are consolidated Petitions1 for Declaratory
Relief, Certiorari, and Prohibition. The petitioners in G.R. No. 137794
seek to declare null and void the proceedings in Civil Case No.
23477, an ejectment case, before the Metropolitan Trial Court
(MeTC), Caloocan City, Branch 49, and Civil Case No. C-17725, a
complaint for Recovery of Possession and Ownership, filed with the
Regional Trial Court (RTC), Caloocan City, Branch 124;2while the
petitioners in G.R. No. 149664 pray for the nullity of the following
ejectment proceedings before the different branches of the
Caloocan City MeTC: (1) Civil Case No. 99-25011, Branch 52; (2) Civil
Case No. 22559 and Civil Case No. 18575, Branch 49 and its appeal
to the RTC, Branch 131; (3) Civil Case No. 00-25892, Branch 51; and
(4) Civil Case No. 00-25889, Branch 51.3 G.R. No. 149664 was
considered closed and terminated by the Court’s Resolution dated
August 30, 2006.4
The parcels of land which are the subject matter of these cases are
part of the Tala Estate, situated between the boundaries of Caloocan
City and Quezon City and encompassing an area of 7,007.9515
hectares more or less.5
In G.R. No. 137794, respondents Segundo Bautista and spouses
Bernard and Florencia Perl sought the ouster from the contested
lots of Erlinda Reyes, spouses Rene and Rosemarie Matienzo and
Sergio Abejero, who are occupants of separate home lots in
Camarin, Caloocan City.
land occupied by spouses Rene and Rosemarie Matienzo. The case
was a complaint for Recovery of Possession and/or Ownership of
Real Property (Recovery case) against the latter spouses with the
RTC Caloocan City, Branch 124.6 This was docketed as Civil Case No.
C-17725.7
Shortly thereafter, a separate but related action, was initiated by the
Republic of the Philippines, represented by the Director of Lands on
December 27, 1996, before the Quezon City RTC, Branch 85 (re-
raffled to Branch 93).8 This was a complaint for Annulment of
Title/Reversion (Annulment/Reversion case) against Biyaya
Corporation and the Register of Deeds of the Cities of Pasig,
Caloocan, and Quezon, the City of Manila, and the Administrator of
the Land Registration Authority involving the Tala Estate. The case,
docketed as Civil Case No. Q-96-29810, sought to declare null and
void the transfer certificates of title issued in the name of Biyaya
Corporation, and all derivative titles emanating therefrom, and to
declare the land in suit to be reverted to it as part of the patrimonial
property of the State, and the same be awarded to the actual
occupants. One of the intervenors therein is Samahan ng Maliliit na
Magkakapitbahay (SAMAKABA) of which petitioners Erlinda Reyes
and Rosemarie Matienzo are members.9
On May 28, 1997, the Quezon City RTC in the Annulment/Reversion
case issued a Preliminary Injunction (Injunction) freezing all
ejectment cases involving the Tala Estate pending in the MeTCs of
Quezon City and Caloocan City.10
Believing that the Injunction issued by the Quezon City RTC can be
beneficial to them in the Recovery case pending before the Caloocan
City RTC, on June 27, 1997, spouses Rene and Rosemarie Matienzo
filed a motion to suspend the proceedings of the Recovery
case.11 On December 8, 1997, the Caloocan City RTC, Branch 124
denied said motion.12 Spouses Matienzo moved for the
reconsideration of the motion, but the same was denied on May 14,
1998.13 The spouses received the order denying their motion for
reconsideration on June 9, 1998.14 Trial on the merits started on
December 2, 1998.15
The second case, an ejectment complaint, was commenced by
spouses Bernard and Florencia Perl on June 25, 1997, against Erlinda
Reyes before the Caloocan City MeTC, Branch 49.16 It was docketed
as Civil Case No. 23477. Shortly thereafter, on July 8, 1997, spouses
Perl filed the third case, an ejectment action against Sergio Abejero.
The case, which was raffled off to Branch 49 of the Caloocan City
MeTC, was docketed as Civil Case No. 23519.17 Subsequently, these
two ejectment cases were consolidated (Ejectment cases). 18 In her
Answer and during the preliminary conference, Erlinda Reyes moved
for the suspension of the proceedings and/or for the dismissal of
these cases citing the Injunction issued in Civil Case No. Q-96-
29810.19 In its Order20 dated January 22, 1999, the MeTC did not
entertain Reyes’s motion, instead, it required her to submit a
position paper. Erlinda Reyes received the order on March 11,
1999.21 On April 16, 1999, the trial court issued a Decision ordering
Erlinda to vacate the contested property.22
The Recovery case and the Ejectment cases converged when
petitioners Rosemarie Matienzo and Erlinda Reyes, joined on March
25, 1999 in filing directly with this Court the instant petition
denominated as "Declaratory Relief, Certiorari, and Prohibition,"
mainly assailing the denial of their respective motions for
suspension.23 Petitioners Matienzo and Reyes asked that the
Rule 63 Full Text Cases andm1 of 88
proceedings in the Ejectment cases and the Recovery case be
declared null and void for violating the Injunction order of the
Quezon City RTC. This case is docketed as G.R. No. 137794.
During the pendency of G.R. No. 137794, certain events supervened
when the Ejectment cases ran their course and petitioner Reyes
appealed the MeTC decision to the RTC. In the RTC, the Ejectment
cases were docketed as Civil Cases Nos. C-18904-05.24 Apparently,
respondent-spouses Perl moved for the execution of the MeTC
decision pending appeal, which the RTC granted as the Writ of
Execution was thereafter issued on October 20, 2000.25 Petitioner
Erlinda Reyes and company, thus, filed with this Court a motion to
suspend the proceedings in the RTC. 26 On October 25, 2000, this
Court issued a Temporary Restraining Order restraining the
implementation of the said writ of execution.27
G.R. No. 149664, on the other hand, emanated from four distinct
ejectment complaints filed against petitioners Corazon Laurente,
spouses Alberto and Lourdes Embores, spouses Roberto and Evelyn
Palad, and Dennis Henosa.28 The parcels of land from which
petitioners were sought to be evicted were located in Camarin,
Caloocan City and within the Tala Estate.29 Petitioners were
members of Alyansa Ng Mga Naninirahan Sa Tala Friar Lands
(ALNATFRAL), an intervenor in the Reversion case. 30 These
ejectment cases were all filed after the Injunction order was issued
on May 28, 1997 by the Quezon City RTC in the
Annulment/Reversion case. Thus, petitioners separately invoked the
said injunction in seeking the dismissal or suspension of the four
ejectment cases. Petitioners’ motions for suspension were dismissed
and the trial court proceeded to render judgments on these cases.
Petitioners resorted directly to this Court in seeking the declaration
of nullity of the proceedings of these ejectment cases for violating
the prevailing injunction issued by the Quezon City RTC.
Meanwhile, on March 4, 2003, the petitioners in G.R. No. 149664
filed a motion for consolidation asking that the said case be
consolidated with G.R. No. 137794.
On April 28, 2003, this Court resolved to consolidate the two cases.
On July 28, 2006, petitioners in G.R. No. 149664 filed a Motion to
Withdraw and/or Dismiss Instant Petition31 stating that since a
decision in the Annulment/Reversion case (Civil Case No. Q-96-
29810) was already issued (although they did not attach a copy
thereof), the petition is therefore rendered moot and academic as
the injunction order was effective only pending determination of the
merits.
On August 30, 2006, the Court granted the motion to withdraw
petition in G.R. No. 149664 and considered the same closed and
terminated.32 On October 11, 2006, G.R. No. 149664 became final
and executory.
What remains to be resolved, therefore, are the issues raised in G.R.
No. 137794.
In their bid to declare null and void the proceedings in the Recovery
case and the Ejectment cases, petitioners argued that the Caloocan
City MeTC, where the Ejectment cases were filed, and the Caloocan
City RTC where the Recovery case was pending, were divested of
jurisdiction since the Quezon City RTC acquired jurisdiction over the
subject matter.33 Petitioners specifically alleged that the MeTC’s
refusal to suspend the Ejectment cases despite the Injunction order
is tantamount or amounting to lack of or excess of jurisdiction. As to
the Caloocan City RTC, its desistance to heed the Injunction is
unjustified and contrary to well-settled jurisprudence.34 Petitioners
were of the view that the interference by the Quezon City RTC was
justified since no third-party claim is involved.35
The Office of the Solicitor General (OSG) adopts the position of
petitioners in praying that the orders denying the motion to suspend
proceedings and the proceedings that transpired in the Ejectment
cases be set aside for having been issued with grave abuse of
discretion.36 Citing Honda Giken Kogyo-Kabushiki Kaisha v. San
Diego,37 where it was held that a writ of injunction may be issued to
a court by another court superior in rank, the OSG maintains that
the Injunction issued by the Quezon City RTC in Civil Case No. Q-96-
29810 covers all metropolitan trial courts including the Ejectment
cases in Caloocan City MeTC, Branch 49.38 The OSG also maintains
that the Injunction was in accordance with the settled jurisprudence
where the reversion case is being filed by the State.
Respondent Segundo Bautista contends that petitioners resorted to
a wrong remedy. He argues that the action for declaratory relief can
only prosper if the statute, deed, or contract has not been
violated.39 Hence, where the law or contract has already been
breached prior to the filing of the declaratory relief, courts can no
longer assume jurisdiction since this action is not geared towards
the settling of issues arising from breach or violation of the rights
and obligations of the parties under a statute, deed, and contract,
but rather it is intended to secure an authoritative statement for
guidance in their enforcement or compliance of the same.40 Since
the Injunction order of the Quezon City RTC had already been
violated as early as December 8, 1997 by the Caloocan City RTC in
the Recovery case, or before the filing of this instant petition, resort
to Rule 63 of the Rules of Court would not lie. Respondent Bautista
insists that the instant recourse of petitioner Matienzo was resorted
to as a ploy to substitute the filing of certiorariunder Rule 65, which
she already lost since the 60-day period had already
expired.41 Respondent points out that direct resort to this Court
violates the rule on the hierarchy of courts. Since it was the
Caloocan City RTC which denied petitioner Matienzo’s motion to
suspend proceedings, the petition for declaratory relief should have
been filed with the Court of Appeals. Direct filing with this Court is
not justified as, other than making motherhood statements,
petitioner Matienzo failed to state clearly the exceptional and
compelling circumstances to justify the exercise of this Court’s
primary jurisdiction.42 He likewise contends that the Caloocan City
RTC did not err in not suspending the proceedings in the Recovery
case, notwithstanding the Injunction issued by the Quezon City RTC,
since the said injunction applied only to the MeTCs of Quezon City
and Caloocan City so the RTC was excluded from the injunction
order. He avers that it is the Caloocan City RTC which is vested with
the jurisdiction to hear and decide the case until its final conclusion
since it had acquired the same ahead of the Quezon City RTC. He
states that being co-equal, the Quezon City RTC had no authority to
stop by injunction the Caloocan City RTC and even though there are
instances where another court may exercise coordinate jurisdiction
in cases where there are justifiable grounds, here, petitioner
Matienzo has not alleged any of those circumstances.
Petitioners insist that this is mainly a petition for declaratory relief.
Section 1, Rule 63 of the 1997 Rules of Court provides:
SECTION 1. Who may file petition. — Any person interested under a
deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or
Rule 63 Full Text Cases andm2 of 88
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, to quiet title to real
property or remove clouds therefrom, or to consolidate ownership
under Article 1607 of the Civil Code, may be brought under this Rule.
The foregoing section can be dissected into two parts. The first
paragraph concerns declaratory relief, which has been defined as a
special civil action by any person interested under a deed, will,
contract or other written instrument or whose rights are affected by
a statute, ordinance, executive order or regulation to determine any
question of construction or validity arising under the instrument,
executive order or regulation, or statute and for a declaration of his
rights and duties thereunder. The second paragraph pertains to (1)
an action for the reformation of an instrument; (2) an action to quiet
title; and (3) an action to consolidate ownership in a sale with a right
to repurchase.43
The first paragraph of Section 1 of Rule 63 enumerates the subject
matter to be inquired upon in a declaratory relief namely, deed, will,
contract or other written instrument, a statute, executive order or
regulation, or any government regulation. This Court, in Lerum v.
Cruz,44 declared that the subject matters to be tested in a petition
for declaratory relief are exclusive, viz:
Under this rule, only a person who is interested "under a deed, will,
contract or other written instrument, and whose rights are affected
by a statute or ordinance, may bring an action to determine any
question of construction or validity arising under the instrument or
statute and for a declaration of his rights or duties thereunder." This
means that the subject matter must refer to a deed, will, contract or
other written instrument, or to a statute or ordinance, to warrant
declaratory relief. Any other matter not mentioned therein is
deemed excluded. This is under the principle of expressio unius est
exclussio alterius. (Emphasis supplied.)
The foregoing holding was reiterated in Natalia Realty, Inc. v. Court
of Appeals,45 wherein this Court stressed that court orders or
decisions cannot be made the subject matter of a declaratory relief,
thus:
Judge Querubin's query is not an action for declaratory relief.
Section 1 of Rule 64 [now Rule 63] of the Rules of Court provides the
requisites of an action for declaratory relief. In interpreting these
requisites, the Court has ruled that:
xxxx
The letter of Judge Querubin pertained to final orders and decisions
of the courts that are clearly not the proper subjects of a petition for
declaratory relief. Thus, the requisites prescribed by the Rules of
Court in an action for declaratory relief are not applicable to the
letter of Judge Querubin.46 (Emphasis supplied.)
Then again in a recent ruling of this Court, it was emphasized:
A petition for declaratory relief cannot properly have a court
decision as its subject matter. In Tanda v. Aldaya [98 Phil. 244
(1956)], we ruled that:
[A] court decision cannot be interpreted as included within the
purview of the words "other written instrument," as contended by
appellant, for the simple reason that the Rules of Court already
provide for the ways by which an ambiguous or doubtful decision
may be corrected or clarified without need of resorting to the
expedient prescribed by Rule 66 [now Rule 64].47 (Emphasis
supplied.)
In the instant case, petitioners Erlinda Reyes and Rosemarie
Matienzo assailed via Declaratory Relief under Rule 63 of the Rules
of Court, the orders of the trial courts denying their motions to
suspend proceedings. This recourse by petitioners, unfortunately,
cannot be countenanced since a court order is not one of those
subjects to be examined under Rule 63.
The proper remedy that petitioner Erlinda Reyes could have utilized
from the denial of her motion to suspend proceedings in the
Caloocan City MeTC was to file a motion for reconsideration and, if it
is denied, to file a petition for certiorari before the RTC pursuant to
Rule 65 of the Rules of Court. On the other hand, petitioner
Matienzo should have filed a special civil action on certiorari also
under Rule 65 with the Court of Appeals from the denial of her
motion by the Caloocan City RTC. The necessity of filing the petition
to the RTC in the case of Erlinda Reyes and to the Court of Appeals in
the case of Matienzo is dictated by the principle of the hierarchy of
courts.48 Both petitions must be filed within 60 days from the receipt
or notice of the denial of the motion to suspend proceedings or from
the denial of the motion for reconsideration. Section 4 of Rule 65
partly provides:
Sec. 4. When and where to file the petition. - The petition shall be
filed not later than sixty (60) days from notice of the judgment,
order or resolution. In case a motion for reconsideration or new trial
is timely filed, whether such motion is required or not, the petition
shall be filed not later than sixty (60) days counted from the notice
of the denial of said motion.
If the petition relates to an act or an omission of a municipal trial
court x x x, it shall be filed with the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed with the Court of Appeals or with the
Sandiganbayan, whether or not the same is in aid of the court’s
appellate jurisdiction.
Despite this procedural remedy available to them, petitioners, under
the pretext that they were in a quandary as to their rights under the
Injunction order of the Quezon City RTC, directly filed the instant
case here. Petitioners did not bother to proffer a compelling reason
for their direct resort to this Court. This procedural faux pas proves
fatal. The Court’s exhortation against taking a procedural shortcut
cannot be overemphasized. In Ortega v. The Quezon City
Government, 49 the Court accentuated:
At all events, even if this petition delves on questions of law, there is
no statutory or jurisprudential basis for according to this Court
original and exclusive jurisdiction over declaratory relief which
advances only questions of law.
Finally, while a petition for declaratory relief may be treated as one
for prohibition if it has far reaching implications and raises questions
that need to be resolved, there is no allegation of facts by petitioner
tending to show that she is entitled to such a writ. The judicial policy
must thus remain that this Court will not entertain direct resort to it,
Rule 63 Full Text Cases andm3 of 88
except when the redress sought cannot be obtained in the proper
courts or when exceptional and compelling circumstances warrant
availment of a remedy within and calling for the exercise of this
Court's primary jurisdiction. (Emphasis supplied.)
To make matters worse, petitioner Matienzo obviously availed of
the instant declaratory relief to substitute for a petition
for certiorari, a remedy which she sadly lost by inaction. It must be
recalled that on December 8, 1997, the Caloocan City RTC, Branch
124 denied Matienzo’s motion to suspend proceedings. 50 She moved
for reconsideration, but the same was denied on May 14,
1998.51 She received the Order denying her motion for
reconsideration on June 9, 1998.52 She had 60 days therefrom to
question the same before the Quezon City RTC. It was only on March
25, 1999 that petitioner Matienzo assailed the order denying her
motion for reconsideration, albeit wrongly before this Court.53 From
this, it can be inferred that petitioner Matienzo’s recourse is a
belated attempt designed to salvage her lost opportunity to assail
the order denying her motion to suspend proceedings.
Also unavailing are the contentions of petitioners that the Caloocan
City RTC and MeTC committed grave abuse of discretion when they
denied petitioners’ motions to suspend proceedings. The pertinent
portion of the Injunction order of the Quezon City RTC reads:
WHEREFORE, premises considered, this Court has to grant, as it
hereby grants the application for the issuance of the writ of
preliminary injunction. Let a writ of preliminary Injunction be issued
ordering defendant representing Biyaya Corporation, its agents,
assigns, and transferees, as well as all other persons representing
themselves as owners of certain portions of the land in question,
otherwise known as the Tala Estate, to immediately cease and desist
from doing or causing to do, further acts of disposition of the lots
subject of the present complaint, such as the filing of ejectment
cases in the Municipal Trial Courts of Quezon City and Caloocan City
and, the demolition and ejectment therefrom of the members of the
herein Intervenors. Accordingly, the Metropolitan Trial Courts of
Quezon City and Caloocan City are specifically ordered to cease and
desist from further conducting trials and proceedings in the
ejectment cases filed and to be filed involving the lots of the present
complaint, until further orders from this Court.54 (Emphasis
supplied.)
The foregoing order is not addressed to the Caloocan City RTC.
Neither can it be inferred from the language thereof that the
Quezon City RTC intended to enjoin the Caloocan City RTC from
further proceeding with the Recovery case. The order merely
mentions the Caloocan City MeTCs. Nothing more. But more
importantly, the Quezon City RTC could not have validly enjoined
the Caloocan City RTC without violating the doctrine that no court
has the power to interfere by injunction with the judgments or
decrees of a court of concurrent or coordinate jurisdiction.55Spouses
Ching v. Court of Appeals56 justifies this rule in this manner:
Beginning with the case of Orais v. Escaño, down to the subsequent
cases of Nuñez v. Low, Cabigao v. del Rosario, Hubahib v. Insular
Drug Co., Inc., National Power Corp. v. De Veyra, Luciano v.
Provincial Governor, De Leon v. Hon. Judge Salvador, Cojuangco v.
Villegas, Darwin v. Tokonaga, we laid down the long standing
doctrine that no court has the power to interfere by injunction with
the judgments or decrees of a court of concurrent or coordinate
jurisdiction. The various trial courts of a province or city, having the
same or equal authority, should not, cannot, and are not permitted
to interfere with their respective cases, much less with their orders
or judgments. A contrary rule would obviously lead to confusion and
seriously hamper the administration of justice. (Emphasis supplied.)
In Compania General de Tabacos de Filipinas v. Court of
Appeals,57 two civil cases with identical causes of action were filed in
different RTCs, one ahead of the other. The second RTC which
acquired jurisdiction over the case issued a preliminary injunction
enjoining the proceedings in the RTC which first acquired jurisdiction
of the case. Ruling against the injunction issued by the RTC, this
Court stressed:
Hence, nothing can be clearer than that Judge Rapatalo had indeed
issued the questioned writ of preliminary injunction with grave
abuse of discretion amounting to excess or lack of jurisdiction for
the blatant disregard of the basic precept that no court has the
power to interfere by injunction with the judgments or orders of a
co-equal and coordinate court of concurrent jurisdiction having the
power to grant the relief sought by injunction.
This Court explained in Parco vs. Court of Appeals that:
x x x Jurisdiction is vested in the court not in any particular branch or
judge, and as a corollary rule, the various branches of the Court of
First Instance of a judicial district are a coordinate and co-equal
courts one branch stands on the same level as the other. Undue
interference by one on the proceedings and processes of another is
prohibited by law. In the language of this Court, the various
branches of the Court of First Instance of a province or city, having
as they have the same or equal authority and exercising as they do
concurrent and coordinate jurisdiction should not, cannot, and are
not permitted to interfere with their respective cases, much less
with their orders or judgments x x x.
Needless to say, adherence to a different rule would sow confusion
and wreak havoc on the orderly administration of justice, and in the
ensuing melee, hapless litigants will be at a loss as to where to
appear and plead their cause.1avvphi158 (Emphasis supplied.)
While there are recognized exceptions to the foregoing rule, other
than citing said cases, 59 petitioners did not explain the applicability
of said exceptional cases to their petition.
Bereft of merit too is petitioners’ argument that the Caloocan City
MeTC cannot disregard the injunction order of the Quezon City RTC
hearing the Annulment/Reversion case. The established rule is that a
pending civil action for ownership such as annulment of title shall
not ipso facto suspend an ejectment proceeding. 60 The Court
explained that the rationale for this is that in an ejectment case, the
issue is possession, while in an annulment case the issue is
ownership.61 In fact, an ejectment case can be tried apart from an
annulment case.62 Although there is an exception to this rule,
petitioners failed to justify that this case falls within said exception.
The words of the Court on this matter are instructive:
In the absence of a concrete showing of compelling equitable
reasons at least comparable and under circumstances analogous
to Amagan, we cannot override the established rule that a pending
civil action for ownership shall not ipso facto suspend an ejectment
proceeding. Additionally, to allow a suspension on the basis of the
reasons the petitioners presented in this case would create the
dangerous precedent of allowing an ejectment suit to be suspended
by an action filed in another court by parties who are not involved or
affected by the ejectment suit.63(Emphases supplied.)
Rule 63 Full Text Cases andm4 of 88
Hence, petitioners’ posture that the Ejectment cases should be
suspended due to the pendency of the Annulment/Reversion case is
not meritorious.
WHEREFORE, premises considered, the instant petition is
hereby DISMISSED. The Temporary Restraining Order dated October
25, 2000 issued by this Court is LIFTED.
SO ORDERED.
SECOND DIVISION
G.R. No. 172457 December 24, 2008
CJH DEVELOPMENT CORPORATION, petitioner,
vs.
BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS, and
DISTRICT COLLECTOR OF CUSTOMS EDWARD O.
BALTAZAR, respondents.
DECISION
TINGA, J.:
Before us is a petition for review on certiorari1 seeking the reversal
of the orders dated 14 October 20052 and 04 April 20063 of the
Regional Trial Court (RTC) of Baguio City, Branch 5. The RTC
dismissed the petition for declaratory relief filed by petitioner CJH
Development Corporation (CJH). This petition was brought directly
to this Court since it involves a pure question of law in accordance
with Rule 50 of the 1997 Revised Rules of Court.
Proclamation No. 420 (the Proclamation) was issued by then
President Fidel V. Ramos to create a Special Economic Zone (SEZ) in
a portion of Camp John Hay in Baguio City. Section 34 of the
Proclamation granted to the newly created SEZ the same incentives
then already enjoyed by the Subic SEZ. Among these incentives are
the exemption from the payment of taxes, both local and national,
for businesses located inside the SEZ, and the operation of the SEZ
as a special customs territory providing for tax and duty free
importations of raw materials, capital and equipment.5
In line with the Proclamation, the Bureau of Internal Revenue (BIR)
issued Revenue Regulations No. 12-976 while the Bureau of Customs
(BOC) issued Customs Administrative Order No. 2-98.7 The two
issuances provided the rules and regulations to be implemented
within the Camp John Hay SEZ. Subsequently, however, Section 3 of
the Proclamation was declared unconstitutional in part by the
Court en banc in John Hay Peoples Alternative Coalition v.
Lim, 8 when it ruled that:
WHEREORE, the second sentence of Section 3 of
Proclamation No. 420 is hereby declared NULL and VOID
and is accordingly declared of no legal force and effect.
Public respondents are hereby enjoined from
implementing the aforesaid void provision.
Proclamation No. 420, without the invalidated portion,
remains valid and effective.9
The decision attained finality when the Court en banc denied the
motion for reconsideration through a resolution dated 29 March
2005.10
While the motion for reconsideration was pending with the Court,
on 16 January 2004 the Office of the City Treasurer of Baguio sent a
demand letter11 which stated that:
In view of the Supreme Court decision dated October 24,
2003 on G.R. No. 119775, declaring null and void Section 3
of Proclamation 420 on applicable incentives of Special
Economic Zones, we are sending you updated statements
of real property taxes due on real estate properties
declared under the names of the Bases Conversion and
Development Authority and Camp John Hay Development
Corporation totaling P101,935,634.17 inclusive of
penalties, as of January 10, 2004.
May we request for the immediate settlement of the
above indebtedness, otherwise this office shall be
constrained to hold the processing of your business permit
pursuant to Section 2 C c.1 of Tax Ordinance 2000-001 of
Baguio City.
Five months later, on 26 May 2005, the BOC followed suit and
demanded12 of CJH the payment of P71,983,753.00 representing the
duties and taxes due on all the importations made by CJH from 1998
to 2004. For its part, the BIR sent a letter dated 23 May 2005 to CJH
wherein it treated CJH as an ordinary corporation subject to the
regular corporate income tax as well as to the Value Added Tax of
1997.13
CJH questioned the retroactive application by the BOC of the
decision of this Court in G.R. No. 119775. It claimed that the
assessment was null and void because it violated the non-retroactive
principle under the Tariff and Customs Code.14
The Office of the Solicitor General (OSG) filed a motion to
dismiss.15 The OSG claimed that the remedy of declaratory relief is
inapplicable because an assessment is not a proper subject of such
petition. It further alleged that there are administrative remedies
which were available to CJH.
In an Order16 dated 28 June 2005, the RTC dropped the City of
Baguio as a party to the case. The remaining parties were required
to submit their respective memoranda. On 14 October 2005, the
RTC rendered its assailed order.17 It held that the decision in G.R.
No. 119775 applies retroactively because the tax exemption granted
by Proclamation No. 420 is null and void from the beginning. The
RTC also ruled that the petition for declaratory relief is not the
appropriate remedy. A judgment of the court cannot be the proper
subject of a petition for declaratory relief; the enumeration in Rule
64 is exclusive. Moreover, the RTC held that Commonwealth Act No.
55 (CA No. 55) which proscribes the use of declaratory relief in cases
where a taxpayer questions his tax liability is still in force and effect.
CJH filed a motion for reconsideration but the RTC denied it.18 Hence
this petition, which, as earlier stated, was filed directly to this Court,
raising as it does only pure questions of law.
There are two issues raised in this petition, one procedural and the
other substantive. First, is the remedy of declaratory relief proper in
Rule 63 Full Text Cases andm5 of 88
this case? Second, can the decision in G.R. No. 119775 be applied
retroactively?
The requisites for a petition for declaratory relief to prosper are: (1)
there must be a justiciable controversy; (2) the controversy must be
between persons whose interests are adverse; (3) the party seeking
declaratory relief must have a legal interest in the controversy; and
(4) the issue involved must be ripe for judicial determination.19
CJH alleges that CA No. 5520 has already been repealed by the Rules
of Court; thus, the remedy of declaratory relief against the
assessment made by the BOC is proper. It cited the commentaries of
Moran allegedly to the effect that declaratory relief lies against
assessments made by the BIR and BOC. Yet in National Dental Supply
Co. v. Meer,21 this Court held that:
From the opinion of the former Chief Justice Moran may
be deduced that the failure to incorporate the above
proviso [CA No. 55] in section 1, rule 66, [now Rule 64] is
not due to an intention to repeal it but rather to the desire
to leave its application to the sound discretion of the
court, which is the sole arbiter to determine whether a
case is meritorious or not. And even if it be desired to
incorporate it in rule 66, it is doubted if it could be done
under the rule-making power of the Supreme Court
considering that the nature of said proviso
is substantive and not adjective, its purpose being to lay
down a policy as to the right of a taxpayer to contest the
collection of taxes on the part of a revenue officer or of
the Government. With the adoption of said proviso, our
law-making body has asserted its policy on the matter,
which is to prohibit a taxpayer to question his liability for
the payment of any tax that may be collected by the
Bureau of Internal Revenue. As this Court well said,
quoting from several American cases, "The Government
may fix the conditions upon which it will consent to litigate
the validity of its original taxes..." "The power of taxation
being legislative, all incidents are within the control of the
Legislature." In other words, it is our considered opinion
that the proviso contained in Commonwealth Act No. 55 is
still in full force and effect and bars the plaintiff from filing
the present action.22(Emphasis supplied) (Citations
omitted.)
As a substantive law that has not been repealed by another statute,
CA No. 55 is still in effect and holds sway. Precisely, it has removed
from the courts’ jurisdiction over petitions for declaratory relief
involving tax assessments. The Court cannot repeal, modify or alter
an act of the Legislature.
Moreover, the proper subject matter of a declaratory relief is a
deed, will, contract, or other written instrument, or the construction
or validity of statute or ordinance.23 CJH hinges its petition on the
demand letter or assessment sent to it by the BOC. However, it is
really not the demand letter which is the subject matter of the
petition. Ultimately, this Court is asked to determine whether the
decision of the Court en banc in G.R. No. 119775 has a retroactive
effect. This approach cannot be countenanced. A petition for
declaratory relief cannot properly have a court decision as its subject
matter. In Tanda v. Aldaya,24 we ruled that:
x x x [A] court decision cannot be interpreted as included
within the purview of the words "other written
instrument," as contended by appellant, for the simple
reason that the Rules of Court already provide[s] for the
ways by which an ambiguous or doubtful decision may be
corrected or clarified without need of resorting to the
expedient prescribed by Rule 66 [now Rule 64].25
There are other remedies available to a party who is not agreeable
to a decision whether it be a question of law or fact. If it involves a
decision of an appellate court, the party may file a motion for
reconsideration or new trial in order that the defect may be
corrected.26 In case of ambiguity of the decision, a party may file a
motion for a clarificatory judgment.27 One of the requisites of a
declaratory relief is that the issue must be ripe for judicial
determination. This means that litigation is inevitable28 or there is
no adequate relief available in any other form or proceeding.29
However, CJH is not left without recourse. The Tariff and Customs
Code (TCC) provides for the administrative and judicial remedies
available to a taxpayer who is minded to contest an assessment,
subject of course to certain reglementary periods. The TCC provides
that a protest can be raised provided that payment first be made of
the amount due.30 The decision of the Collector can be reviewed by
the Commissioner of Customs who can approve, modify or reverse
the
decision or action of the Collector.31 If the party is not satisfied with
the ruling of the Commissioner, he may file the necessary appeal to
the Court of Tax Appeals.32 Afterwards, the decision of the Court of
Tax Appeals can be appealed to this Court.
With the foregoing disquisition on the first issue, there is no need to
delve into the second issue at this juncture. It should be noted
though, as admitted by CJH in its Certificate of Non-Forum
Shopping,33 that even before the filing of this petition, it already had
a pending petition for review with this Court, docketed as G.R. No.
16923434 and entitled, Camp John Hay Development Corporation v.
Central Board of Assessment Appeals, et al. That case emanated
from assessments made in 2002 for real estate taxes on CJH by the
City of Baguio. Said assessments were duly challenged before the
Local Board of Assessment Appeals, the Central Board of
Assessment Appeals and the Court of Tax Appeals. The petition in
G.R. No. 169234 was filed with this Court in September 2005, or
after our 2003 Decision in John Hay Peoples Alternative
Coalition had attained finality. CJH therein raised the same question
of law, as in this case, whether the doctrine of operative fact applies
to G.R. No. 119775. Clearly, the Court in G.R. No. 169234 is better
positioned to resolve that question of law, there being no
antecedent jurisdictional defects that would preclude the Court
from squarely deciding that particular issue. CJH is free to reiterate
this current point of clarification as it litigates the petition in G.R. No.
169234.
WHEREFORE, the Petition is DENIED.
SO ORDERED.
THIRD DIVISION
G.R. No. 200670 July 6, 2015
CLARK INVESTORS AND LOCATORS ASSOCIATION INC., Petitioner,
vs.
Rule 63 Full Text Cases andm6 of 88
SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL
REVENUE, Respondents.
DECISION
VILLARAMA, JR., J.:
This is a petition for certiorari with a prayer for the issuance of a
temporary restraining order and/or writ of preliminary injunction to
annul and set aside Revenue Regulations No. 2-2012 (RR 2-2012)
issued by the Department of Finance (DOF) on February 17, 2012
upon recommendation of the Bureau of Internal Revenue (BIR).
Petitioner Clark Investors and Locators Association, Inc. claims that
RR 2-2012, which imposes Value Added Tax (VAT) and excise tax on
the importation of petroleum and petroleum products from abroad
into the Freeport or Economic Zones, is void and contrary to
Republic Act (RA) No. 7227, otherwise known as the Bases
Conversion and Development Act of 1992, as amended by RA No.
9400.
The salient facts follow.
On March 13, 1992, Congress enacted RA No. 7227 which mandated
the accelerated conversion of the Clark and Subic military
reservations into special economic zones. Section 12 thereof
provides for the creation of the Subic Special Economic Zone:
SEC. 12. Subic Special Economic Zone. - Subject to the concurrence
by resolution of the sangguniang panlungsod of the City of Olongapo
'and the sangguniang bayan of the Municipalities of Subic, Morong
and Hermosa, there is hereby created a Special Economic and Free-
port Zone consisting of the City of Olongapo and the Municipality of
Subic, Province of Zambales, the lands occupied by the Subic Naval
Base and its contiguous extensions as embraced, covered, and
defined by the 1947 Military Bases Agreement between the
Philippines and the United states of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong and
Hermosa, Province of Bataan, hereinafter referred to as the Subic
Special Economic Zone whose metes and bounds shall be delineated
in a proclamation to be issued by the President of the Philippines.
Within thirty (30) days after the approval of this Act, each local
government unit shall submit its resolution of concurrence to join
the Subic Special Economic Zone to the Office of the President.
Thereafter, the President of the Philippines shall issue a
proclamation defining the metes and bounds of the zone as
provided herein.
The abovementioned zone shall be subject to the following policies:
(a) Within the framework and subject to the mandate and
limitations of the Constitution and the pertinent provisions
of the Local Government Code, the Subic Special Economic
Zone 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;
(b) The Subic Special Economic Zone shall be operated
and managed as a separate customs territory ensuring
free flow or movement of goods and capital within, into
and exported out of the Subic Special Economic Zone, as
well as provide incentives such as tax and duty-free
importations of raw materials, capital and equipment.
However, exportation or removal of goods from the
territory of the Subic Special Economic Zone to the other
parts of the Philippine territory shall be subject to
customs duties and taxes under the Customs and Tariff
Code and other relevant tax laws of the Philippines;
(c) The provision of existing laws, rules and regulations to
the contrary notwithstanding, no taxes, local and
national, shall be imposed within the Subic Special
Economic Zone. In lieu of paying taxes, three percent
(3%) of the gross income earned by all businesses and
enterprises within the Subic Special Economic Zone to be
remitted to the National Government, one percent (1%)
each to the local government units affected by the
declaration of the zone in proportion to their population
area, and other factors. In addition, there is hereby
established a development fund of one percent (1 %) of
the gross income earned by all businesses and
enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the
City of Olongapo and the Municipality of Subic and other
municipalities contiguous to the base areas.
In case of conflict between national and local laws with
respect to tax exemption privileges in the Subic Special
Economic Zone, the same shall be resolved in favor of the
latter;
(d) No exchange control policy shall be applied and free
markets for foreign exchange, gold, securities and futures
shall be allowed and maintained in the Subic Special
Economic Zone;
(e) The Central Bank, through the Monetary Board, shall
supervise and regulate the operation of banks and other
financial institutions within the Subic Special Economic
Zone;
(f) Banking and finance shall be liberalized with the
establishment of foreign currency depository units of local
commercial banks and offshore banking units of foreign
banks with minimum Central Bank regulation;
(g) Any investor within the Subic Special Economic Zone
whose continuing investment shall not be less than Two
hundred fifty thousand dollars ($250,000), his/her spouse
and dependent children under twenty one (21) years of
age, shall be granted permanent resident status within
theSubic Special Economic Zone. They shall have freedom
of ingress and egress to and from the Subic Special
Economic Zone without any need of special authorization
from the Bureau of Immigration and Deportation. The
Subic Bay Metropolitan Authority referred to in Section 13
of this Act may also issue working visas renewable every
two (2) years to foreign executives and other aliens
possessing highly-technical skills which no Filipino within
the Subic Special Economic Zone possesses, as certified by
the Department of Labor and Employment. The names of
aliens granted permanent residence status and working
visas by the Subic Bay Metropolitan Authority shall be
reported to the Bureau of Immigration and Deportation
within thirty (30) days after issuance thereof;
Rule 63 Full Text Cases andm7 of 88
 (h) The defense of the zone and the security of its
perimeters shall be the responsibility of the National
Government in coordination with the Subic Bay
Metropolitan Authority. The Subic Bay Metropolitan
Authority shall provide and establish its own internal
security and fire-fighting forces; and
(i) Except as herein provided, the local government units
comprising the Subic Special Economic Zone shall retain
their basic autonomy and identity.1âwphi1 The cities shall
be governed by their respective charters and the
municipalities shall operate and function in accordance
with Republic Act No. 7160, otherwise known as the Local
Government Code of 1991. (Emphasis supplied)
Based on Section 12 (c) above, in lieu of national and local taxes, all
businesses and enterprises operating within the Subic Special
Economic Zone shall pay a preferential gross income tax rate of five
percent (5%). In addition, Section 12 (b) also provides that such
businesses and enterprises shall be exempt from the payment of all
taxes and duties on the importation of raw materials, capital, and
equipment into the Subic Special Economic Zone.
Meanwhile, on March 20, 2007, Congress enacted RA No. 9400
which extended the aforementioned tax and fiscal incentives under
RA No. 7227 to the Clark Freeport Zone. By way of amendment,
Section 2 thereof provides:
SEC. 2. Section 15 of Republic Act No. 7227, as amended, is hereby
amended to read as follows:
"SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport
Zone (CFZ). - Subject to the concurrence by resolution of the local
government units directly affected, the President is hereby
authorized to create by executive proclamation a Special Economic
Zone covering the lands occupied by the Clark military reservations
and its contiguous extensions as embraced, covered and defined by
the 194 7 Military Bases Agreement between the Philippines and the
United States of America, as amended, located within the territorial
jurisdiction of Angeles City, municipalities of Mabalacat and Porac,
Province of Pampanga, and the municipalities of Capas and Bamban,
Province of Tarlac, in accordance with the provision as herein
provided insofar as applied to the Clark military reservations. The
Clark Air Base proper with an area of not more than four thousand
four hundred hectares (4,400 has.), with the exception of the
twenty-two-hectare commercial area situated near the main gate
and the Bayanihan Park consisting of seven and a half hectares (7.5
has.) located outside the main gate of the Clark Special Economic
Zone, is hereby declared a freeport zone.
"The CFZ shall be operated and managed as a separate customs
territory ensuring free flow or movement of goods and capital
equipment within, into and exported out of the CFZ, as well as
provide incentives such as tax and duty-free importation of raw
materials and capital equipment. However, exportation or removal
of goods from the territory of the CFZ to the other parts of the
Philippine territory shall be subject to customs duties and taxes
under the Tariff and Customs Code of the Philippines, as amended,
the National Internal Revenue Code of 1997, as amended, and
other relevant tax laws of the Philippines.
"The provisions of existing laws, rules and regulations to the
contrary notwithstanding, no national and local taxes shall be
imposed on registered business enterprises within the CFZ. In lieu of
said taxes, a five percent (5%) tax on gross income earned shall be
paid by all registered business enterprises within the CFZ and shall
be directly remitted as follows: three percent (3%) to the National
Government, and two percent (2%) to the treasurer's office of the
municipality or city where they are located.
"The governing body of the Clark Special Economic Zone shall
likewise be established by executive proclamation with such powers
and functions exercised by the Export Processing Zone Authority
pursuant to Presidential Decree No. 66, as amended: Provided, That
it shall have no regulatory authority over public utilities, which
authority pertains to the regulatory agencies created by law for the
purpose, such as the Energy Regulatory Commission created under
Republic Act No. 9136 and the National Telecommunications
Commission created under Republic Act No. 7925.
"x x x
"Subject to the concurrence by resolution of the local government
units directly affected and upon recommendation of the Philippine
Economic Zone Authority (PEZA), the President is hereby authorized
to create by executive proclamation Special Economic Zones
covering the City of Balanga and the municipalities of Limay,
Mariveles, Morong, Hermosa, and Dinalupihan, Province of Bataan.
"Subject to the concurrence by resolution of the local government
units directly affected and upon recommendation of the PEZA, the
President is hereby authorized to create by executive proclamation
Special Economic Zones covering the municipalities of Castillejos,
San Marcelino, and San Antonio, Province of Zambales.
"Duly registered business enterprises that will operate in the Special
Economic Zones to be created shall be entitled to the same tax and
duty incentives as provided for under Republic Act No. 7916, as
amended: Provided that for the purpose of administering these
incentives, the PEZA shall register, regulate, and supervise all
registered enterprises within the Special Economic Zones."
Thus, the businesses and enterprises within the Clark Freeport Zone
are similarly exempt from the payment of all taxes and duties on the
importation of raw materials, capital and equipment.
On February 17, 2012, the DOF, upon recommendation of the BIR,
issued RR 2-2012 which imposed VAT and excise tax on the
importation of petroleum and petroleum products from abroad and
into the Freeport or Economic Zones. Section 3 thereof partly
provides:
SECTION 3. TAX TREATMENT OF ALL PETROLEUM AND PETROLEUM
PRODUCTS IMPORTED AND ITS SUBSEQUENT EXPORTATION OR
SALES TO FREEPORT AND ECONOMIC ZONE LOCATORS OR OTHER
PERSONS/ENTITIES; REFUND OF TAXES PAID; AUTHORITY TO
RELEASE IMPORTED GOODS (ATRIG) AND OTHER ADMINISTRATIVE
REQUIREMENTS. - The Value-Added and Excise taxes which are due
on all petroleum and petroleum products that are imported and/or
brought directly from abroad to the Philippines, including Freeport
and Economic zones, shall be paid by the importer thereof to the
Bureau of Customs (BOC).
The subsequent exportation or sale/delivery of these petroleum or
petroleum products to registered enterprises enjoying tax privileges
within the Freeport and Economic zones, as well as the sale of said
Rule 63 Full Text Cases andm8 of 88
goods to persons engaged in international shipping or international
air transport operations, shall be subject to 0% VAT. With respect to
the VAT paid on petroleum or petroleum products by the importer
on account of aforesaid 0% VAT transactions/entities and the Excise
taxes paid on account of sales to international carriers of Philippine
or Foreign Registry for use or consumption outside the Philippines or
exempt entities or agencies covered by tax treaties, conventions and
international agreements for their use or consumption (covered by
Certification in such entity's favor), as well as entities which are by
law exempt from indirect taxes, the importer may file a claim for
credit or refund with the BOC, which shall process the claim for
refund, subject to the favorable endorsement of the BIR, in
accordance with existing rules and procedures: Provided, that no
claim for refund shall be granted unless it is properly shown to the
satisfaction of the BIR that said petroleum or petroleum products
have been sold to a duly registered locator and have been utilized in
the registered activity/operation of the locator, or that such have
been sold and have been used for international shipping or air
transport operations, or that the entities to which the said goods
were sold are statutorily zero-rated for VAT, and/or exempt from
Excise taxes.
xxxx
On March 8, 2012, petitioner, which represents the businesses and
enterprises within the Clark Freeport Zone, filed the instant petition
alleging that respondents acted with grave abuse of discretion in
issuing RR 2-2012. It argues that by imposing the VAT and excise tax
on the importation of petroleum and petroleum products from
abroad and into the Freeport or Economic Zones, RR 2-2012
unilaterally revoked the tax exemption granted by RA No. 7227 and
RA No. 9400 to the businesses and enterprises operating within the
Subic Special Economic Zone and Clark Freeport Zone.
Respondents, through the Office of the Solicitor General (OSG),
contend that the petition must be denied outright because the
special civil action for certiorari cannot be used to assail RR 2-2012
which was issued by the respondents in the exercise of their quasi-
legislative or rule-making powers. According to the OSG, certiorari
can only be used against a public officer exercising judicial or quasi-
judicial powers. In addition, the OSG invokes the doctrine of
hierarchy of courts and claims that a petition for certiorari cannot be
filed directly to this Court absent highly exceptional reasons which
the petitioner failed to adduce. Finally, the OSG opposes the
argument of petitioner that RR 2-2012 unilaterally revoked the tax
exemption granted by RA No. 7227 and RA No. 9400 to the
businesses and enterprises operating within the Subic Special
Economic Zone and Clark Freeport Zone by referring to the tax
refund under Section 3 of RR 2-2012. It points out that Section 3
allows the businesses and enterprises operating within the Subic
Special Economic Zone and Clark Freeport Zone to claim for a tax
refund upon submission of competent proof that they used the
imported fuel exclusively within the Subic Special Economic Zone
and Clark Freeport Zone. Thus, the OSG claimed that RR 2-2012 is
consistent with RA No. 7227 and RA No. 9400.
We deny the petition for being an improper remedy.
Firstly, respondents did not act in any judicial or quasi-judicial
capacity. A petition for certiorari under Rule 65 of the 1997 Rules of
Civil Procedure, as amended, is a special civil action that may be
invoked only against a tribunal, board, or officer exercising judicial
or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure, as amended,
provides:
SECTION 1. Petition for certiorari. - When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of
such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require.
xxxx
For a special civil action for certiorari to prosper, the following
requisites must concur: ( 1) it must be directed against a tribunal,
board, or officer exercising judicial or quasi-judicial functions; (2) the
tribunal, board, or officer must have acted without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (3) there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law.1
A respondent is said to be exercising judicial function where he has
the power to determine what the law is and what the legal rights of
the parties are, and then undertakes to determine these questions
and adjudicate upon the rights of the parties. 2 Quasi-judicial
function, on the other hand, is "a term which applies to the action,
discretion, etc., of public administrative officers or bodies x x x
required to investigate facts, or ascertain the existence of facts, hold
hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature." 3 before
a tribunal, board, or officer may exercise judicial or quasi-judicial
acts, it is necessary that there be a law that gives rise to some
specific rights of persons or property under which adverse claims to
such rights are made, and the controversy ensuing therefrom is
brought before a tribunal, board, or officer clothed with power and
authority to determine the law and adjudicate the respective rights
of the contending parties.4
Respondents do not fall within the ambit of a tribunal, board, or
officer exercising judicial or quasi-judicial functions. They issued RR
2-2012 in the exercise of their quasi-legislative or rule-making
powers, and not judicial or quasi-judicial functions. Verily,
respondents did not adjudicate or determine the rights of the
parties.
In order to determine whether a Revenue Regulation is
quasilegislative in nature, we must examine the legal basis of the
Secretary of Finance in the issuance thereof. In BPI Leasing
Corporation v. Court of Appeals.5 we ruled that Revenue Regulation
19-86 was quasi-legislative in nature because it was issued by the
Secretary of Finance in the exercise of his rule-making powers under
Section 244 of the National Internal Revenue Code (NIRC):
The Court finds the questioned revenue regulation to be legislative
in nature. Section 1 of Revenue Regulation 19-86 plainly states that
it was promulgated pursuant to Section 277 of the NIRC. Section 277
(now Section 244) is an express grant of authority to the Secretary of
Finance to promulgate all needful rules and regulations for the
effective enforcement of the provisions of the NIRC. In Paper
Industries Corporation of the Philippines v. Court of Appeals, the
Rule 63 Full Text Cases andm9 of 88
Court recognized that the application of Section 277 calls for none
other than the exercise of quasi-legislative or rule-making authority.
Verily, it cannot be disputed that Revenue Regulation 19-86 was
issued pursuant to the rule-making power of the Secretary of
Finance, thus making it legislative and not interpretative as alleged
by BLC. 6
Similarly, in the case at bar, RR 2-2012 was also issued by the
Secretary of Finance based on Section 244 of the NIRC. Section 1 of
RR 2-2012 provides:
SECTION 1. SCOPE - Pursuant to Section 244, in relation to Section
245, of the National Internal Revenue Code (NIRC) of 1997, as
amended, these Regulations are hereby promulgated in order to
prescribe:
1) the tax administration treatment of all petroleum and petroleum
products imported into the Philippines, including those coming in
through Freeport zones or Economic Zones; and 2) the refund of
Value-Added Tax (VAT) and Excise taxes paid for transactions
statutorily zero-rated or exempt therefrom; and to provide
administrative guidelines on the operation and maintenance of
storage tanks, facilities, depots or terminals where commodities for
commercial use can be stored.
Relevantly, Section 244 of the NIRC provides:
SEC. 244. Authority of Secretary of Finance to Promulgate Rules and
Regulations. -The Secretary of Finance, upon recommendation of
the Commissioner, shall promulgate all needful rules and regulations
for the effective enforcement of the provisions of this Code.
Conformably with our ruling in BPI Leasing Corporation that the
application of Section 244 of the NIRC is an exercise of quasi-
legislative or rule-making powers of the Secretary of Finance, and
since RR 2-2012 was issued by the Secretary of Finance based on
Section 244 of the NIRC, such administrative issuance is therefore
quasi-legislative in nature which is outside the scope of a petition for
certiorari. issued by the Secretary of Finance based on Section 244
of the NIRC, such administrative issuance is therefore quasi-
legislative in nature which is outside the scope of a petition for
certiorari.
Secondly, while this case is styled as a petition for certiorari, there is,
however, no denying the fact that, in essence, it seeks the
declaration by this Court of the unconstitutionality and illegality of
the questioned rule, thus partaking the nature, in reality, of one for
declaratory relief over which this Court has only appellate, not
original, jurisdiction. 7Section 5, Article VIII of the 1987 Philippine
Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting
ambassadors, other public ministers and consuls, and over
petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or
certiorari as the law or the Rules of Court may provide,
final judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in
question.
xxxx
Accordingly, this petition must fail because this Court does not have
original jurisdiction over a petition for declaratory relief even if only
questions of law are involved.8 The special civil action of declaratory
relief falls under the exclusive jurisdiction of the Regional Trial
Courts. 9 The Rules of Court is explicit that such action shall be
brought before the appropriate Regional Trial Court. Section 1, Rule
63 of the Rules of Court provides:
SECTION 1. Who may file petition. - Any person interested under a
deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.
Lastly, although this Court, the Court of Appeals and the Regional
Trial Courts have concurrent jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum.10 In Heirs of Bertuldo
Hinog v. Hon. Melicor, 11citing People v. Cuaresma, 12 we held:
This Court's original jurisdiction to issue writs of certiorari is not
exclusive. It is shared by this Court with Regional Trial Courts and
with the Court of Appeals. This concurrence of jurisdiction is not,
however, to be taken as according to parties seeking any of the writs
an absolute, unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a hierarchy of
courts. That hierarchy is determinative of the venue of appeals, and
also serves as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that
judicial hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme
Court's original jurisdiction to issue these writs should be allowed
only when there are special and important reasons therefor, clearly
and specifically set out in the petition. This is [an] established policy.
It is a policy necessary to prevent inordinate demands upon the
Court's time and attention which are better devoted to those
matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court's docket.
The rationale for this rule is two-fold: (1) it would be an imposition
upon the precious time of this Court; and (2) it would cause an
inevitable and resultant delay, intended or otherwise, in the
adjudication of cases, which in some instances had to be remanded
or referred to the lower court as the proper forum under the rules of
procedure, or as better equipped to resolve the issues because this
Court is not a trier of facts. 13
We thus affirm the judicial policy that we shall not entertain a direct
resort to this Court unless the remedy cannot be obtained in the
apporiate courts, and exceptional and compelling circumstances,
Rule 63 Full Text Cases andm10 of 88
such as cases of national interest and of serious implications, justify
the availment of the extraordinary remedy of writ of certiorari. 14
In Chamber of Real Estate and Builders Association, Inc (CREBA) v.
Secretary of Agrarian Reform, 15 we provided examples of such
exceptional and compelling circumstances, to wit:
Exceptional and compelling circumstances were held present in the
following cases (a) Chavez v. Romulo, on citizens 9 right to bear arms
;(b) Government of [the] United States of America v. Hon. Purganan,
on bail in extradition remedy of writ of certiorari.
In Chamber of Real Estate and Builders Association, Inc.(CREBA) v.
Secretary of Agrarian Reform, 15 we provided examples of such
exceptional and compelling circumstances, to wit:
Exceptional and compelling circumstances were held present in the
following cases: (a) Chavez v. Romulo, on citizens' right to bear arms;
(b) Government of[the] United States of America v. Hon Purganan,
on bail in extradition proceedings; (c) Commission on Elections
v.Judge Quijano- Padilla, on government contract involving
modernization and computerization of voters' registration list;(d)
Buklod ng Kawaning EJIB v. Hon Sec. Zamora, on status and
existence of a public office; and (e) Hon. Fortich v. Hon. Corona, on
the so-called "Win-Win Resolution" of the Office of the President
which modified the approval of the conversion to agro-industrial
area. 16
In the case at bar, petitioner failed to allege such exceptional and
compelling circumstances which justify a direct resort to this Court.
In view of the serious procedural and technical defects of the
petition, we see no need for this Court to resolve the other issues
raised by the petitioner.
WHEREFORE, premises considered, the petition is DISMISSED.
With costs against the petitioner.
SO ORDERED.
THIRD DIVISION
G.R. No. 211356 September 29, 2014
CRISOSTOMO B. AQUINO, Petitioner,
vs.
MUNICIPALITY OF MALAY, AKLAN, represented by HON. MAYOR
JOHN P. YAP, SANGGUNIANG BA YAN OF MALAY, AKLAN,
represented by HON. EZEL FLORES, DANTE PASUGUIRON, ROWEN
AGUIRRE, WILBEC GELITO, JUPITER GALLENERO, OFFICE OF THE
MUNICIPAL ENGINEER, OFFICE OF THE MUNICIPAL TREASURER,
BORACAY PNP CHIEF, BORACAY FOUNDATION, INC., represented
by NENETTE GRAF, MUNICIPAL AUXILIARY POLICE, and JOHN and
JANE DOES, Respondents.
DECISION
VELASCO, JR., J.:
Nature of the Case
Before the Court is a Petition for Review on Certiorari challenging
the Decision1 and the Resolution of the Court of Appeals (CA) in CA-
G.R. SP No. 120042 dated August 13, 2013 and February 3, 2014,
respectively. The assailed rulings denied Crisostomo Aquino's
Petition for Certiorari for not being the proper remedy to question
the issuance and implementation of Executive Order No. 10, Series
of 2011 (EO 10), ordering the demolition of his hotel establishment.
The Facts
Petitioner is the president and chief executive officer of Boracay
Island West Cove Management Philippines, Inc. (Boracay West
Cove). On January 7, 2010, the company applied for a zoning
compliance with the municipal government of Malay, Aklan.2 While
the company was already operating a resort in the area, the
application sought the issuance of a building permit covering the
construction of a three-storey hotel over a parcel of land measuring
998 sqm. located in Sitio Diniwid, Barangay Balagab, Boracay Island,
Malay, Aklan,which is covered by a Forest Land Use Agreement for
Tourism Purposes (FLAgT) issued by the Department of Environment
and Natural Resources (DENR) in favor of Boracay West Cove.
Through a Decision on Zoning dated January 20, 2010, the Municipal
Zoning Administrator denied petitioner’s application on the ground
that the proposed construction site was withinthe "no build zone"
demarcated in Municipal Ordinance 2000-131 (Ordinance).3 As
provided in the Ordinance:
SECTION 2. – Definition of Terms. Asused in this Ordinance, the
following words, terms and phrases shall mean as follows:
xxxx
(b) No Build Zone – the space twenty-five (25) meters from the edge
of the mean high water mark measured inland;
xxxx
SECTION 3. – No building or structure of any kind whether
temporary or permanent shall be allowed to be set up, erected or
constructed on the beaches around the Island of Boracay and in its
offshore waters. During the conduct of special activities or special
events, the Sangguniang Bayan may, through a Resolution, authorize
the Office of the Mayor to issue Special Permits for construction of
temporary structures on the beach for the duration of the special
activity as embodied in the Resolution.
In due time, petitioner appealed the denial action to the Office of
the Mayor on February 1, 2010. On May 13, 2010, petitioner
followed up his appeal through a letter but no action was ever taken
by the respondent mayor. On April 5, 2011, however, a Notice of
Assessment was sent to petitioner asking for the settlement of
Boracay West Cove’s unpaid taxes and other liabilities under pain of
a recommendation for closure in view of its continuous commercial
operation since 2009 sans the necessaryzoning clearance, building
permit, and business and mayor’s permit. In reply, petitioner
expressed willingness to settle the company’s obligations, butthe
municipal treasurer refused to accept the tendered payment.
Meanwhile, petitioner continued with the construction, expansion,
and operation of the resort hotel.
Rule 63 Full Text Cases andm11 of 88
Subsequently, on March 28, 2011, a Cease and Desist Order was
issued by the municipal government, enjoining the expansion of the
resort, and on June 7, 2011, the Office of the Mayor of Malay, Aklan
issued the assailed EO 10, ordering the closure and demolition of
Boracay West Cove’s hotel.
EO 10 was partially implemented on June 10, 2011. Thereafter, two
more instances followed wherein respondents demolished the
improvements introduced by Boracay West Cove, the most recent of
which was made in February 2014.
Alleging that the order was issued and executed with grave abuse of
discretion, petitioner filed a Petition for Certiorari with prayer for
injunctive relief with the CA. He argued that judicial proceedings
should first be conducted before the respondent mayor could order
the demolition of the company’s establishment; that Boracay West
Cove was granted a FLAgT by the DENR, which bestowed the
company the right to construct permanent improvements on the
area in question; thatsince the area is a forestland, it is the DENR—
and not the municipality of Malay, or any other local government
unit for that matter—that has primary jurisdiction over the area, and
that the Regional Executive Director of DENR-Region 6 had officially
issued an opinion regarding the legal issues involved in the present
case; that the Ordinance admits of exceptions; and lastly, that it is
the mayor who should be blamed for not issuing the necessary
clearances in the company’s favor.
In rebuttal, respondents contended that the FLAgT does not excuse
the company from complying with the Ordinance and Presidential
Decree No. 1096 (PD 1096), otherwise known as the National
Building Code of the Philippines. Respondents also argued that the
demolition needed no court order because the municipal mayor has
the express power under the Local Government Code (LGC) to order
the removal of illegally constructed buildings.
Ruling of the Court of Appeals
In its assailed Decision dated August 13, 2013, the CA dismissed the
petition solely on procedural ground, i.e., the special writ of
certiorari can only be directed against a tribunal, board, or officer
exercising judicial or quasi-judicial functions and since the issuance
of EO 10 was done in the exercise of executive functions, and not of
judicial or quasi-judicial functions, certiorari will not lie. Instead, the
proper remedy for the petitioner, according to the CA, is to file a
petition for declaratory relief with the Regional Trial Court.
Petitioner sought reconsideration but this was denied by the CA on
February 3, 2014 through the challenged Resolution. Hence, the
instant petition raising arguments on both procedure and substance.
The Issues
Stripped to the essentials, the pivotal issues in the extant case are as
follows:
1. The propriety under the premises ofthe filing of a
petition for certiorari instead of a petition for declaratory
relief;
a. Whether or not declaratory reliefis still
available to petitioner;
b. Whether or not the CA correctly ruled that the
respondent mayor was performing neither a
judicial nor quasi-judicial function when he
ordered the closure and demolition of Boracay
West Cove’s hotel;
2. Whether or not respondent mayor committed grave
abuse of discretion when he issued EO 10;
a. Whether or not petitioner’s right to due
process was violated when the respondent
mayor ordered the closure and demolition of
Boracay West Cove’s hotel without first
conducting judicial proceedings;
b. Whether or not the LGU’s refusal to issue
petitioner the necessary building permit and
clearances was justified;
c. Whether or not petitioner’s rights under the
FLAgT prevail over the municipal ordinance
providing for a no-build zone; and
d. Whether or not the DENR has primary
jurisdiction over the controversy, not the LGU.
The Court’s Ruling
We deny the petition.
Certiorari, not declaratory relief, is the proper remedy
a. Declaratory relief no longer viable
Resolving first the procedural aspect of the case, We find merit in
petitioner’s contention that the special writ of certiorari, and not
declaratory relief, is the proper remedy for assailing EO 10. As
provided under Sec. 1, Rule 63 of the Rules of Court:
SECTION 1. Who may file petition. – Any person interested under a
deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance or
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder. x x x (emphasis
added)
An action for declaratory relief presupposes that there has been no
actual breach of the instruments involved or of the rights arising
thereunder. Since the purpose of an action for declaratory relief is to
secure an authoritative statement of the rights and obligations of
the parties under a statute, deed, or contract for their guidance in
the enforcement thereof, or compliance therewith, and not to settle
issues arising from an alleged breach thereof, it may be entertained
before the breach or violation of the statute, deed or contract to
which it refers. A petition for declaratory relief gives a practical
remedy for ending controversies that have not reached the state
where another relief is immediately available; and supplies the need
for a form of action that will set controversies at rest before they
lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs.4
Rule 63 Full Text Cases andm12 of 88
In the case at bar, the petition for declaratory relief became
unavailable by EO 10’s enforcement and implementation. The
closure and demolition of the hotel rendered futile any possible
guidelines that may be issued by the trial court for carrying outthe
directives in the challenged EO 10. Indubitably, the CA erred when it
ruled that declaratory relief is the proper remedy given such a
situation.
b. Petitioner correctly resorted to certiorari
On the propriety of filing a petition for certiorari, Sec. 1, Rule 65 of
the Rules of Court provides:
Section 1. Petition for certiorari. — When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of
such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require. x x x
For certiorari to prosper, the petitioner must establish the
concurrence of the following requisites, namely:
1. The writ is directed against a tribunal, board, or officer
exercising judicial or quasi-judicial functions;
2. Such tribunal, board, or officer has acted without or in
excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and
3. There is no appeal or any plain speedy, and adequate
remedy in the ordinary course of law.5
Guilty of reiteration, the CA immediately dismissed the Petition for
Certiorari upon determining that the first element is wanting—that
respondent mayor was allegedly not exercising judicial or quasi-
judicial functions when he issued EO 10.
We are not persuaded.
The CA fell into a trapwhen it ruled that a mayor, an officer from the
executive department, exercises an executive function whenever he
issues an Executive Order. This is tad too presumptive for it is the
nature of the act to be performed, rather than of the office,board,
or body which performs it, that determines whether or not a
particular act is a discharge of judicial or quasijudicial functions. The
first requirement for certiorari is satisfied if the officers act judicially
in making their decision, whatever may be their public character.6
It is not essential that the challenged proceedings should be strictly
and technically judicial, in the sense in which that word is used when
applied to courts of justice, but it issufficient if they are quasi-
judicial.7 To contrast, a party is said to be exercising ajudicial
function where he has the power to determine what the law is and
what legal rights of the parties are, and then undertakes to
determine these questions and adjudicate upon the rights of the
parties, whereas quasi-judicial functionis "a term which applies to
the actions, discretion, etc., of public administrative officers or
bodies x x x required to investigate facts or ascertain the existence
of facts, hold hearings, and draw conclusions from themas a basis
for their official action and to exercise discretion of a judicial
nature."8
In the case at bench, the assailed EO 10 was issued upon the
respondent mayor’s finding that Boracay West Cove’s construction,
expansion, and operation of its hotel inMalay, Aklan is illegal. Such a
finding of illegality required the respondent mayor’s exercise of
quasijudicial functions, against which the special writ of certiorari
may lie. Apropos hereto is Our ruling in City Engineer of Baguio v.
Baniqued:9
There is no gainsaying that a city mayor is an executive official nor is
the matter of issuing demolition notices or orders not a ministerial
one. In determining whether or not a structure is illegal or it should
be demolished, property rights are involved thereby needing notices
and opportunity to be heard as provided for in the constitutionally
guaranteed right of due process. In pursuit of these functions, the
city mayor has to exercise quasi-judicial powers.
With the foregoing discussion, the CA erred in ruling that the
respondent mayor was merely exercising his executive functions, for
clearly, the first requisite for the special writ has been satisfied.
Aside from the first requisite, We likewise hold that the third
element, i.e., the unavailability of a plain, speedy,or adequate
remedy, is also present herein. While it may be argued that, under
the LGC, Executive Orders issued by mayors are subject to review by
provincial governors,10 this cannot be considered as an adequate
remedy given the exigencies of petitioner’s predicament. In a litany
of cases, We have held that it is inadequacy, not the mere absence
of all other legal remedies and the danger of failure of justice
without the writ, that must usually determine the propriety of
certiorari. A remedy is plain, speedy and adequate ifit will promptly
relieve the petitioner from the injurious effects of the judgment,
order, or resolution of the lower court or agency. It is understood,
then, that a litigant need not mark time by resorting to the less
speedy remedy of appeal in order to have an order annulled and set
aside for being patently void for failureof the trial court to comply
with the Rules of Court.11
Before applying this doctrine, it must first be borne in mind that
respondents in this case have already taken measures towards
implementing EO 10. In fact, substantial segments of the hotel have
already been demolished pursuant to the mayor’s directive. It is
then understandable why petitioner prayed for the issuance ofan
injunctive writ––a provisional remedy that would otherwise have
been unavailable had he sought a reversal from the office of the
provincial governor of Aklan. Evidently, petitioner correctly saw the
urgent need for judicial intervention via certiorari.
In light of the foregoing, the CA should have proceeded to grab the
bull by its horns and determine the existence of the second element
of certiorari––whether or not there was grave abuse of discretion on
the part of respondents.
Upon Our finding that a petition for certiorari under Rule 65 is the
appropriate remedy, We will proceed to resolve the core issues in
view of the urgency of the reliefs prayed for in the petition.
Respondents did not commit grave abuse of discretion
a. The hotel’s classification as a nuisance
Rule 63 Full Text Cases andm13 of 88
Article 694 of the Civil Code defines "nuisance" as any act, omission,
establishment, business, condition or property, or anything else that
(1) injures or endangers the health or safety of others; (2) annoys or
offends the senses; (3) shocks, defies or disregards decency or
morality; (4) obstructs or interferes with the free passage of any
public highway or street, or any body of water; or (5) hinders or
impairs the use of property.12
In establishing a no build zone through local legislation, the LGU
effectively made a determination that constructions therein,
without first securing exemptions from the local council, qualify as
nuisances for they pose a threat to public safety. No buildzones are
intended for the protection of the public because the stability ofthe
ground’s foundation is adversely affected by the nearby body of
water. The ever present threat of high rising storm surges also
justifies the ban on permanent constructions near the shoreline.
Indeed, the area’s exposure to potential geo-hazards cannot be
ignored and ample protection to the residents of Malay, Aklan
should be afforded.
Challenging the validity of the public respondents’ actuations,
petitioner posits that the hotel cannot summarily be abated because
it is not a nuisance per se, given the hundred million peso-worth of
capital infused in the venture. Citing Asilo, Jr. v. People,13 petitioner
also argues that respondents should have first secured a court order
before proceeding with the demolition. Preliminarily, We agree with
petitioner’s posture that the property involved cannot be classified
as a nuisance per se, but not for the reason he so offers. Property
valuation, after all, is not the litmus test for such a determination.
More controlling is the property’s nature and conditions, which
should be evaluated to see if it qualifies as a nuisance as defined
under the law.
As jurisprudence elucidates, nuisances are of two kinds: nuisanceper
se and nuisanceper accidens. The first is recognized as a nuisance
under any and all circumstances, because it constitutes a direct
menace to public health or safety, and, for that reason, may be
abated summarily under the undefined law of necessity. The second
is thatwhich depends upon certain conditions and circumstances,
and its existence being a question of fact, it cannot be abated
without due hearing thereon in a tribunal authorized to decide
whether such a thing does in law constitute a nuisance.14
In the case at bar, the hotel, in itself, cannot be considered as a
nuisance per sesince this type of nuisance is generally defined as an
act, occupation, or structure, which is a nuisance at all timesand
under any circumstances, regardless of locationor
surrounding.15 Here, it is merely the hotel’s particular incident––its
location––and not its inherent qualities that rendered it a nuisance.
Otherwise stated, had it not been constructed in the no build zone,
Boracay West Cove could have secured the necessary permits
without issue. As such, petitioner is correct that the hotel is not a
nuisance per se, but to Our mind, it is still a nuisance per accidens.
b. Respondent mayor has the power to order the demolition of
illegal constructions
Generally, LGUs have no power to declare a particular thing as a
nuisance unless such a thing is a nuisance per se.16 So it was held in
AC Enterprises v. Frabelle Properties Corp:17
We agree with petitioner’s contention that, under Section
447(a)(3)(i) of R.A. No. 7160, otherwise known as the Local
Government Code, the Sangguniang Panglungsod is empowered to
enact ordinances declaring, preventing or abating noise and other
forms of nuisance. It bears stressing, however, that the Sangguniang
Bayan cannot declare a particular thing as a nuisance per se and
order its condemnation. It does not have the power to find, as a fact,
that a particular thing is a nuisance when such thing is not a
nuisance per se; nor can it authorize the extrajudicial condemnation
and destruction of that as a nuisance which in its nature, situation or
use is not such. Those things must be determined and resolved in
the ordinary courts of law.If a thing, be in fact, a nuisance due to the
manner of its operation, that question cannot be determined by a
mere resolution of the Sangguniang Bayan. (emphasis supplied)
Despite the hotel’s classification as a nuisance per accidens,
however, We still find in this case that the LGU may nevertheless
properly order the hotel’s demolition. This is because, in the
exercise of police power and the general welfare clause,18 property
rights of individuals may be subjected to restraints and burdens in
order to fulfil the objectives of the government.
Otherwise stated, the government may enact legislation that may
interfere with personal liberty, property, lawfulbusinesses and
occupations to promote the general welfare.19
One such piece of legislation is the LGC, which authorizes city and
municipal governments, acting through their local chief executives,
to issue demolition orders. Under existing laws, the office of the
mayor is given powers not only relative to its function asthe
executive official of the town; it has also been endowed with
authorityto hear issues involving property rights of individuals and to
come out with an effective order or resolution thereon.20 Pertinent
herein is Sec. 444 (b)(3)(vi) of the LGC, which empowered the mayor
to order the closure and removal of illegally constructed
establishments for failing tosecure the necessary permits, to wit:
Section 444.The Chief Executive: Powers, Duties, Functions and
Compensation. –
xxxx
(b) For efficient, effective and economical governance the purpose
of which is the general welfare of the municipality and its
inhabitants pursuant to Section 16 of this Code, the municipal mayor
shall:
xxxx
(3) Initiate and maximize the generation of resources and revenues,
and apply the same to the implementation of development plans,
program objectives and priorities as provided for under Section 18
of this Code, particularly those resources and revenues programmed
for agro-industrial development and country-wide growth and
progress, and relative thereto, shall:
xxxx
(vi) Require owners of illegally constructed houses, buildings or
other structures to obtain the necessary permit, subject to such
fines and penalties as may be imposed by law or ordinance, or to
make necessary changes in the construction of the same when said
Rule 63 Full Text Cases andm14 of 88
construction violates any law or ordinance, or to order the
demolition or removal of said house, building or structure within the
period prescribed by law or ordinance. (emphasis supplied)
c. Requirements for the exercise of the power are present
i. Illegality of structures
In the case at bar, petitioner admittedly failed to secure the
necessary permits, clearances, and exemptions before the
construction, expansion, and operation of Boracay Wet Cove’s hotel
in Malay, Aklan. To recall, petitioner declared that the application
for zoning compliance was still pending with the office of the mayor
even though construction and operation were already ongoing at
the same time. As such, it could no longer be denied that petitioner
openly violated Municipal Ordinance 2000-131, which provides:
SECTION 9. – Permits and Clearances.
(a) No building or structure shall beallowed to start construction
unless a Building Permit therefore has been duly issued by the Office
of the Municipal Engineer.Once issued, the building owner or any
person in charge of the construction shall display on the lot or on
the building undergoing construction a placard containing the
Building Permit Number and the date of its issue. The office of the
Municipal Engineer shall not issue any building permit unless:
1. The proposed construction has been duly issued a
Zoning Clearance by the Office of the Municipal Zoning
Officer;
2. The proposed construction has been duly endorsed by
the Sangguniang Bayan through a Letter of Endorsement.
(b) Only buildings/structures which has complied
with all the requirements for its construction
asverified to by the Building Inspector and the
Sangguniang Bayan shall be issued a Certificate
of Occupancy by the Office of the Municipal
Engineer.
(c) No Business or Mayor’s Permit shall be issued
to businesses being undertaken on buildings or
structures which were not issued a certificate of
Occupancy beginning January 2001 and
thereafter.
xxxx
SECTION 10. – Penalties.
xxxx
(e) Any building, structure, or contraption erected in any
public place within the Municipality of Malay such as but
not limited to streets, thoroughfares, sidewalks, plazas,
beachesor in any other public place are hereby declared as
nuisance and illegal structure.Such building structure or
contraption shall be demolished by the owner thereof or
any of his authorized representative within ten (10) days
from receipt of the notice to demolish. Failure or refusal
on the part of the owner or any of his authorized
representative to demolish the illegal structure within the
period here inabove specified shall automatically authorize
the government of the Municipality of Malay to demolish
the same, gather and keep the construction materials of
the demolished structure. (emphasis supplied)
Petitioner cannot justify his position by passing the blame onto the
respondent mayor and the latter’s failure to act on his appeal for
this does not, in any way, imply that petitioner can proceed with his
infrastructure projects. On the contrary,this only means that the
decision of the zoning administrator denying theapplication still
stands and that petitioner acquired no right to construct on the no
build zone. The illegality of the construction cannot be cured by
merely tendering payment for the necessary fees and permits since
the LGU’s refusal rests on valid grounds.
Instead of taking the law into his own hands, petitioner could have
filed, as an alternative, a petition for mandamus to compel the
respondent mayor to exercise discretion and resolve the controversy
pending before his office. There is indeed an exception to the rule
that matters involving judgment and discretion are beyond the
reach of a writ of mandamus, for such writ may be issued to compel
action in those matters, when refused. Whether or not the decision
would be for or against petitioner would be for the respondent
mayor to decide, for while mandamus may be invoked to compel the
exercise of discretion, it cannot compel such discretion to be
exercised in a particular way.21 What would have been important
was for the respondent mayor to immediately resolve the case for
petitioner to be able to go through the motions that the zoning
clearance application process entailed.
Alas, petitioner opted to defy the zoning administrator’s ruling. He
consciously chose to violate not only the Ordinance but also Sec. 301
of PD 1096, laying down the requirement of building permits, which
provides:
Section 301. Building Permits. No person, firm or corporation,
including any agency or instrumentality of the government shall
erect, construct, alter, repair, move, convert or demolish any
building or structure or cause the same to be done without first
obtaining a building permit therefor from the Building Official
assigned in the place where the subject building is located or the
building work is to be done.
This twin violation of law and ordinance warranted the LGU’s
invocation of Sec. 444 (b)(3)(vi) of the LGC, which power is separate
and distinct from the power to summarily abate nuisances per se.
Under the law, insofar as illegal constructions are concerned, the
mayor can, after satisfying the requirement of due notice and
hearing, order their closure and demolition.
ii. Observance of procedural due process rights
In the case at bench, the due process requirement is deemed to
have been sufficiently complied with. First, basic is the rule that
public officers enjoy the presumption of regularity in the
performance of their duties.22 The burden is on the petitioner herein
to prove that Boracay West Cove was deprived of the opportunity to
beheard before EO 10 was issued. Regrettably, copies of the Cease
and Desist Order issued by the LGU and of the assailed EO 10 itself
were never attached to the petition before this Court, which
documents could have readily shed light on whether or not
Rule 63 Full Text Cases andm15 of 88
petitioner has been accorded the 10-day grace period provided in
Section 10 of the Ordinance. In view of this fact, the presumption of
regularity must be sustained. Second, as quoted by petitioner in his
petition before the CA, the assailed EO 10 states that petitioner
received notices from the municipality government on March 7 and
28, 2011, requiring Boracay West Cove to comply with the zoning
ordinance and yet it failed to do so.23 If such was the case, the grace
period can be deemed observed and the establishment was already
ripe for closure and demolition by the time EO 10 was issued in June.
Third, the observance of the 10-day allowance for the owner to
demolish the hotel was never questioned by petitioner so there is no
need to discuss the same. Verily, the only grounds invoked by
petitioner in crying due process violation are (1) the absence of a
court order prior to demolition and (2) the municipal government’s
exercise of jurisdiction over the controversy instead of the DENR.
Therefore, it can no longer be belatedly argued that the 10-day
grace period was not observed because to entertain the same would
result in the violation of the respondents’ own due process rights.
Given the presence of the requirements under Sec. 444 (b)(3)(vi) of
the LGC, whether the building constituted a nuisance per seor a
nuisance per accidensbecomes immaterial. The hotelwas
demolished not exactly because it is a nuisance but because it failed
to comply with the legal requirements prior to construction. It justso
happened that, in the case at bar, the hotel’s incident that qualified
it as a nuisance per accidens––its being constructed within the no
build zone––further resulted in the non-issuance of the necessary
permits and clearances, which is a ground for demolition under the
LGC. Under the premises, a court order that is required under
normal circumstances is hereby dispensed with.
d. The FLAgT cannot prevail over the municipal ordinance and PD
1096
Petitioner next directs our attention to the following FLAgT
provision:
VII. The SECOND PARTY may construct permanent and/or temporary
improvements or infrastructure in the FLAgT Area necessary and
appropriate for its development for tourism purposes pursuant to
the approved SMP. "Permanent Improvements" refer to access
roads, and buildings or structures which adhere to the ground in a
fixed and permanent manner. On the other hand, "Temporary
Improvements" include those which are detachablefrom the
foundation or the ground introduced by the SECOND PARTY inthe
FLAgT Area and which the SECOND PARTY may remove or dismantle
upon expiration or cancellation of this AGREEMENT x x x.24
Taken in conjunction with the exceptions laid down in Sections 6 and
8 of the Ordinance, petitioner argues that Boracay West Cove is
exempted from securing permits from the LGU. Said exceptions
read:
SECTION 6. – No building or structure shall be allowed to be
constructed on a slope Twenty Five Percent (25%) or higher unless
provided with soil erosion protective structures and authorized by
the Department of Environment and Natural Resources.
xxxx
SECTION 8. – No building or structure shall be allowed to be
constructed on a swamp or other water-clogged areas unless
authorized by the Department of Environment and Natural
Resources.
According to petitioner, the fact that it was issued a FLAgT
constitutes sufficient authorization from the DENR to proceed with
the construction of the three-storey hotel.
The argument does not persuade.
The rights granted to petitioner under the FLAgT are not unbridled.
Forestlands, although under the management of the DENR, are not
exempt from the territorial application of municipal laws, for local
government units legitimately exercise their powers of government
over their defined territorial jurisdiction.
Furthermore, the conditions set forth in the FLAgT and the
limitations circumscribed in the ordinance are not mutually exclusive
and are, in fact, cumulative. As sourced from Sec. 447 (a)(5)(i) of the
LGC:
Section 447.Powers, Duties, Functions and Compensation. –
(a) The sangguniang bayan, as the legislative body of the
municipality, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the
municipalityand its inhabitants pursuant to Section 16 of
this Code and in the proper exercise of the corporate
powers of the municipality as provided for under Section
22 of this Code, and shall:
xxxx
(5) Approve ordinances which shall ensure the efficient
and effective delivery of the basic services and facilities as
provided for under Section 17 of this Code, and in addition
to said services and facilities, shall:
(i) Provide for the establishment, maintenance, protection,
and conservation of communal forests and watersheds,
tree parks,greenbelts, mangroves, and other similar forest
development projectsx x x. (emphasis added)
Thus, aside from complying with the provisions in the FLAgT granted
by the DENR, it was incumbent on petitioner to likewise comply with
the no build zone restriction under Municipal Ordinance 2000-131,
which was already in force even before the FLAgT was entered into.
On this point, it is well to stress that Sections 6 and 8 of the
Ordinance do not exempt petitioner from complying with the
restrictions since these provisions adverted to grant exemptions
from the ban on constructions on slopes and swamps, not on the no
build zone.
Additionally, the FLAgT does not excuse petitioner from complying
with PD 1096. As correctly pointed out by respondents, the
agreement cannot and will not amend or change the law because a
legislative act cannot be altered by mere contractual agreement.
Hence, petitioner has no valid reason for its failure to secure a
building permit pursuant to Sec. 301 of the National Building Code.
e. The DENR does not have primary jurisdiction over the controversy
Lastly, in ascribing grave abuse ofdiscretion on the part of the
respondent mayor, petitioner argued that the hotel site is a
forestland under the primary jurisdiction of the DENR. Assuch, the
merits of the case should have been passed upon by the agency and
Rule 63 Full Text Cases andm16 of 88
not by the LGU. In the alternative, petitioner explains that even if
jurisdiction over the matter has been devolved in favor of the LGU,
the DENR still has the power of review and supervision over the
former’s rulings. As cited by the petitioner, the LGC reads:
Section 17.Basic Services and Facilities. –
xxxx
(b) Such basic services and facilities include, but are not limited to,
the following:
xxxx
(2) For a Municipality:
xxxx
(ii) Pursuant to national policies and subject to supervision, control
and review of the DENR, implementation of community-based
forestry projects which include integrated social forestry programs
and similar projects; management and control of communal forests
with an area not exceeding fifty (50) square kilometers;
establishment of tree parks, greenbelts, and similar forest
development projects. (emphasis added)
Petitioner has made much of the fact that in line with this provision,
the DENR Region 6 had issued anopinion favourable to
petitioner.25 To petitioner, the adverted opinion effectively reversed
the findings of the respondent mayor that the structure introduced
was illegally constructed.
We disagree.
In alleging that the case concernsthe development and the proper
use of the country’s environment and natural resources, petitioner
is skirting the principal issue, which is Boracay West Cove's non-
compliance with the permit, clearance, and zoning requirements for
building constructions under national and municipal laws. He
downplays Boracay West Cove's omission in a bid to justify ousting
the LGU of jurisdiction over the case and transferring the same to
the DENR. He attempts to blow the issue out of proportion when it
all boils down to whether or not the construction of the three-storey
hotel was supported by the necessary documentary requirements.
Based on law and jurisprudence, the office of the mayor has
quasijudicial powers to order the closing and demolition of
establishments.1âwphi1 This power granted by the LGC, as earlier
explained, We believe, is not the same power devolved in favor of
the LGU under Sec. 17 (b )(2)(ii), as abovequoted, which is subject to
review by the DENR. The fact that the building to be demolished is
located within a forestland under the administration of the DENR is
of no moment, for what is involved herein, strictly speaking, is not
an issue on environmental protection, conservation of natural
resources, and the maintenance of ecological balance, but the
legality or illegality of the structure.1âwphi1 Rather than treating
this as an environmental issue then, focus should not be diverted
from the root cause of this debacle-compliance.
Ultimately, the purported power of review by a regional office of the
DENR over respondents' actions exercised through an
instrumentality of an ex-parte opinion, in this case, finds no
sufficient basis. At best, the legal opinion rendered, though perhaps
informative, is not conclusive on the courts and should be taken
with a grain of salt.
WHEREFORE, in view of the foregoing, the petition is hereby DENIED
for lack of merit. The Decision and the Resolution of the Court of
Appeals in CA-G.R. SP No. 120042 dated August 13, 2013 and
February 3, 2014, respectively, are hereby AFFIRMED.
SO ORDERED.
THIRD DIVISION
G.R. No. 175064 September 18, 2009
PROVINCE OF CAMARINES SUR, represented by Governor LUIS
RAYMUND F. VILLAFUERTE, Jr., Petitioner,
vs.
HONORABLE COURT OF APPEALS; and CITY OF NAGA, represented
by Mayor JESSE M. ROBREDO,Respondents.
DECISION
CHICO-NAZARIO, J.:
This Petition for Certiorari1 under Rule 65 of the Rules of Court seeks
to annul and set aside the Decision2 dated 28 June 2004 and the
Resolution3 dated 11 August 2006 of the Court of Appeals in CA-G.R.
SP No. 56243. The assailed Decision of the appellate court denied
due course the Petition for Review on Certiorari4 filed by petitioner
Province of Camarines Sur (Camarines Sur), while the assailed
Resolution denied the Motion for Reconsideration of the earlier
Decision.
The property subject of the instant case is a parcel of land, known as
Plaza Rizal, situated within the territory of herein respondent City of
Naga and with an aggregate area of 4,244 square meters, more or
less. Plaza Rizal is located in front of the old provincial capitol
building, where the Provincial Government of Camarines Sur used to
have its seat, at the time when the then Municipality of Naga was
still the provincial capital.
On 18 June 1948, Republic Act No. 3055 took effect and, by virtue
thereof, the Municipality of Naga was converted into the City of
Naga. Subsequently, on 16 June 1955, Republic Act No. 1336 6 was
approved, transferring the site of the provincial capitol of Camarines
Sur from the City of Naga to the barrio of Palestina, Municipality of
Pili.7 The Municipality of Pili was also named as the new provincial
capital.8
On 13 January 1997, the City of Naga filed a Complaint9 for
Declaratory Relief and/or Quieting of Title against Camarines Sur
before the Regional Trial Court (RTC) of the City of Naga, Branch 61,
which was docketed as Civil Case No. 97-3691.
The City of Naga alleged that, for a considerable length of time,
Camarines Sur possessed and claimed ownership of Plaza Rizal
because of a tax declaration over the said property in the name of
the province. As a result, Camarines Sur had long exercised
administrative control and management of Plaza Rizal, to the
exclusion of the City of Naga. The City of Naga could not introduce
improvements on Plaza Rizal, and its constituents could not use the
Rule 63 Full Text Cases andm17 of 88
property without securing a permit from the proper officials of
Camarines Sur. The situation had created a conflict of interest
between the parties herein and had generated animosities among
their respective officials.
The City of Naga stressed that it did not intend to acquire ownership
of Plaza Rizal. Being a property of the public domain, Plaza Rizal
could not be claimed by any subdivision of the state, as it belonged
to the public in general. Instead, the City of Naga sought a
declaration that the administrative control and management of
Plaza Rizal should be vested in it, given that the said property is
situated within its territorial jurisdiction. The City of Naga invoked
Section 2, Article I of Republic Act No. 305, the Charter of the City of
Naga, which states:
SEC. 2. Territory of the City of Naga. — The city of Naga which is
hereby created, shall comprise the present territorial jurisdiction of
the municipality of Naga, in the Province of Camarines Sur.
On 21 February 1997, Camarines Sur filed an Answer with Motion to
Dismiss.10 It argued that it was the legal and absolute owner of Plaza
Rizal and, therefore, had the sole right to maintain, manage, control,
and supervise the said property. Camarines Sur asserted that the
City of Naga was without any cause of action because the Complaint
lacked any legal or factual basis. Allegedly, Section 2 of Republic Act
No. 305 merely defined the territorial jurisdiction of the City of Naga
and did not vest any color of right to the latter to manage and
control any property owned by Camarines Sur. Furthermore, the
remedy of Declaratory Relief was inappropriate because there was
no justiciable controversy, given that the City of Naga did not intend
to acquire ownership of Plaza Rizal; and Camarines Sur, being the
owner of Plaza Rizal, had the right to the management,
maintenance, control, and supervision thereof. There was likewise
no actual or impending controversy, since Plaza Rizal had been
under the control and supervision of Camarines Sur since time
immemorial. The remedy of Quieting of Title was inappropriate, as
the City of Naga had no legal or equitable title to or interest in Plaza
Rizal that needed protection. Lastly, Camarines Sur stated that Plaza
Rizal was not a property of public domain, but a property owned by
Camarines Sur which was devoted to public use.
In an Order11 dated 28 May 1997, the RTC denied the Motion to
Dismiss of Camarines Sur, since the grounds cited therein were legal
issues that were evidentiary in nature and could only be threshed
out in a full-blown trial.
On 10 March 1999, the RTC rendered a Decision12
in favor of the City
of Naga, the pertinent portions of which provide:
As understood in the Law of Nations, the right of jurisdiction
accorded a sovereign state consists of first, its personal jurisdiction,
which in a sense is its authority over its nationals who are in a
foreign country and second, territorial jurisdiction, which is its
authority over persons and properties within the territorial
boundaries x x x.
"The territorial jurisdiction of a state is based on the right of domain.
The domain of a State includes normally only the expanse of its
territory over which it exercises the full rights of sovereignty." x x x
"Sovereignty, in turn, refers to the supreme power of a State to
command and enforce obedience; it is the power, to which, legally
speaking all interest[s] are practically subject and all wills
subordinate." x x x Indeed, from the point of view of national law, it
is in a sense absolute control over a definite territory. x x x.
In summation therefore from the above-quoted citations, when
territorial jurisdiction is being referred to, it means the entire
territory over which a State (or any local government unit) can
exercise absolute control.
In the instant case, [Camarines Sur] thru (sic) counsel admitted
during the pre-trial conference that indeed, the property in
question, which is Plaza Rizal, is within the territorial jurisdiction of
the [City of Naga]. Thus, applying the above-quoted principles
concerning territorial jurisdiction, [Camarines Sur] is barred by its
express admission from claiming that it is the Province of Camarines
Sur who has the right to administratively control, manage and
supervise said Plaza Rizal.
[The contention of Camarines Sur] that [Section 2, Article I] of
[Republic Act No.] 305 merely defines [the] territory of the City of
Naga has no strong leg to stand on.
The unequivocal and specific import of said provision provides the
extent into which the City of Naga can exercise its powers and
functions over all its constituents and properties found within its
territory. Further, Art. II, Sec. 9, par. b of [Republic Act No.] 305
provides one of the general powers and duties of the City Mayor, to
wit:
"To safeguard all the lands, buildings, records, moneys, credits and
other property and rights of the city, and subject to the [provisions]
of this Charter, have control of all its property."
Considering that the Province [of Camarines Sur] expressly
acknowledged that [Section 2, Article I] of [Republic Act No.] 305
merely defines the territory of [the City of Naga], then it is safe to
assume that it also accept that the City of Naga as represented by
the City Mayor exercises control of all the properties of the City, for
properties as used in the above-quoted provision refers to lands,
buildings, records, moneys[,] credits and other property and rights
of the city. x x x Since [Section 2, Article I] of [Republic Act No.] 305
defines the territory of [the City of] Naga and Plaza Rizal is within its
territorial jurisdiction, ergo, it is the City [of Naga] who has the right
of administrative control and management of Plaza Rizal.
The RTC thus decreed:
WHEREFORE, premises considered, [Section 2, Article I] of [Republic
Act No.] 305 is hereby interpreted and declared in this Court to
mean that the administrative control and management of Plaza Rizal
is within the City of Naga and not with the Province of Camarines
Sur.13
Camarines Sur received a copy of the foregoing Decision on 16
March 1999, and filed a Motion for Reconsideration14 of the same
on 30 March 1999. The RTC denied the Motion for Reconsideration
of Camarines Sur in an Order15 dated 1 September 1999. The RTC
reiterated that the enactment of Republic Act No. 305, which
converted the Municipality of Naga into an independent city, had
ipso facto ceased the power of administrative control and
supervision exercised by Camarines Sur over the property within the
territorial jurisdiction of the Municipality of Naga and vested into
the City of Naga. The administrative control and supervision
exercised by Camarines Sur over Plaza Rizal, since the time of the
Rule 63 Full Text Cases andm18 of 88
creation of the City of Naga and up to the time of the filing of the
instant case, was by mere tolerance on the part of the said city.
Furthermore, the claim of ownership of Plaza Rizal by Camarines Sur
was wanting, given that there was no express legislative action
therefor. Public streets, squares, plazas and the like, are not the
private property of either the City of Naga or Camarines Sur.
Camarines Sur received a copy of the RTC Order dated 1 September
1999, denying its Motion for Reconsideration, on 3 September 1999.
On 8 September 1999, Camarines Sur filed with the RTC a Notice of
Appeal.16 In an Order17dated 13 September 1999, the RTC
disapproved the Notice of Appeal for non-compliance with the
material data rule, which requires the statement of such data as will
show that the appeal was perfected on time.
On 13 September 1999, Camarines Sur filed a second Notice of
Appeal,18 which was again disapproved by the RTC in an
Order19 dated 14 September 1999 for having been filed outside of
the reglementary period. The RTC noted that Camarines Sur
received a copy of the RTC Decision dated 10 March 1999 on 16
March 1999. It thus had a period of 15 days therefrom to file a
motion for reconsideration or appeal. Camarines Sur filed its Motion
for Reconsideration on 30 March 1999 or on the fourteenth day of
the reglementary period. Said Motion for Reconsideration was
denied by the RTC in an Order dated 1 September 1999, which was
received by Camarines Sur on 3 September 1999. Thereafter,
Camarines Sur only had two days left to file its Notice of Appeal, but
the province filed said Notice on 8 September 1999, or five days
after receipt of the Order denying its Motion for
Reconsideration.201avvphi1
On 18 October 1999, Camarines Sur filed before the Court a Petition
for Review on Certiorari,21 which was docketed as G.R. No. 139838.
Camarines Sur questioned in its Petition the act of the RTC of giving
due course to the Complaint for Declaratory Relief and/or Quieting
of Title and the interpretation of said trial court of Section 2, Article
1 of Republic Act No. 305.
In a Resolution22 dated 17 November 1999, the Court referred the
Petition for Review filed by Camarines Sur to the Court of Appeals
for appropriate action, holding that the latter had jurisdiction
concurrent with that of the former over the case, and no special and
important reason was cited for the Court to take cognizance of the
case in the first instance. Before the appellate court, the Petition for
Review of Camarines Sur was docketed as CA-G.R. SP No. 56243.
On 28 June 2004, the Court of Appeals promulgated the assailed
Decision denying the Petition in CA-G.R. SP No. 56243. It
pronounced:
We deny the petition.
Where an appeal would have been an adequate remedy but it was
lost through petitioner’s inexcusable negligence, certiorari is not in
order. x x x Certiorari cannot be resorted to as a substitute for the
lost remedy of appeal x x x. It is notable that Camarines Sur took this
recourse of petition for certiorari only after it twice attempted to
avail of appeal, but both of which were DISAPPROVED. Because it
made these attempts to appeal, it goes without saying that
Camarines Sur believed that the errors it claimed were committed
by the court a quo were correctible only by appeal and not by
certiorari. Thus, when it subsequently filed the instant petition, it
was availing of it as a disallowed substitute remedy for a lost appeal.
Time and again it has been ruled that [the] remedies of appeal and
certiorari are mutually exclusive and not alternative or successive x x
x.
But disregarding for the nonce the lost appeal and its disallowed
substitution by certiorari, still the petition would fail because of the
absence of grave abuse of discretion. The court a quo had declared
that:
The existence of the Municipality of Naga was governed by the
provisions of Chapter 57 of the Old Revised Administrative Code,
otherwise known as the Regular Municipal Law. A law under which
the municipalities in regularly organized provinces like the province
of Camarines Sur may be organized. As a consequence of its
creation, the Municipality of Naga acquired title to all the property,
powers, rights and obligations falling within its territorial limits (62
C.J.S. 193). Being a political subdivision created within an organized
province, the administration of the higher political subdivision, the
province of Camarines Sur x x x has stood as trustee of all the
properties belonging to the State within its territorial limits. This is
the legal and logical reason why[,] before the conversion of the
municipality of Naga to a City[,] [Camarines Sur] was exercising
control and supervision over Plaza Rizal. x x x
This finds support in one of the provisions of the old Administrative
Code of the Philippine Islands where it was provided that:
SEC. 2168. Beginning of the corporate existence of new municipality.
– x x x.
When a township or other local territorial division is converted or
fused into a municipality all property rights vested in the original
territorial organization shall become vested in the government of
the municipality. x x x.
When Naga was converted from a municipality into a city, all
properties under its territorial jurisdiction including Plaza Rizal was
vested upon it.23 (Emphasis ours.)
The fallo of the Court of Appeals decision reads:
WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED. 24
Camarines Sur sought a reconsideration25 of the aforequoted
Decision, but the Court of Appeals denied the same in the assailed
Resolution dated 11 August 2006.
Camarines Sur, thus, filed the instant Petition, raising the sole issue
of:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ACTED
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT TREATED THE [PETITION FOR
REVIEW UNDER RULE 45 FILED BY CAMARINES SUR] AS ONE FOR
CERTIORARI UNDER RULE 65 THEREBY DENYING DUE COURSE AND
DISMISSING THE PETITION AND EVEN THE MOTION FOR
RECONSIDERATION ON THE GROUND THAT THE PETITION WAS
AVAILED OF AS A SUBSTITUTE FOR THE LOST APPEAL AND FOR
ABSENCE OF GRAVE ABUSE OF DISCRETION.
Camarines Sur argues that the Court of Appeals went beyond its
authority and gravely abused its discretion when it treated and
Rule 63 Full Text Cases andm19 of 88
resolved the Petition for Review on Certiorari under Rule 45 of the
Rules of Court as a Petition for Certiorari under Rule 65, which must
allege grave abuse of discretion on the part of the RTC, and which
cannot be made a substitute for a lost appeal. Camarines Sur insists
that what it filed was a Petition under Rule 45, which raised all
reversible errors committed by the RTC and presented all questions
of laws.
Moreover, as the Court of Appeals upheld the Decision dated 16
March 1999 of the RTC based on a wrong premise and application of
legal principles, Camarines Sur pleads for this Court to decide on the
questions of law raised in the dismissed Petition.
First, Camarines Sur avers that the filing of the Complaint for
Declaratory Relief and/or Quieting of Title was improper as it was
hinged on a pretended controversy. Essentially, the complaint of the
City of Naga did not show "an active antagonistic assertion of a legal
right, on one side, and a denial thereof, on the other." Such action
sought merely to create an unwarranted inference not of a clear
right, but of a theoretical implication that a property, even if not
legally owned or possessed by a city, could be administratively
controlled and managed by it on the sheer expediency of being
located within its territorial jurisdiction. Thus, there was no actual
controversy between Camarines Sur and the City of Naga,
considering that Camarines Sur had always managed and
administratively controlled the same, the projects installed thereon
and the programs and activities held therein, without any question
from the previous Mayors of the City of Naga or from any national
official, department, bureau or agency.
Second, Camarines Sur contends that since Plaza Rizal is admittedly
located within the territorial jurisdiction of the City of Naga, the
question of law is whether the management and administrative
control of said land should be vested in the City of Naga, simply
because of Article 1, Section 2 of the Charter of the City of Naga.
Naga never possessed administrative control and management of
Plaza Rizal when it was still a municipality, and it cannot be deemed
to have been vested with the same, just because it was converted
into the City of Naga – especially when the City admits it does not
intend to acquire ownership of Plaza Rizal.
Petition for Review v. Petition for Certiorari
At the outset, the Court holds that the Court of Appeals indeed
committed grave abuse of discretion amounting to lack or excess of
jurisdiction in erroneously and inexplicably resolving the Petition,
which was initially filed by Camarines Sur before the Court, but later
referred to the appellate court, as if the same were a Petition for
Certiorari under Rule 65 of the Rules of Court. This mistake is
evident in the preliminary statement of the case, as found in the first
paragraph of the Decision dated 28 June 2004, where the Court of
Appeals stated that:
The petitioner Province of Camarines Sur (or Camarines Sur for
brevity), represented by Gov. Luis Villafuerte, asks through this
Petition for Certiorari that the Decision of Branch 61 of the Regional
Trial Court stationed at Naga City x x x be reversed and set aside x x
x.26 (Emphasis ours.)
For a Petition for Certiorari under Rule 65 of the Rules of Court to
prosper, the following requisites must be present: (1) the writ is
directed against a tribunal, a board or an officer exercising judicial or
quasi-judicial functions; (2) such tribunal, board or officer has acted
without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (3) there is no appeal
or any plain, speedy and adequate remedy in the ordinary course of
law.27
There is grave abuse of discretion "when there is a capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction, such as where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it
must be so patent and gross so as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law."28
On the other hand, Rule 45 of the Rules of Court pertains to a
Petition for Review on Certiorari, whereby "a party desiring to
appeal by certiorari from a judgment, final order or resolution of the
x x x the Regional Trial Court x x x, may file with the Supreme Court a
verified petition for review on certiorari. The petition may include an
application for a writ of preliminary injunction or other provisional
remedies and shall raise only questions of law, which must be
distinctly set forth."29
A perusal of the petition referred to the Court of Appeals lays bare
the fact that the same was undoubtedly a Petition for Review on
Certiorari under Rule 45 of the Rules of Court. Not only does the title
of the Petition indicate it as such, but a close reading of the issues
and allegations set forth therein also discloses that it involved pure
questions of law. A question of law arises when there is doubt as to
what the law is on a certain state of facts. For a question to be one
of law, the same must not involve an examination of the probative
value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on
the given set of circumstances.30 The Court of Appeals, thus, could
not fault Camarines Sur for failing to allege, much less prove, grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of the RTC when such is not required for a Petition for Review
on Certiorari.
Likewise, the doctrine that certiorari cannot be resorted to as a
substitute for the lost remedy of appeal applies only when a party
actually files a Petition for Certiorari under Rule 65 in lieu of a
Petition for Review under Rule 45, since the latter remedy was
already lost through the fault of the petitioning party. In the instant
case, Camarines Sur actually filed a Petition for Review under Rule
45; the Court of Appeals only mistook the same for a Petition for
Certiorari under Rule 65.
Be that as it may, the Court still finds that the questions of law
invoked by Camarines Sur must be resolved against it.
Declaratory Relief
Declaratory relief is defined as an action by any person interested in
a deed, will, contract or other written instrument, executive order or
resolution, to determine any question of construction or validity
arising from the instrument, executive order or regulation, or
statute; and for a declaration of his rights and duties
thereunder.31 The only issue that may be raised in such a petition is
the question of construction or validity of provisions in an
instrument or statute.32
The requisites of an action for declaratory relief are: (1) there must
be a justiciable controversy between persons whose interests are
Rule 63 Full Text Cases andm20 of 88
adverse; (2) the party seeking the relief has a legal interest in the
controversy; and (3) the issue is ripe for judicial determination.33
The Court rules that the City of Naga properly resorted to the filing
of an action for declaratory relief.
In the instant case, the controversy concerns the construction of the
provisions of Republic Act No. 305 or the Charter of the City of Naga.
Specifically, the City of Naga seeks an interpretation of Section 2,
Article I of its Charter, as well as a declaration of the rights of the
parties to this case thereunder.
To recall, Section 2, Article I of Republic Act No. 305 defines the
territory of the City of Naga, providing that the City shall comprise
the present territorial jurisdiction of the Municipality of Naga. By
virtue of this provision, the City of Naga prays that it be granted the
right to administratively control and supervise Plaza Rizal, which is
undisputedly within the territorial jurisdiction of the City.
Clearly, the interests of the City of Naga and Camarines Sur in this
case are adverse. The assertion by the City of Naga of a superior
right to the administrative control and management of Plaza Rizal,
because said property of the public domain is within its territorial
jurisdiction, is clearly antagonistic to and inconsistent with the
insistence of Camarines Sur. The latter asserted in its Complaint for
Declaratory Relief and/or Quieting of Title that it should maintain
administrative control and management of Plaza Rizal having
continuously possessed the same under a claim of ownership, even
after the conversion of the Municipality of Naga into an independent
component city. The City of Naga further asserted that as a result of
the possession by Camarines Sur, the City of Naga could not
introduce improvements on Plaza Rizal; its constituents were denied
adequate use of said property, since Camarines Sur required that
the latter’s permission must first be sought for the use of the same;
and it was still Camarines Sur that was able to continuously use
Plaza Rizal for its own programs and projects. The City of Naga
undoubtedly has a legal interest in the controversy, given that Plaza
Rizal is undisputedly within its territorial jurisdiction. Lastly, the issue
is ripe for judicial determination in that, in view of the conflicting
interests of the parties to this case, litigation is inevitable, and there
is no adequate relief available in any other form or proceeding.34
Administrative control and supervision of Plaza Rizal
Republic Act No. 305 took effect on 18 June 1948. At that time, the
Spanish Civil Code of 1889 was still in effect in the Philippines.
Properties of local government units under the Spanish Civil Code
were limited to properties of public use and patrimonial
property.35 Article 344 of the Spanish Civil Code provides:
Art. 344. Property of public use, in provinces and in towns,
comprises the provincial and town roads, the squares, streets,
fountains, and public waters, the promenades, and public works of
general service paid for by such towns or provinces.
All other property possessed by either is patrimonial and shall be
governed by the provisions of this code, unless otherwise provided
by special laws.
Under the 1950 Civil Code, the properties of local government units
are set forth in Article 424 thereof, which reads:
Art. 424. Property for public use, in the provinces, cities, and
municipalities, consist of the provincial roads, city streets, municipal
streets, the squares, fountains, public waters, promenades, and
public works for public service paid for by said provinces, cities, or
municipalities.
All other property possessed by any of them is patrimonial and shall
be governed by this Code, without prejudice to the provisions of
special laws.
Manifestly, the definition of what constitutes the properties for
public use and patrimonial properties of local government units has
practically remained unchanged.
As regards properties for public use, the principle is the same:
property for public use can be used by everybody, even by strangers
or aliens, in accordance with its nature; but nobody can exercise
over it the rights of a private owner.36
It is, therefore, vital to the resolution of this case that the exact
nature of Plaza Rizal be ascertained. In this regard, the description
thereof by Camarines Sur is enlightening, viz:
The land subject of the Action filed by the City of Naga against the
Province of Camarines Sur was a garden that served as the front
lawn of the old capitol site in Naga. A monument in honor of our
national hero was built by the Provincial Government of Camarines
Sur sometime in 1911 on a portion of subject land. Within the same
land, a structure as a memorial for Ninoy Aquino was also
constructed by the Provincial Government of Camarines Sur; and
nearby, a stage in honor of President Manuel Quezon was also built.
In the post-martial [law] period there was inscribed in the wall of the
said garden the following words: "Freedom Park of Camarines Sur."
A historical marker was erected in the said place which attests to the
long standing ownership, possession and management by the
Province of Camarines Sur of said place.
All the improvements in said place, such as the construction of
monuments and memorial structures, the concreting of its flooring
and the walkways, planting of trees and ornamental plants, the
construction of the skating or skateboard ring, a public TV facility, an
internet café, a gazebo where people from all walks of life discuss
religion, political, social and economic issues, a portable stage where
cultural shows are held, a giant chessboard on the tiled ground with
large pieces for playing, where portable booths are installed for the
trade fairs during fiesta or Christmas season, where year-round
lights are wrapped around the trees, all of which have been
constructed, operated and maintained by the Province of Camarines
Sur (not by Naga City) where millions of pesos had been spent for
construction and millions of pesos are budgeted annually for
maintenance, operating expenses and personnel services by the
Province of Camarines Sur.37
Unmistakable from the above description is that, at present, Plaza
Rizal partakes of the nature of a public park or promenade. As such,
Plaza Rizal is classified as a property for public use.
In Municipality of San Carlos, Pangasinan v. Morfe,38 the Court
recognized that a public plaza is a public land belonging to, and,
subject to the administration and control of, the Republic of the
Philippines. Absent an express grant by the Spanish Government or
that of the Philippines, the local government unit where the plaza
Rule 63 Full Text Cases andm21 of 88
was situated, which in that case was the Municipality of San Carlos,
had no right to claim it as its patrimonial property. The Court further
held that whatever right of administration the Municipality of San
Carlos may have exercised over said plaza was not proprietary, but
governmental in nature. The same did not exclude the national
government. On the contrary, it was possessed on behalf and in
representation thereof, the municipal government of San Carlos
being -- in the performance of its political functions -- a mere agency
of the Republic, acting for its benefit.
Applying the above pronouncements to the instant case, Camarines
Sur had the right to administer and possess Plaza Rizal prior to the
conversion of the then Municipality of Naga into the independent
City of Naga, as the plaza was then part of the territorial jurisdiction
of the said province. Said right of administration by Camarines Sur
was governmental in nature, and its possession was on behalf of and
in representation of the Republic of the Philippines, in the
performance of its political functions.
Thereafter, by virtue of the enactment of Republic Act No. 305 and
as specified in Section 2, Article I thereof, the City of Naga was
created out of the territory of the old Municipality of Naga. Plaza
Rizal, which was located in the said municipality, thereby ceased to
be part of the territorial jurisdiction of Camarines Sur and was,
instead transferred to the territorial jurisdiction of the City of Naga.
Theretofore, the local government unit that is the proper agent of
the Republic of the Philippines that should administer and possess
Plaza Rizal is the City of Naga.
Camarines Sur cannot claim that Plaza Rizal is part of its patrimonial
property. The basis for the claim of ownership of Camarines Sur, i.e.,
the tax declaration39 covering Plaza Rizal in the name of the
province, hardly convinces this Court. Well-settled is the rule that a
tax declaration is not conclusive evidence of ownership or of the
right to possess land, when not supported by any other evidence.
The same is merely an indicia of a claim of ownership.40In the same
manner, the Certification41 dated 14 June 1996 issued by the
Department of Environment and Natural Resources–Community
Environment and Natural Resources Office (DENR-CENRO) in favor of
Camarines Sur, merely stating that the parcel of land described
therein, purportedly Plaza Rizal, was being claimed solely by
Camarines Sur, hardly constitutes categorical proof of the alleged
ownership of the said property by the province.
Thus, being a property for public use within the territorial
jurisdiction of the City of Naga, Plaza Rizal should be under the
administrative control and supervision of the said city.
WHEREFORE, premises considered, the Petition for Certiorari under
Rule 65 of the Rules of Court is hereby DISMISSED. The
administrative control and supervision of Plaza Rizal is hereby vested
in the City of Naga. Costs against petitioner.
SO ORDERED.
THIRD DIVISION
G.R. No. 150806 January 28, 2008
EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners,
vs.
BATHALA MARKETING INDUSTRIES, INC., respondent.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court, of the Decision1 of the Court of Appeals (CA), dated
September 3, 2001, in CA-G.R. CV No. 67784, and its
Resolution2 dated November 19, 2001. The assailed Decision
affirmed with modification the Decision3 of the Regional Trial Court
(RTC), Makati City, Branch 136, dated May 9, 2000 in Civil Case No.
98-411.
Sometime in May 1997, respondent Bathala Marketing Industries,
Inc., as lessee, represented by its president Ramon H. Garcia,
renewed its Contract of Lease4 with Ponciano L. Almeda (Ponciano),
as lessor, husband of petitioner Eufemia and father of petitioner
Romel Almeda. Under the said contract, Ponciano agreed to lease a
portion of the Almeda Compound, located at 2208 Pasong Tamo
Street, Makati City, consisting of 7,348.25 square meters, for a
monthly rental of P1,107,348.69, for a term of four (4) years from
May 1, 1997 unless sooner terminated as provided in the
contract.5 The contract of lease contained the following pertinent
provisions which gave rise to the instant case:
SIXTH - It is expressly understood by the parties hereto
that the rental rate stipulated is based on the present rate
of assessment on the property, and that in case the
assessment should hereafter be increased or any new tax,
charge or burden be imposed by authorities on the lot and
building where the leased premises are located, LESSEE
shall pay, when the rental herein provided becomes due,
the additional rental or charge corresponding to the
portion hereby leased; provided, however, that in the
event that the present assessment or tax on said property
should be reduced, LESSEE shall be entitled to reduction in
the stipulated rental, likewise in proportion to the portion
leased by him;
SEVENTH - In case an extraordinary inflation or
devaluation of Philippine Currency should supervene, the
value of Philippine peso at the time of the establishment
of the obligation shall be the basis of payment;6
During the effectivity of the contract, Ponciano died. Thereafter,
respondent dealt with petitioners. In a letter7 dated December 29,
1997, petitioners advised respondent that the former shall assess
and collect Value Added Tax (VAT) on its monthly rentals. In
response, respondent contended that VAT may not be imposed as
the rentals fixed in the contract of lease were supposed to include
the VAT therein, considering that their contract was executed on
May 1, 1997 when the VAT law had long been in effect.8
On January 26, 1998, respondent received another letter from
petitioners informing the former that its monthly rental should be
increased by 73% pursuant to condition No. 7 of the contract and
Article 1250 of the Civil Code. Respondent opposed petitioners'
demand and insisted that there was no extraordinary inflation to
warrant the application of Article 1250 in light of the
pronouncement of this Court in various cases.9
Respondent refused to pay the VAT and adjusted rentals as
demanded by petitioners but continued to pay the stipulated
amount set forth in their contract.
Rule 63 Full Text Cases andm22 of 88
On February 18, 1998, respondent instituted an action for
declaratory relief for purposes of determining the correct
interpretation of condition Nos. 6 and 7 of the lease contract to
prevent damage and prejudice.10 The case was docketed as Civil
Case No. 98-411 before the RTC of Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment,
rescission and damages against respondent for failure of the latter
to vacate the premises after the demand made by the
former.11 Before respondent could file an answer, petitioners filed a
Notice of Dismissal.12 They subsequently refiled the complaint
before the Metropolitan Trial Court of Makati; the case was raffled
to Branch 139 and was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief
case for being an improper remedy considering that respondent was
already in breach of the obligation and that the case would not end
the litigation and settle the rights of the parties. The trial court,
however, was not persuaded, and consequently, denied the motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of
respondent and against petitioners. The pertinent portion of the
decision reads:
WHEREFORE, premises considered, this Court renders
judgment on the case as follows:
1) declaring that plaintiff is not liable for the payment of
Value-Added Tax (VAT) of 10% of the rent for [the] use of
the leased premises;
2) declaring that plaintiff is not liable for the payment of
any rental adjustment, there being no [extraordinary]
inflation or devaluation, as provided in the Seventh
Condition of the lease contract, to justify the same;
3) holding defendants liable to plaintiff for the total
amount of P1,119,102.19, said amount representing
payments erroneously made by plaintiff as VAT charges
and rental adjustment for the months of January, February
and March, 1999; and
4) holding defendants liable to plaintiff for the amount
of P1,107,348.69, said amount representing the balance of
plaintiff's rental deposit still with defendants.
SO ORDERED.13
The trial court denied petitioners their right to pass on to
respondent the burden of paying the VAT since it was not a new tax
that would call for the application of the sixth clause of the contract.
The court, likewise, denied their right to collect the demanded
increase in rental, there being no extraordinary inflation or
devaluation as provided for in the seventh clause of the contract.
Because of the payment made by respondent of the rental
adjustment demanded by petitioners, the court ordered the
restitution by the latter to the former of the amounts paid,
notwithstanding the well-established rule that in an action for
declaratory relief, other than a declaration of rights and obligations,
affirmative reliefs are not sought by or awarded to the parties.
Petitioners elevated the aforesaid case to the Court of Appeals
which affirmed with modification the RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is
DISMISSED and the appealed decision in Civil Case No. 98-
411 is hereby AFFIRMED with MODIFICATION in that the
order for the return of the balance of the rental deposits
and of the amounts representing the 10% VAT and rental
adjustment, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.14
The appellate court agreed with the conclusions of law and the
application of the decisional rules on the matter made by the RTC.
However, it found that the trial court exceeded its jurisdiction in
granting affirmative relief to the respondent, particularly the
restitution of its excess payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE
IS APPLICABLE TO THE CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN
FILIPINO PIPE AND FOUNDRY CORP. VS. NAWASA CASE,
161 SCRA 32 AND COMPANION CASES ARE (sic)
APPLICABLE IN THE CASE AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN
THE CASE OF DEL ROSARIO VS. THE SHELL COMPANY OF
THE PHILIPPINES, 164 SCRA 562, THE HONORABLE COURT
OF APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE
COURT OF APPEALS THAT RESPONDENT IS NOT LIABLE TO
PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE WITH
THE MANDATE OF RA 7716.
V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE
PLAINTIFF-APPELLEE WAS IN BREACH WHEN THE PETITION
FOR DECLARATORY RELIEF WAS FILED BEFORE THE TRIAL
COURT.
In fine, the issues for our resolution are as follows: 1) whether the
action for declaratory relief is proper; 2) whether respondent is
liable to pay 10% VAT pursuant to Republic Act (RA) 7716; and 3)
whether the amount of rentals due the petitioners should be
adjusted by reason of extraordinary inflation or devaluation.
Rule 63 Full Text Cases andm23 of 88
Declaratory relief is defined as an action by any person interested in
a deed, will, contract or other written instrument, executive order or
resolution, to determine any question of construction or validity
arising from the instrument, executive order or regulation, or
statute, and for a declaration of his rights and duties thereunder.
The only issue that may be raised in such a petition is the question
of construction or validity of provisions in an instrument or statute.
Corollary is the general rule that such an action must be justified, as
no other adequate relief or remedy is available under the
circumstances. 15
Decisional law enumerates the requisites of an action for
declaratory relief, as follows: 1) the subject matter of the
controversy must be a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance; 2)
the terms of said documents and the validity thereof are doubtful
and require judicial construction; 3) there must have been no breach
of the documents in question; 4) there must be an actual justiciable
controversy or the "ripening seeds" of one between persons whose
interests are adverse; 5) the issue must be ripe for judicial
determination; and 6) adequate relief is not available through other
means or other forms of action or proceeding.16
It is beyond cavil that the foregoing requisites are present in the
instant case, except that petitioners insist that respondent was
already in breach of the contract when the petition was filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the
months that followed, respondent complied with the terms and
conditions set forth in their contract of lease by paying the rentals
stipulated therein. Respondent religiously fulfilled its obligations to
petitioners even during the pendency of the present suit. There is no
showing that respondent committed an act constituting a breach of
the subject contract of lease. Thus, respondent is not barred from
instituting before the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a
separate action for rescission, ejectment and damages had been
commenced before another court; thus, the construction of the
subject contractual provisions should be ventilated in the same
forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum
Corporation17 we held that the petition for declaratory relief should
be dismissed in view of the pendency of a separate action for
unlawful detainer. However, we cannot apply the same ruling to the
instant case. In Panganiban, the unlawful detainer case had already
been resolved by the trial court before the dismissal of the
declaratory relief case; and it was petitioner in that case who
insisted that the action for declaratory relief be preferred over the
action for unlawful detainer. Conversely, in the case at bench, the
trial court had not yet resolved the rescission/ejectment case during
the pendency of the declaratory relief petition. In fact, the trial
court, where the rescission case was on appeal, itself initiated the
suspension of the proceedings pending the resolution of the action
for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v.
Mirasol18 where the declaratory relief action was dismissed because
the issue therein could be threshed out in the unlawful detainer suit.
Yet, again, in that case, there was already a breach of contract at the
time of the filing of the declaratory relief petition. This dissimilar
factual milieu proscribes the Court from applying Teodoro to the
instant case.
Given all these attendant circumstances, the Court is disposed to
entertain the instant declaratory relief action instead of dismissing
it, notwithstanding the pendency of the ejectment/rescission case
before the trial court. The resolution of the present petition would
write finis to the parties' dispute, as it would settle once and for all
the question of the proper interpretation of the two contractual
stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the
payment of VAT and for rental adjustment allegedly brought about
by extraordinary inflation or devaluation. Both the trial court and
the appellate court found no merit in petitioners' claim. We see no
reason to depart from such findings.
As to the liability of respondent for the payment of VAT, we cite with
approval the ratiocination of the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT
is the lessor who may choose to pass it on to the lessee or
absorb the same. Beginning January 1, 1996, the lease of
real property in the ordinary course of business, whether
for commercial or residential use, when the gross annual
receipts exceed P500,000.00, is subject to 10% VAT.
Notwithstanding the mandatory payment of the 10% VAT
by the lessor, the actual shifting of the said tax burden
upon the lessee is clearly optional on the part of the
lessor, under the terms of the statute. The word "may" in
the statute, generally speaking, denotes that it is directory
in nature. It is generally permissive only and operates to
confer discretion. In this case, despite the applicability of
the rule under Sec. 99 of the NIRC, as amended by R.A.
7716, granting the lessor the option to pass on to the
lessee the 10% VAT, to existing contracts of lease as of
January 1, 1996, the original lessor, Ponciano L. Almeda
did not charge the lessee-appellee the 10% VAT nor
provided for its additional imposition when they renewed
the contract of lease in May 1997. More significantly, said
lessor did not actually collect a 10% VAT on the monthly
rental due from the lessee-appellee after the execution of
the May 1997 contract of lease. The inevitable implication
is that the lessor intended not to avail of the option
granted him by law to shift the 10% VAT upon the lessee-
appellee. x x x.19
In short, petitioners are estopped from shifting to respondent the
burden of paying the VAT.
Petitioners' reliance on the sixth condition of the contract is,
likewise, unavailing. This provision clearly states that respondent can
only be held liable for new taxes imposed after the effectivity of the
contract of lease, that is, after May 1997, and only if they pertain to
the lot and the building where the leased premises are located.
Considering that RA 7716 took effect in 1994, the VAT cannot be
considered as a "new tax" in May 1997, as to fall within the coverage
of the sixth stipulation.
Rule 63 Full Text Cases andm24 of 88
Neither can petitioners legitimately demand rental adjustment
because of extraordinary inflation or devaluation.
Petitioners contend that Article 1250 of the Civil Code does not
apply to this case because the contract stipulation speaks of
extraordinary inflation or devaluation while the Code speaks of
extraordinary inflation or deflation. They insist that the doctrine
pronounced in Del Rosario v. The Shell Company, Phils.
Limited20 should apply.
Essential to contract construction is the ascertainment of the
intention of the contracting parties, and such determination must
take into account the contemporaneous and subsequent acts of the
parties. This intention, once ascertained, is deemed an integral part
of the contract.21
span of time, such downward trend of the peso cannot be
considered as the extraordinary phenomenon contemplated by
Article 1250 of the Civil Code. Furthermore, absent an official
pronouncement or declaration by competent authorities of the
existence of extraordinary inflation during a given period, the effects
of extraordinary inflation are not to be applied. 25
WHEREFORE, premises considered, the petition is DENIED. The
Decision of the Court of Appeals in CA-G.R. CV No. 67784, dated
September 3, 2001, and its Resolution dated November 19, 2001,
are AFFIRMED.
SO ORDERED.
EN BANC

While, indeed, condition No. 7 of the contract speaks of G.R. No. L-27247 April 20, 1983
"extraordinary inflation or devaluation" as compared to Article
1250's "extraordinary inflation or deflation," we find that when the
IN THE MATTER OF THE PETITION FOR DECLARATORY JUDGMENT
parties used the term "devaluation," they really did not intend to
REGARDING THE VALIDITY OF ORDINANCE NO. 386 OF THE CITY OF
depart from Article 1250 of the Civil Code. Condition No. 7 of the
BAGUIO, BAGUIO CITIZENS ACTION INC., and JUNIOR CHAMBER OF
contract should, thus, be read in harmony with the Civil Code
BAGUIO CITY, INC., petitioners-appellants,
provision.
vs.
THE CITY COUNCIL AND CITY MAYOR OF THE CITY OF
That this is the intention of the parties is evident from petitioners' BAGUIO, respondents-appellees.
letter22 dated January 26, 1998, where, in demanding rental
adjustment ostensibly based on condition No. 7, petitioners made
DE CASTRO, J:
explicit reference to Article 1250 of the Civil Code, even quoting the
law verbatim. Thus, the application of Del Rosario is not warranted.
Rather, jurisprudential rules on the application of Article 1250 In this petition for declaratory relief originally filed in the Court of
should be considered. First Instance of Baguio, Branch II, what is involved is the validity of
Ordinance 386 passed by the City Council of Baguio City which took
effect on February 23, 1967, quoted together with the explanatory
Article 1250 of the Civil Code states:
note, as follows:

In case an extraordinary inflation or deflation of the

ORDINANCE 386
currency stipulated should supervene, the value of the
currency at the time of the establishment of the obligation
shall be the basis of payment, unless there is an AN ORDINANCE CONSIDERING ALL SQUATTERS
agreement to the contrary. OF PUBLIC LAND, OTHER THAN THOSE
EARMARKED FOR PUBLIC USE IN THE CITY OF
BAGUIO WHO ARE DULY REGISTERED AS SUCH
Inflation has been defined as the sharp increase of money or credit,
AT THE TIME OF THE PROMULGATION OF THIS
or both, without a corresponding increase in business transaction.
ORDINANCE AS BONAFIDE OCCUPANTS OF THEIR
There is inflation when there is an increase in the volume of money
RESPECTIVE LOTS AND WHICH SHALL HEREAFTER
and credit relative to available goods, resulting in a substantial and
BE EMBRACED AS A CITY GOVERNMENT
continuing rise in the general price level.23 In a number of cases, this
HOUSING PROJECT AND PROVIDING FOR OTHER
Court had provided a discourse on what constitutes extraordinary
PURPOSES.
inflation, thus:

Upon strong recommendation of the Vice-Mayor

[E]xtraordinary inflation exists when there is a decrease or
and Presiding Officer, on Motion of all the
increase in the purchasing power of the Philippine
Councilors, seconded by the same, be it
currency which is unusual or beyond the common
ordained by the City Council assembled:
fluctuation in the value of said currency, and such increase
or decrease could not have been reasonably foreseen or
was manifestly beyond the contemplation of the parties at Section l.—All public lands within Baguio
the time of the establishment of the obligation.24 townsite which are occupied by squatters who
are duly registered as such at the time of the
promulgation of this Ordinance such public lands
The factual circumstances obtaining in the present case do not make
not designated by city and national authorities
out a case of extraordinary inflation or devaluation as would justify
for public use, shall be considered as embraced
the application of Article 1250 of the Civil Code. We would like to
and comprising a City Government Housing
stress that the erosion of the value of the Philippine peso in the past
Project; PROVIDED, HOWEVER, That areas
three or four decades, starting in the mid-sixties, is characteristic of
covered by Executive Orders or Presidential
most currencies. And while the Court may take judicial notice of the
Proclamations but the city had made official
decline in the purchasing power of the Philippine currency in that
Rule 63 Full Text Cases andm25 of 88
representation for the lifting of such orders or
proclamation shall be deemed to be part of the
Baguio Townsite for the purposes of this
ordinance;
Section 2.—Building permits shall have been
deemed issued to all squatters as contemplated
by this Ordinance, giving such squatters five
years from the approval of this Ordinance to
satisfactorily comply with city building
specifications and payment of the corresponding
city building permit fees;
Section 3.—All cases pending in court against
squatters be dropped without prejudice to the
full prosecution of all subsequent violations in
relation to the provisions of existing city
ordinances and/or resolutions;
Section 4.—All squatters be given all the
necessary and needed protection of the City
Government against the stringent provisions of
the Public Land Act, particularly on public
bidding, in that the lots occupied by said
squatters be awarded to them by direct sale
through Presidential Proclamation;
Section 5.—The City Government shall not be
interested in making financial profit out of the
project and that the appraisal and evaluation of
the said lots shall be made at minimum cost per
square meters, the total cost of the lots made
payable within the period of ten years;
Section 6.—The minimum lot area requirements
shall be disregarded in cases where it could not
be implemented due to existing congestion of
houses, and that, if necessary, areas applied for
under this ordinance shall be reduced to that
which is practical under the circumstances;
PROVIDED, HOWEVER, That squatters in
congested areas shall be given preference in the
transfer to resettlement areas or government
housing projects earmarked as such under the
provisions of this ordinance, if and when it
becomes necessary to ease congestion or when
their lots shall be traversed by the laying of
roads or are needed for public use;
Section 7.—The amount of P20,000.00 or so
much as is necessary, for the lot survey of each
squatter's lot be appropriated, such survey of
which shall be conducted by licensed private
surveyors through public biddings; PROVIDED,
That, said expenses for survey shall be included
in the overall cost of each lot;
Section 8.—The three-man control committed
for the Quirino-Magsaysay housing project which
was previously created under City Ordinance No.
344, shall exercise administration and
supervision of the city government housing
projects created under this Ordinance shall,
furthermore, be entrusted with the duty of: (1)
Consolidating a list of all city squatters who shall
be benefitted in contemplation and under the
provisions of this Ordinance; (2) To assist and
help the squatters in the preparation of all the
necessary and required paper work and relative
items in connection with their application over
their respective lots; (3) To seek and locate other
areas within the Baguio Townsite conveniently
situated and which will be earmarked as
subsequently housing projects of the city for
landless bonafide city residents; and (4) To carry
out and implement the provisions of this
Ordinance without the least possible delay.
EXPLANATORY NOTE
This ordinance is primarily designed to extend a
helping hand to the numerous landless city
residents and the called 'Squatters' within the
Baguio Townsite in their desire to acquire
residential lots which they may rightly call their
own.
The reported people who have violated the
City's building ordinances were not so guarded
by any criminal perversity, but where given to it
more by circumstances of necessity and that
they are, therefore, entitled to a more human
treatment, more of understanding and more of
pity rather than be herded before the courts,
likened to hardened criminals and deliberate
violators of our laws and ordinances.
PRESENT AND VOTING:
Hon. Norberto de Guzman — Vice Mayor
Presiding Officer Hon. Gaudencio Floresca —
Councilor Hon. Jose S. Florendo — Councilor
Hon. Francisco G. Mayo — Councilor Hon.
Braulio D. Yaranon — Councilor Hon. Sinforoso
Fañgonil — Councilor
The petition for declaratory relief filed with the Court of First
Instance of Baguio, Branch II, prays for a judgment declaring the
Ordinance as invalid and illegal ab initio. The respondents-appellees,
the City Council and the City Mayor, filed motions to dismiss the
petition which were denied. Nonetheless, in the decision thereafter
rendered, the petition was dismissed on the grounds that: 1)
another court, the Court of First Instance of Baguio, Branch I, had
declared the Ordinance valid in a criminal case filed against the
squatters for illegal construction, and the Branch II of the same court
cannot, in a declaratory proceeding, review and determine the
validity of said judgment pursuant to the policy of judicial respect
and stability; 2) those who come within the protection of the
ordinance have not been made parties to the suit in accordance with
Section 2 of Rule 64 and it has been held that the non-joinder of
such parties is a jurisdictional defect; and 3) the court is clothed with
discretion to refuse to make any declaration where the declaration
is not necessary and proper at the time under all circumstances, e.g.
where the declaration would be of no practical help in ending the
controversy or would not stabilize the disputed legal relation, citing
Rule 63 Full Text Cases andm26 of 88
Section 5 of Rule 64; ICJS 1033-1034; 16 AM. JUR 287-289; Hoskyns
vs. National City Bank of New York, 85 Phil. 201.
Hence, the instant appeal which was perfected in accordance with
the provisions of Rule 42, before the approval of Republic Act No.
5440 on September 9, 1968.
1. The case before the Court of First Instance of Baguio, Branch 1,
dealt with the criminal liability of the accused for constructing their
houses without obtaining building permits, contrary to Section 47 in
relation to Section 52 of the Revised Ordinances of Baguio, which act
the said court considered as pardoned by Section 2 of Ordinance
386. The court in said case upheld the power of the Municipal
Council to legalize the acts punished by the aforesaid provisions of
the Revised Ordinances of Baguio, stating that the Municipal Council
is the policy determining body of Baguio City and therefore it can
amend, repeal, alter or modify its own laws as it did when it enacted
Ordinance 386. In deciding the case, the first branch of the court a
quo did not declare the whole Ordinance valid. This is clear when it
stated that "had the issue been the legalization of illegal occupation
of public land, covered by Republic Act No. 947, ... the Ordinance in
question should have been ultra vires and unconstitutional." 1 Said
court merely confined itself to Sections 2 and 3 of Ordinance 386. It
did not make any definite pronouncement whether or not the City
Council has the power to legalize the illegal occupation of public
land which is the issue in the instant case. It is noteworthy that the
court, in passing upon the validity of the aforesaid sections, was
apparently guided by the rule that where part of a statute is void as
repugnant to the organic law, while another part is valid, the valid
portion, if separable from the invalid may stand and be enforced.
Contrary to what was said in the decision under review, the second
branch of the court a quo was not called upon to determine the
validity of the judgment of the first branch.
2. The non-inclusion of the squatters mentioned in the Ordinance in
question as party defendants in this case cannot defeat the
jurisdiction of the Court of First Instance of Baguio. There is nothing
in Section 2 of Rule 64 of the Rules of Court which says that the non-
joinder of persons who have or claim any interest which would be
affected by the declaration is a jurisdictional defect. Said section
merely states that "All persons shall be made parties who have or
claim any interest which would be affected by the declaration; and
no declaration shall, except or otherwise provided in these rules,
prejudice the rights of persons not parties to the action." This
section contemplates a situation where there are other persons who
would be affected by the declaration, but were not impleaded as
necessary parties, in which case the declaration shall not prejudice
them. If at all, the case may be dismissed not on the ground of lack
of jurisdiction but for the reason stated in Section 5 of the same Rule
stating that "the Court may refuse to exercise the power to declare
rights and to construe instruments in any case where a decision
would not terminate the uncertainty or controversy which gave rise
to the action, or any case where the declaration or construction is
not necessary and proper at the time under all circumstances."
It must be noted that the reason for the law requiring the joinder of
all necessary parties is that failure to do so would deprive the
declaration of the final and pacifying function the action for
declaratory relief is calculated to subserve, as they would not be
bound by the declaration and may raise the Identical issue. 2 In the
case at bar, although it is true that any declaration by the court
would affect the squatters, the latter are not necessary parties
because the question involved is the power of the Municipal Council
to enact the Ordinances in question. Whether or not they are
impleaded, any determination of the controversy would be binding
upon the squatters.
A different situation obtains in the case of Degala v. Reyes 3 cited in
the decision under review. The Degala case involves the validity of
the trust created in the will of the testator. In the said case, the
Roman Catholic Church which was a necessary party, being the one
which would be most vitally affected by the declaration of the nullity
of the will was not brought in as party. The Court therefore, refused
to make any declaratory judgment on ground of jurisdictional
defect, for there can be no final judgment that could be rendered
and the Roman Catholic not being bound by such judgment might
raise the Identical issue, making therefore the declaration a mere
exercise in futility.
This is not true in the instant case. A declaration on the nullity of the
ordinance, would give the squatters no right which they are entitled
to protect. The party most interested to sustain and defend the
legality of the Ordinance is the body that passed it, the City Council,
and together with the City Mayor, is already a party in these
proceedings.
3. The Ordinance in question is a patent nullity. It considered all
squatters of public land in the City of Baguio as bona-fide occupants
of their respective lots. As we have stated in City of Manila v.
Garcia, 4 et al.:
Squatting is unlawful and no amount of
acquiescence on the part of the city officials will
elevate it into a lawful act. In principle, a
compound of illegal entry and official permit to
stay is obnoxious to our concept of proper
official norm of conduct. Because, such permit
does not serve social justice; it fosters moral
decadence. It does not promote public welfare;
it abets disrespect for the law. It has its roots in
vice; so it is an infected bargain. Official approval
of squatting should not, therefore, be permitted
to obtain in this country where there is an
orderly form of government.
In the same case, squatting was characterized as a widespread vice
and a blight Thus:
Since the last global war, squatting on another's
property in this country has become a
widespread vice. It was and is a blight Squatter's
areas pose problems of health, sanitation. They
are breeding places for crime. They constitute
proof that respect for the law and the rights of
others, even those of the government are being
flouted. Knowingly, squatters have embarked on
the pernicious act of occupying property
whenever and wherever convenient to their
interests without as much as leave, and even
against the will, of the owner. They are
emboldened seemingly because of their belief
that they could violate the law with impunity.
The pugnaciousness of some of them has tied up
the hands of legitimate owners. The latter are
thus prevented from recovering possession by
peaceful means. Government lands have not
been spared by them. They know, of course, that
Rule 63 Full Text Cases andm27 of 88
 instrusion into property, government or private,
is wrong. But, then the wheels of justice grind
slow, mainly because of lawyers who, by means,
fair or foul, are quite often successful in
procuring delay of the day of reckoning.
Rampancy of forcible entry into government
lands particularly, is abetted by the apathy of
some public officials to enforce the
government's rights. Obstinacy of these
squatters is difficult to explain unless it is
spawned by official tolerance, if not outright
encouragement or protection. Said squatters
have become insensible to the difference
between right and wrong. To them, violation of
law means nothing. With the result that
squatters still exists, much to the detriment of
public interest. It is high time that, in this aspect,
sanity and the rule of law be restored. It is in this
environment that we look into the validity of the
permits granted defendants herein.
In the above cited case, the land occupied by the squatters belongs
to the City of Manila. In the instant case, the land occupied by the
squatters are portions of water sheds, reservations, scattered
portions of the public domain within the Baguio townsite. Certainly,
there is more reason then to void the actions taken by the City of
Baguio through the questioned ordinance.
Being unquestionably a public land, no disposition thereof could be
made by the City of Baguio without prior legislative authority. It is
the fundamental principle that the state possesses plenary power in
law to determine who shall be favored recipients of public domain,
as well as under what terms such privilege may be granted not
excluding the placing of obstacles in the way of exercising what
otherwise would be ordinary acts of ownership. And the law has laid
in the Director of Lands the power of exclusive control,
administrations, disposition and alienation of public land that
includes the survey, classification, lease, sale or any other form of
concessions or disposition and management of the lands of public
domains. 5
Nor could the enactment of Ordinance 386 be justified by stating
that "this Ordinance is primarily designed to extend a helping hand
to the numerous landless city residents and the so called squatters
within the Baguio townsite in their desire to acquire residential lots
which they may rightly call their own and that the reported people
who have violated the City's building ordinances were not so guided
by any criminal perversity, but were given to it more by
circumstances of necessity and that they are, therefore, entitled to a
more human treatment, more understanding and more of pity
rather than be herded before the courts, likened to hardened
criminals and deliberate violators of our laws and ordinances."6
Our pronouncement in Astudillo vs. Board of Directors of PHHC 7 is
relevant to this case. Thus—
In carrying out its social re-adjustment policies,
the government could not simply lay aside moral
standards, and aim to favor usurpers, squatters,
and intruders, unmindful of the lawful and
unlawful origin and character of their occupancy.
Such a policy would perpetuate conflicts instead
of attaining their just solution. (Bernardo vs.
Bernardo, 96 Phil. 202, 206.)
Indeed, the government has enunciated a
militant policy against squatters. Thus, Letter of
Instruction No. 19 dated October 2, 1972 orders
city and district engineers 'to remove all illegal
constructions including buildings ... and those
built without permits on public or private
property' and providing for the relocation of
squatters (68 O.G. 7962. See Letter of Instruction
No. 19-A). As noted by Justice Sanchez, since the
last global war, squatting on another's property
in this country has become a widespread vice.
(City of Manila vs.. Garcia, L-26053, Feb. 21,
1967, 19 SCRA 413, 418).
WHEREFORE, in view of the foregoing, Ordinance 386 is hereby
rendered nullified and without force and effect.
SO ORDERED.
SECOND DIVISION
G.R. No. L-21036 June 30, 1977
COMMISSIONER OF CUSTOMS and COLLECTOR OF CUSTOMS FOR
MANILA and CONRADO SOLEDAD, EDMUNDO POSTRERO,
MAXIMINO ABRUGENA, GERONIMO DERILO, SANTOS GUINTO and
EUSTAQUIO MARANAN, as employees and duly authorized
representatives of the House of Representatives, Congress of the
Philippines, petitioners,
vs.
HON. JUDGE GAUDENCIO CLORIBEL, as Presiding Judge of Branch
VI, Court of First Instance of Manila, and JOSE and SUSANA
COCHINGYAN, respondents.
Solicitor General Arturo A. Alafriz Assistant Solicitor General Pacifico
P. de Castro, Solicitor Alejandro B. Afurong, Special Attorney Jose T.
Viduya and Attorney Ceferino de los Santos for petitioners.
Lino M. Patajo and Ramon Encarnacion, Jr. for private respondents.
BARREDO, J.:
Petition for certiorari and prohibition to annul and set aside several
orders of respondent court all of which together in effect: (1)
permitted ex-parte private respondents Jose and Susana
Conchingyan to file a third-party complaint for mandamus against
petitioners in a special civil. action for declaratory relief in which
said Cochingyans were defendants and which was already tried and
almost ready for decision; on the same day, (2) admitted said third-
party complaint and (8) further issued immediately a writ of
preliminary mandatory injunction likewise ex-parte; and which (4)
were intended to enforce said writ of injunction.
There was pending before respondent court as Civil Case No. 52318,
entitled Macario M. Ofilada vs. Reparations Commission, Jose
Cochingyan and Susana Cochingyan, a special civil action for
declaratory relief, wherein Ofilada, as the Second Receiver of the
World War II Veterans Enterprises, Inc. (Warvets) in Civil Case No.
34998, likewise pending in another Branch of the Court of First
Instance of Manila, sought a judicial declaration as to whether,
under the allocation granted to said Warvets to purchase
reparations goods, the conversion into pesos of the dollar prices of
Rule 63 Full Text Cases andm28 of 88
said goods should be at the rate of two pesos to one dollar or at the
prevailing market rate at the time for payment, which would be
much higher. Civil Case No. 34998 was a minority suit filed by certain
stockholders of Warvets alleging irregularities in the management
and disposition of the goods being purchased by the corporation by
virtue of the aforementioned allocation, hence the need for
receivers, of which there were two, the first being one Ramon E.
Saura and the second, Ofilada. In the same Civil Case No. 34998, an
order had been issued on October 9, 1962 ordering Ofilada to
deliver to the Cochingyans the second shipment of goods under
Warvets' allocation. (The Cochingyans had a contract with Warvets
regarding said goods.) It appears, however, that a motion for the
reconsideration of the just mentioned order of October 9, 1962 had
been filed and was still unresolved when on February 9, 1963, the
Honorable Judge Francisco Arca (now deceased) issued the following
order:
Considering all the foregoing, the Court is of the
opinion that the petition of Atty. Magno to defer
action on the motion for contempt against the
intervenors should be granted until after it can
be definitely known whether or not the parties
can settle this case amicably. Resolutions on all
pending incidents, such as the motion for
reconsideration of the order authorizing the
release of the second shipment, and the motions
for the release of the third, fourth and fifth
shipments, are also held in abeyance until such
time that the Court knows the result of the
pending settlement being negotiated among the
parties.
In view of all the above, the Court hereby orders
that all incidents pending resolution be held in
abeyance until after the parties have definitely
decided whether they are going to settle this
case or not. (Emphasis supplied.)
It was shortly after the issuance of this order which in effect freezed
the order of release of October 9, 1962, that the incidents subject of
the instant petition took place. On February 13, 1963, the
Cochingyans filed in Civil Case No. 52318 then already tried although
not yet decided by Judge Gaudencio Cloribel (now also deceased) —
who on February 9, 1963 had written the Secretary of Justice asking
for permission to go on leave for a week starting February 12, 1973
but who later changed the starting date to February 13, 1973- an ex-
parte motion asking permission to file a third party complaint which
was forthwith granted. On the same day, another motion was filed
asking for immediate admission of the third party complaint, which
likewise, was forthwith granted. The third-party complaint included
in the prayer, among other reliefs, the following:
1. Immediately upon the filing of the herein
third-party complaint this Honorable Court issue
a writ of preliminary mandatory injunction ex-
parte, without notice to the other parties,
ordering the third-party defendants
Commissioner of Customs and Collector of
Customs and Reparations Commission to release
immediately to the third-party plaintiffs the
balance of the 202 packages of rayon clothing
forming part of the shipment of consumer goods
originally consigned to the Reparations
Commission which arrived in Manila aboard the
SS GUILLERMO on September 10, 1962, and
which to the present are still under the custody
and possession of the Collector of Customs and
Commissioner of Customs, upon the filing of a
bond by the third-party plaintiffs in such amount
as may be fixed by this Honorable Court to pay
for any damages that the third-party defendants
may suffer should this Honorable Court find that
issuance of the preliminary mandatory
injunction is not proper. (Page 87, Record.)
Without loss of time and without hearing the third-party
defendants, the following order, was issued on the same day,
February 12, 1963:
In a verified third-party complaint for mandamus
against the Commissioner of Customs, the
Collector of Customs and others, third party
plaintiffs Jose and Susana Cochingyan, doing
business under the name and style "The Catholic
Church Mart", alleged that a shipment of 402
packages of rayon cloth which was procured by
the Reparations Commission to cover an
allocation granted by the Commission to the
World War II Veterans Enterprises (WARVETS for
reparation consumer goods from Japan arrived
in Manila on September 10, 1962, consigned to
the Reparations Commission; that this Court in
Civil Case No. 34998 entitled "Pilar Normandy et
al., vs. Calixto Duque, et al." authorized in its
order of October 9, 1962, the Second Receiver of
WARVETS, Mr. Macario M. Ofilada, to release
said goods to Jose and Susana Cochingyan; that
pursuant to said order of October 9, 1962, Mr.
Ofilada, in his capacity as second receiver of
WARVETS, signed a contract of absolute sale
with the Reparations Commission covering the
described reparation consumer goods and paid
in full the purchase price of said goods; that after
receiving full payment of the purchase price of
said goods the Commission instead of releasing
the goods from customs and delivering them
requested the Collector of Customs to verify and
make an appraisal of the value of the goods and
complying with said request, the Collector of
Customs opened and inspected each and all of
the bales and packages compromising said
shipment; that after completing said inspection
and verification the Collector of Customs advised
the third-party plaintiffs herein that the
shipment cannot be released unless the advance
sales' tax due on the goods be first paid; that
said Collector of Customs also advised the
Reparations Commission that the goods, being
reparations goods and as such owned by the
Philippine Government, cannot be subject to
seizure or forfeiture proceedings; that of the 402
packages the Commissioner and Collector of
Customs have released to the said third-party
plaintiffs only 200 packages but have retained
202 packages supposedly to secure the payment
of advance sales tax assessed on the shipment as
recomputed on the basis of an opinion of the
Collector of Internal Revenue; that
Rule 63 Full Text Cases andm29 of 88
 notwithstanding the fact that there are no
unpaid liens fines, surcharges taxes (except the
advance sales tax the payment of which was
tendered by third-party plaintiffs and refused
and the amount deposited with the Clerk of this
Court) customs duties, and consular fees (of
which the goods are exempt under Section 14 of
the Reparations Law) and notwithstanding the
fact that there are no pending proceedings for
the seizure and forfeiture of the goods for the
same have been imported by the Reparations
Commission which made the proper declaration
of entry therefor, third-party defendants
Commissioner of Customs and Collector of
Customs have refused without any legal reason
or justification whatsoever to release and deliver
the balance of the shipment to the third-party
plaintiffs; that the duty of the Collector of
Customs and Commissioner of Customs to
deliver or release said goods to third- party
plaintiffs is clear as under the circumstances
above recited said officials have no discretion to
decide whether or not to release said goods.
Third-party plaintiffs further alleged that the
delay in the release of the goods to them has
caused and will cause them grave and
irreparable damage and injury; and unless a writ
of preliminary injunction were to be issued ex-
parte they will suffer greater and grave
damages.
WHEREFORE, finding the petition for the
issuance of a writ of preliminary injunction to be
meritorious, the same is hereby granted, and
upon the filing by the third-party plaintiffs of a
bond in the sum of P5,000.00 to answer for all
damages that the third-party defendants may
sustain by reason of this injunction if it be finally
decided that the third-party plaintiffs are not
entitled thereto, let a writ of preliminary
mandatory injunction be issued ordering the
third-party defendants Commissioner of
Customs, Collector of Customs, and the
Reparations Commission, their representatives,
agents, subordinates and other persons acting in
their behalf to release and deliver immediately
the third-party plaintiffs Jose and Susana
Cochingyan, doing business under the name and
style 'The Catholic, Church Mart the 202
packages of rayon cloth presently in their
possession, custody and/or control, which goods
are part of the shipment of reparation consumer
goods which arrived in Manila aboard the SS
Guillermo from Japan consigned to the
Reparations Commission.
SO ORDERED.
The writ issued pursuant to this order was served on the Law
Division of the Bureau of Customs at 4:55 o'clock in the afternoon of
the same day, February 12, 1963. But compliance therewith did not
materialize. A motion to lift the writ was filed, and in the meanwhile,
the Chairman of the Committee on Reparations of the House of
Representatives, which was then investigating the implementation
of the Warvets allocation, asserted jurisdiction over the goods by
ordering the Collector of Customs to deliver the same to the
Sergeant-at-Arms of the House. Respondent court denied the
motion to lift and threatened the agents of the Committee on
Reparations, herein co-petitioners, with contempt. Still, there was
no release. The goods were, therefore, still unreleased to the
Cochingyans when the petition now at bar was filed.
We deem it unnecessary to dwell on the many interesting issues
extensively and brilliantly discussed by distinguished counsel of both
petitioners and respondents. In Our view of this case, the only
question We have to resolve in order to dispose of it is whether or
not respondent court gravely abused its discretion in allowing the
filing of and in admitting the third-party complaint of the
Cochingyans. In the affirmative, it should follow that the writ of
preliminary mandatory injunction in question would have no legal
basis, as also all subsequent orders of respondent court tending to
enforce the same. And it is Our considered opinion and so We hold
that it was highly irregular and totally unwarranted for respondent
court to have allowed said third-party complaint. The circumstances
surrounding the allowance and admission thereof indicate that
respondent court's action was hasty, baseless and arbitrary.
As already stated, Civil Case No. 52318 was a special civil action for
declaratory relief under Rule 66 of the Rules of 1940 which were in
force when it was filed. The only purpose thereof was to secure from
the court the proper interpretation or construction of the
reparations contract between the Reparations Commission and
Warvets in regard to the rate of conversion of the dollar to the peso
of the purchase price Warvets had to pay No positive or affirmative,
much less any material relief, was 'using sought therein. Indeed, it is
in the very nature of a 'declaratory relief special civil action that "the
Relief is confined to a case of actual controversy within the Court's
jurisdiction, without the need of injunction, execution or other relief
beyond the adjudication of the legal rights which are the subject of
controversy between the parties." ( 3 Moran, Comments on the
Rules of Court, p. 146, 1970 ed.) In other words, the plaintiff Ofilada
in said case did not, as he could not pray for anything to be award or
granted to him. Now, as regards the nature and purpose of a third-
party complaint, Section 1 of Rule 12 of the Rules of 1940 provided:
SECTION 1. Claim against one not a party to an
action. — When a defendant claims to be
entitled against a person not a party to the
action, hereinafter called the third-party
defendant, to contribution, indemnity,
subrogation or any other relief, in respect of the
plaintiff' claim, he may file, with leave of court,
against such person a pleading which shall state
the nature of his claim and shall be called the
third-party complaint.
It is obvious from this definition that a third-party complaint is
inconceivable when the main case is one for nothing more' than a
declaratory relief. In a third-party complaint, the defendant or third-
party plaintiff is supposed to seek contribution, indemnity,
subrogation or any other relief from the third-party defendant is
respect to the claim of the plaintiff against him. In the case at bar,
what possible relief could the Cochingyans, as defendants in Civil
Case No. 52318, for declaratory relief, have asked for by way of
contribution, indemnity, subrogation or any other relief from those
they have named third-party defendants, the Collector of Customs,
Commissioner of Customs, Reparations Commission, their co-
Rule 63 Full Text Cases andm30 of 88
defendant and Macario Ofilada, the very plaintiff, in respect to the
construction or interpretation that Ofilada was asking the court to
make? At the risk of quoting again part thereof, the complete prayer
in the third-party complaint in question reads thus:
1. Immediately upon the filing of the herein
third-party complaint this Honorable Court issue
a writ of preliminary mandatory injunction ex-
parte, without notice to the other parties,
ordering the third-party defendants
Commissioner of Customs and Collector of
Customs and Reparations Commission to release
immediately the third-party plaintiffs the
balance of the 202 packages of rayon clothing
forming part of the shipment of consumer goods
originally consigned to the Reparations
Commission which arrived in Manila aboard the
SS GUILLERMO on September 10, 1962, and
which to the present are still under the custody
and possession of the collector of Customs and
Commissioner of Customs upon the filing of a
bond by the third-party plaintiffs in such amount
as may be fixed by this Honorable Court to pay
for any damages that the third-party defendants
may suffer should this Honorable Court find that
issuance of the preliminary mandatory
injunction is not proper.
2. That after hearing on the merits this
Honorable Court confirm and make final its
order of mandatory preliminary injunction.
The third-party plaintiffs further pray for such
other relief as may be just and equitable under
the premises. (Pp. 87-88, Record.)
According to Moran:
Tests of Propriety.—The test to determine
whether the claim for indemnity in a third-party
complaint in respect to plaintiff's claim is proper,
are (a) whether it arises out of the same
transaction on which plaintiff's claim is based; or
whether the third-party's claim, although arising
out of another or different contract or
transaction, is connected with plaintiff's claim;
(U.S. Commercial Co. v. Guevara, et al., 48 O.G.
612.) (b) whether the third-party defendant
would be liable to the plaintiff or to the
defendant for all or part of the plaintiffs claim
against the original defendant, although the
third- party defendant's liability arises out of
another transaction; or (e) whether the third-
party defendant may assert any defense which
the third-party plaintiff has, or may have, against
plaintiff's claim. (Capayas v. Court of First
Instance, 77 Phil. 181.) Failing these tests, the
complaint is improper. ... (1 Moran, Comments
on the Rules of Court, p. 281, 1970 ed.)
It is thus too evident to call for more elaborate discussion that
respondent court s action in allowing the filing of Cochingyans' third-
party complaint completely disregarded, due presumably to
ignorance thereof, the basic concepts of the remedies of declaratory
relief and third-party complaint.
Moreover, respondent court also paid no heed to the requirement
of Section 2 of Rule 12 of the 1940 Rules to the effect that: "Before
the service of his answer a defendant may move ex parte or, after
the service of his answer, on notice to the plaintiff, for leave as
third- party plaintiff to file a complaint against a third-party
defendant." In the present case, it is a fact that the motions of the
Cochingyans for leave to file their third-party complaint and for the
admission thereof were granted ex parte notwithstanding that the
trial of the case had already been terminated.
IN CONSEQUENCE OF THE FOREGOING, We have no other
alternative than to declare as We do declare null and void all the
orders herein complained of. 1 They are all hereby set aside and
respondent court is enjoined to desist from carrying any of them
into effect, Costs against respondents Jose and Susana Cochingyan.
FIRST DIVISION
G.R. No. L-29673 November 12, 1987
THE VISAYAN PACKING CORPORATION, petitioner,
vs.
THE REPARATIONS COMMISSION and THE COURT OF
APPEALS, respondents.
NARVASA, J.:
The proceedings at bar had their origin in an agreement
denominated "Contract of Constitutional Purchase and Sale of
nterparation Goods" entered into between petitioner Visayan
baking Corporation (hereafter, simply VISPAC) and the Reparations
Commission (hereafter, simply REPACOM). Subject of the contract
were a cannery plant, a tin manufacturing plant, and three (3) filing
boats sold to VISPAC, for which it bound itself to pay the total price
of P1,135,712.47 in ten (10) equal yearly installments with interest. 2
Prior to the due date of the first installment, REPACOM sent VISPAC
a written reminder thereof. VISPAC's response was to file in the
Court of First Instance of Manila two (2) special civil actions for
declaratory relief, 3 alleging ambiguity in the contract between it and
REPACOM consisting in the agreement's failure to clearly state the
precise time when the obligation to pay the first installment of the
price would arise. 4
On the other hand, when VISPAC subsequently failed, despite
several demands, to pay the first installment of the price
(P135,712.47) on what REPACOM deemed to be the due date, the
latter instituted an ordinary civil action for collection
thereof. 5 VISPAC moved to dismiss this collection suit on the ground
of the pendency of the declaratory relief actions, arguing that until
and unless the latter were resolved, no cause of action could be
deemed to exist in favor of REPACOM for collection of said first
installment. The motion to dismiss was denied; and after trial, the
Court of First Instance rendered judgment dated March 27, 1963
ordering VISPAC to pay REPACOM the sum claimed, P135,712.47,
with interest at the legal rate from date of filing of the complaint
until fully paid.
Rule 63 Full Text Cases andm31 of 88
VISPAC appealed to the Court of Appeals claiming error on the part
of the Trial Court in not holding that the collection suit was barred
by the pendency of the declaratory relief cases earlier instituted.
But the declaratory relief actions had been earlier dismissed by
Order of the Court of First Instance dated October 9, 1962, the Court
holding that the issues raised would be necessarily threshed out in
the collection suit. VISPAC appealed to this Court 6 but was rebuffed.
By decision rendered on May 31, 1965, this Court affirmed the
dismissal of the declaratory relief suits, holding that the clarity of the
terms of the contract eliminated all occasion for interpretation
thereof.
VISPAC also received an unfavorable verdict in its appeal to the
Court of Appeals from the decision of the Trial Court in the collection
action against it. That Appellate Court, on October 2, 1968,
promulgated judgment affirming that of the Court of First Instance.
It is this affirmance of the Court of Appeals that is subject of the
instant appeal taken to this Court by VISPAC. VISPAC's contention is
that it was error on the Appellate Court's part to have affirmed the
Trial Court's decision for the collection of the first installment of the
price due from it under its contract with REPACOM, because that
money claim should have been set up as a compulsory
counterclaim in the declaratory relief action, and since REPACOM
had not done this, but had instead set it up in a separate suit, the
claim had thereby become barred.
It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of
Court, that a counterclaim not set up shall be barred if it arises out
of or is necessarily connected with the transaction or occurrence
that is the subject matter of the opposing party's claim and does not
require for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction. In other words, a compulsory
counterclaim cannot be made the subject of a separate action but
should be asserted in the same suit involving the same transaction
or occurrence giving rise to it. The omission is not however
irremediable or irreversibly fatal. The Rules provide that when a
pleader fails to set up a counterclaim through oversight,
inadvertence, or excusable negligence, or when justice requires, he
may, by leave of court, set up the counterclaim or crossclaim by
amendment before judgment. 7 Where the counterclaim is made the
subject of a separate suit, it may be abated upon a plea of auter
action pendant or litis pendentia, 8 and/or dismissed on the ground
of res adjudicata. 9 Res adjudicata may be pleaded as a ground for
dismissal if the opposing party's claim, involving the same
transaction or occurrence as the counterclaim, has already been
adjudicated on the merits by a court of competent jurisdiction, and
the judgment has become final; this, on the theory that what is
barred by prior judgment are not only the matters squarely raised
and litigated, but all such other matters as could have been raised
but were not. 10
Now, there is nothing in the nature of a special civil action for
declaratory relief that proscribes the filing of a counterclaim based
on the same transaction, deed or contract subject of the complaint.
A special civil action is after an not essentially different from all
ordinary civil action, which is generally governed by Rules 1 to 56 of
the Rules of Court, except that the former deals with a special
subject matter which makes necessary some special
regulation. 11But the Identity between their fundamental nature is
such that the same rules governing ordinary civil suits may and do
apply to special civil actions if not inconsistent with or if they may
serve to supplement the provisions of the peculiar rules governing
special civil actions. 12
Ideally, in the case at bar, the separate action for collection should
have been dismissed and set up as a compulsory counterclaim in the
declaratory relief suits, by way of an amended answer. This was not
done. The actions proceeded separately and were decided on the
merits. The final verdict was that the declaratory relief
suits instituted by VISPAC were unmeritorious, quite without
foundation and, in the light of all the relevant facts, appear to have
been initiated by VISPAC merely to obstruct and delay the payment
of the installments clearly due from it, payment of which was
decreed in the collection suit. Under the circumstances, and taking
account of the not inconsiderable lenght of time that the case at bar
has been pending, it would be to do violence to substantial justice to
pronounce the proceedings fatally defective for breach of the rule
on compulsory counterclaims. Rules of procedure are after all laid
down in order to attain justice. They cannot be applied to prevent
the achievement of that goal. Form cannot prevail over
substance. 13
WHEREFORE, the petition is dismissed for lack of merit, with costs
against the petitioner.
EN BANC
G.R. No. 193978 February 28, 2012
JELBERT B. GALICTO, Petitioner,
vs.
H.E. PRESIDENT BENIGNO SIMEON C. AQUINO III, in his capacity as
President of the Republic of the Philippines; ATTY. PAQUITO N.
OCHOA, JR., in his capacity as Executive Secretary; and FLORENCIO
B. ABAD, in his capacity as Secretary of the Department of Budget
and Management, Respondents.
RESOLUTION
BRION, J.:
Before us is a Petition for Certiorari and Prohibition with Application
for Writ of Preliminary Injunction and/or Temporary Restraining
Order,1 seeking to nullify and enjoin the implementation of
Executive Order No. (EO) 7 issued by the Office of the President on
September 8, 2010. Petitioner Jelbert B. Galicto asserts that EO 7 is
unconstitutional for having been issued beyond the powers of the
President and for being in breach of existing laws.
The petitioner is a Filipino citizen and an employee of the Philippine
Health Insurance Corporation (PhilHealth).2 He is currently holding
the position of Court Attorney IV and is assigned at the PhilHealth
Regional Office CARAGA.3
Respondent Benigno Simeon C. Aquino III is the President of the
Republic of the Philippines (Pres. Aquino); he issued EO 7 and has
the duty of implementing it. Respondent Paquito N. Ochoa, Jr. is the
incumbent Executive Secretary and, as the alter ego of Pres. Aquino,
is tasked with the implementation of EO 7. Respondent Florencio B.
Abad is the incumbent Secretary of the Department of Budget and
Management (DBM) charged with the implementation of EO 7.4
The Antecedent Facts
On July 26, 2010, Pres. Aquino made public in his first State of the
Nation Address the alleged excessive allowances, bonuses and other
Rule 63 Full Text Cases andm32 of 88
benefits of Officers and Members of the Board of Directors of the
Manila Waterworks and Sewerage System – a government owned
and controlled corporation (GOCC) which has been unable to meet
its standing obligations.5 Subsequently, the Senate of the Philippines
(Senate), through the Senate Committee on Government
Corporations and Public Enterprises, conducted an inquiry in aid of
legislation on the reported excessive salaries, allowances, and other
benefits of GOCCs and government financial institutions (GFIs).6
Based on its findings that "officials and governing boards of various
[GOCCs] and [GFIs] x x x have been granting themselves
unwarranted allowances, bonuses, incentives, stock options, and
other benefits [as well as other] irregular and abusive
practices,"7 the Senate issued Senate Resolution No. 17 "urging the
President to order the immediate suspension of the unusually large
and apparently excessive allowances, bonuses, incentives and other
perks of members of the governing boards of [GOCCs] and [GFIs]."8
Heeding the call of Congress, Pres. Aquino, on September 8, 2010,
issued EO 7, entitled "Directing the Rationalization of the
Compensation and Position Classification System in the [GOCCs] and
[GFIs], and for Other Purposes." EO 7 provided for the guiding
principles and framework to establish a fixed compensation and
position classification system for GOCCs and GFIs. A Task Force was
also created to review all remunerations of GOCC and GFI
employees and officers, while GOCCs and GFIs were ordered to
submit to the Task Force information regarding their compensation.
Finally, EO 7 ordered (1) a moratorium on the increases in the
salaries and other forms of compensation, except salary adjustments
under EO 8011 and EO 900, of all GOCC and GFI employees for an
indefinite period to be set by the President,9 and (2) a suspension of
all allowances, bonuses and incentives of members of the Board of
Directors/Trustees until December 31, 2010.10
EO 7 was published on September 10, 2010.11 It took effect on
September 25, 2010 and precluded the Board of Directors, Trustees
and/or Officers of GOCCs from granting and releasing bonuses and
allowances to members of the board of directors, and from
increasing salary rates of and granting new or additional benefits
and allowances to their employees.
The Petition
The petitioner claims that as a PhilHealth employee, he is affected
by the implementation of EO 7, which was issued with grave abuse
of discretion amounting to lack or excess of jurisdiction, based on
the following arguments:
I.
EXECUTIVE ORDER NO. 7 IS NULL AND VOID FOR LACK OF
LEGAL BASIS DUE TO THE FOLLOWING GROUNDS:
A. P.D. 985 IS NOT APPLICABLE AS BASIS FOR
EXECUTIVE ORDER NO. 7 BECAUSE THE
GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS WERE SUBSEQUENTLY
GRANTED THE POWER TO FIX COMPENSATION
LONG AFTER SUCH POWER HAS BEEN REVOKED
BY P.D. 1597 AND R.A. 6758.
B. THE GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS DO NOT NEED TO
HAVE ITS COMPENSATION PLANS, RATES AND
POLICIES REVIEWED BY THE DBM AND
APPROVED BY THE PRESIDENT BECAUSE P.D.
1597 REQUIRES ONLY THE GOCCs TO REPORT TO
THE OFFICE TO THE PRESIDENT THEIR
COMPENSATION PLANS AND RATES BUT THE
SAME DOES NOT GIVE THE PRESIDENT THE
POWER OF CONTROL OVER THE FISCAL POWER
OF THE GOCCs.
C. J.R. NO. 4, [SERIES] 2009 IS NOT APPLICABLE
AS LEGAL BASIS BECAUSE IT HAD NOT RIPENED
INTO X X X LAW, THE SAME NOT HAVING BEEN
PUBLISHED.
D. ASSUMING ARGUENDO THAT J.R. NO. 1, S.
2004 (sic) AND J.R. 4, S. 2009 ARE VALID, STILL
THEY ARE NOT APPLICABLE AS LEGAL BASIS
BECAUSE THEY ARE NOT LAWS WHICH MAY
VALIDLY DELEGATE POWER TO THE PRESIDENT
TO SUSPEND THE POWER OF THE BOARD TO FIX
COMPENSATION.
II.
EXECUTIVE ORDER NO. 7 IS INVALID FOR DIVESTING THE
BOARD OF DIRECTORS OF [THE] GOCCS OF THEIR POWER
TO FIX THE COMPENSATION, A POWER WHICH IS A
LEGISLATIVE GRANT AND WHICH COULD NOT BE REVOKED
OR MODIFIED BY AN EXECUTIVE FIAT.
III.
EXECUTIVE ORDER NO. 7 IS BY SUBSTANCE A LAW, WHICH
IS A DEROGATION OF CONGRESSIONAL PREROGATIVE AND
IS THEREFORE UNCONSTITUTIONAL.
IV.
THE ACTS OF SUSPENDING AND IMPOSING MORATORIUM
ARE ULTRA VIRES ACTS BECAUSE J.R. NO. 4 DOES NOT
EXPRESSLY AUTHORIZE THE PRESIDENT TO EXERCISE SUCH
POWERS.
V.
EXECUTIVE ORDER NO. 7 IS AN INVALID ISSUANCE
BECAUSE IT HAS NO SUFFICIENT STANDARDS AND IS
THEREFORE ARBITRARY, UNREASONABLE AND A
VIOLATION OF SUBSTANTIVE DUE PROCESS.
VI.
EXECUTIVE ORDER NO. 7 INVOLVES THE DETERMINATION
AND DISCRETION AS TO WHAT THE LAW SHALL BE AND IS
THEREFORE INVALID FOR ITS USURPATION OF LEGISLATIVE
POWER.
VII.
Rule 63 Full Text Cases andm33 of 88
 CONSISTENT WITH THE DECISION OF THE SUPREME
COURT IN PIMENTEL V. AGUIRRE CASE, EXECUTIVE ORDER
NO. 7 IS ONLY DIRECTORY AND NOT MANDATORY.12
The Case for the Respondents
On December 13, 2010, the respondents filed their Comment. They
pointed out the following procedural defects as grounds for the
petition’s dismissal: (1) the petitioner lacks locus standi; (2) the
petitioner failed to attach a board resolution or secretary’s
certificate authorizing him to question EO 7 in behalf of PhilHealth;
(3) the petitioner’s signature does not indicate his PTR Number,
Mandatory Continuing Legal Education (MCLE) Compliance Number
and Integrated Bar of the Philippines (IBP) Number; (4) the jurat of
the Verification and Certification of Non-Forum Shopping failed to
indicate a valid identification card as provided under A.M. No. 02-8-
13-SC; (5) the President should be dropped as a party respondent as
he is immune from suit; and (6) certiorari is not applicable to this
case.13
The respondents also raised substantive defenses to support the
validity of EO 7. They claim that the President exercises control over
the governing boards of the GOCCs and GFIs; thus, he can fix their
compensation packages. In addition, EO 7 was issued in accordance
with law for the purpose of controlling the grant of excessive
salaries, allowances, incentives and other benefits to GOCC and GFI
employees. They also advocate the validity of Joint Resolution (J.R.)
No. 4, which they point to as the authority for issuing EO 7.14
Meanwhile, on June 6, 2011, Congress enacted Republic Act (R.A.)
No. 10149,15 otherwise known as the "GOCC Governance Act of
2011." Section 11 of RA 10149 expressly authorizes the President to
fix the compensation framework of GOCCs and GFIs.
The Court’s Ruling
We resolve to DISMISS the petition for its patent formal and
procedural infirmities, and for having been mooted by subsequent
events.
A. Certiorari is not the proper remedy.
Under the Rules of Court, petitions for Certiorari and Prohibition are
availed of to question judicial, quasi-judicial and mandatory acts.
Since the issuance of an EO is not judicial, quasi-judicial or a
mandatory act, a petition for certiorari and prohibition is an
incorrect remedy; instead a petition for declaratory relief under Rule
63 of the Rules of Court, filed with the Regional Trial Court (RTC), is
the proper recourse to assail the validity of EO 7:
Section 1. Who may file petition. Any person interested under a
deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder. (Emphases ours.)
Liga ng mga Barangay National v. City Mayor of Manila 16 is a case in
point.17 In Liga, we dismissed the petition for certiorari to set aside
an EO issued by a City Mayor and insisted that a petition for
declaratory relief should have been filed with the RTC. We
painstakingly ruled:
After due deliberation on the pleadings filed, we resolve to dismiss
this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial
capacity nor arrogated unto themselves any judicial or quasi-judicial
prerogatives. A petition for certiorari under Rule 65 of the 1997
Rules of Civil Procedure is a special civil action that may be invoked
only against a tribunal, board, or officer exercising judicial or quasi-
judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari. — When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of
such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following
requisites must concur: (1) it must be directed against a tribunal,
board, or officer exercising judicial or quasi-judicial functions; (2) the
tribunal, board, or officer must have acted without or in excess of
jurisdiction or with grave abuse of discretion amounting [to] lack or
excess of jurisdiction; and (3) there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he
has the power to determine what the law is and what the legal
rights of the parties are, and then undertakes to determine these
questions and adjudicate upon the rights of the parties.
Quasi-judicial function, on the other hand, is "a term which applies
to the actions, discretion, etc., of public administrative officers or
bodies … required to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for
their official action and to exercise discretion of a judicial nature."
Before a tribunal, board, or officer may exercise judicial or quasi-
judicial acts, it is necessary that there be a law that gives rise to
some specific rights of persons or property under which adverse
claims to such rights are made, and the controversy ensuing
therefrom is brought before a tribunal, board, or officer clothed with
power and authority to determine the law and adjudicate the
respective rights of the contending parties.
The respondents do not fall within the ambit of tribunal, board, or
officer exercising judicial or quasi-judicial functions. As correctly
pointed out by the respondents, the enactment by the City Council
of Manila of the assailed ordinance and the issuance by respondent
Mayor of the questioned executive order were done in the exercise
of legislative and executive functions, respectively, and not
of judicial or quasi-judicial functions. On this score
alone, certiorari will not lie.
Rule 63 Full Text Cases andm34 of 88
Second, although the instant petition is styled as a petition
for certiorari, in essence, it seeks the declaration by this Court of the
unconstitutionality or illegality of the questioned ordinance and
executive order. It, thus, partakes of the nature of a petition for
declaratory relief over which this Court has only appellate, not
original, jurisdiction. Section 5, Article VIII of the Constitution
provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting
ambassadors, other public ministers and consuls, and over
petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or
certiorari as the law or the Rules of Court may provide,
final judgments and orders of lower courts in:
(a) All cases in which the constitutionality or
validity of any treaty, international or executive
agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or
regulation is in question. (Italics supplied).
As such, this petition must necessar[ily] fail, as this Court does not
have original jurisdiction over a petition for declaratory relief even if
only questions of law are involved.18
Likewise, in Southern Hemisphere Engagement Network, Inc. v. Anti
Terrorism Council,19 we similarly dismissed the petitions for
certiorari and prohibition challenging the constitutionality of R.A.
No. 9372, otherwise known as the "Human Security Act of 2007,"
since the respondents therein (members of the Anti-Terrorism
Council) did not exercise judicial or quasi-judicial functions.
While we have recognized in the past that we can exercise the
discretion and rulemaking authority we are granted under the
Constitution,20 and set aside procedural considerations to permit
parties to bring a suit before us at the first instance through
certiorari and/or prohibition,21 this liberal policy remains to be an
exception to the general rule, and thus, has its limits. In Concepcion
v. Commission on Elections (COMELEC),22 we emphasized the
importance of availing of the proper remedies and cautioned against
the wrongful use of certiorari in order to assail the quasi-legislative
acts of the COMELEC, especially by the wrong party. In ruling that
liberality and the transcendental doctrine cannot trump blatant
disregard of procedural rules, and considering that the petitioner
had other available remedies (such as a petition for declaratory
relief with the appropriate RTC under the terms of Rule 63 of the
Rules of Court), as in this case, we categorically ruled:
The petitioner’s unusual approaches and use of Rule 65 of the Rules
of Court do not appear to us to be the result of any error in reading
Rule 65, given the way the petition was crafted. Rather, it was a
backdoor approach to achieve what the petitioner could not directly
do in his individual capacity under Rule 65. It was, at the very least,
an attempted bypass of other available, albeit lengthier, modes of
review that the Rules of Court provide. While we stop short of
concluding that the petitioner’s approaches constitute an abuse of
process through a manipulative reading and application of the Rules
of Court, we nevertheless resolve that the petition should be
dismissed for its blatant violation of the Rules. The transgressions
alleged in a petition, however weighty they may sound, cannot be
justifications for blatantly disregarding the rules of procedure,
particularly when remedial measures were available under these
same rules to achieve the petitioner’s objectives. For our part, we
cannot and should not – in the name of liberality and the
"transcendental importance" doctrine – entertain these types of
petitions. As we held in the very recent case of Lozano, et al. vs.
Nograles, albeit from a different perspective, our liberal approach
has its limits and should not be abused.23 [emphasis supplied]
B. Petitioner lacks locus standi.
"Locus standi or legal standing has been defined as a personal and
substantial interest in a case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged. The gist of the question on standing is whether a party
alleges such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation
of issues upon which the court depends for illumination of difficult
constitutional questions."24 This requirement of standing relates to
the constitutional mandate that this Court settle only actual cases or
controversies.25
Thus, as a general rule, a party is allowed to "raise a constitutional
question" when (1) he can show that he will personally suffer some
actual or threatened injury because of the allegedly illegal conduct
of the government; (2) the injury is fairly traceable to the challenged
action; and (3) the injury is likely to be redressed by a favorable
action.26
Jurisprudence defines interest as "material interest, an interest in
issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest. By
real interest is meant a present substantial interest, as distinguished
from a mere expectancy or a future, contingent, subordinate, or
consequential interest."27
To support his claim that he has locus standi to file the present
petition, the petitioner contends that as an employee of PhilHealth,
he "stands to be prejudiced by [EO] 7, which suspends or imposes a
moratorium on the grants of salary increases or new or increased
benefits to officers and employees of GOCC[s] and x x x curtail[s] the
prerogative of those officers who are to fix and determine his
compensation."28 The petitioner also claims that he has standing as a
member of the bar in good standing who has an interest in ensuring
that laws and orders of the Philippine government are legally and
validly issued and implemented.
The respondents meanwhile argue that the petitioner is not a real
party-in-interest since future increases in salaries and other benefits
are merely contingent events or expectancies.29 The petitioner, too,
is not asserting a public right for which he is entitled to seek judicial
protection. Section 9 of EO 7 reads:
Section 9. Moratorium on Increases in Salaries, Allowances,
Incentives and Other Benefits. –Moratorium on increases in the
rates of salaries, and the grant of new increases in the rates of
allowances, incentives and other benefits, except salary adjustments
pursuant to Executive Order No. 8011 dated June 17, 2009 and
Executive Order No. 900 dated June 23, 2010, are hereby imposed
until specifically authorized by the President. [emphasis ours]
Rule 63 Full Text Cases andm35 of 88
In the present case, we are not convinced that the petitioner has
demonstrated that he has a personal stake or material interest in
the outcome of the case because his interest, if any, is speculative
and based on a mere expectancy. In this case, the curtailment of
future increases in his salaries and other benefits cannot but be
characterized as contingent events or expectancies. To be sure, he
has no vested rights to salary increases and, therefore, the absence
of such right deprives the petitioner of legal standing to assail EO 7.
It has been held that as to the element of injury, such aspect is not
something that just anybody with some grievance or pain may
assert. It has to be direct and substantial to make it worth the
court’s time, as well as the effort of inquiry into the constitutionality
of the acts of another department of government. If the asserted
injury is more imagined than real, or is merely superficial and
insubstantial, then the courts may end up being importuned to
decide a matter that does not really justify such an excursion into
constitutional adjudication.30 The rationale for this constitutional
requirement of locus standi is by no means trifle. Not only does it
assure the vigorous adversary presentation of the case; more
importantly, it must suffice to warrant the Judiciary’s overruling the
determination of a coordinate, democratically elected organ of
government, such as the President, and the clear approval by
Congress, in this case. Indeed, the rationale goes to the very essence
of representative democracies.31
Neither can the lack of locus standi be cured by the petitioner’s
claim that he is instituting the present petition as a member of the
bar in good standing who has an interest in ensuring that laws and
orders of the Philippine government are legally and validly issued.
This supposed interest has been branded by the Court in Integrated
Bar of the Phils. (IBP) v. Hon. Zamora,32 "as too general an interest
which is shared by other groups and [by] the whole
citizenry."33 Thus, the Court ruled in IBP that the mere invocation by
the IBP of its duty to preserve the rule of law and nothing more,
while undoubtedly true, is not sufficient to clothe it with standing in
that case. The Court made a similar ruling in Prof. David v. Pres.
Macapagal-Arroyo34 and held that the petitioners therein, who are
national officers of the IBP, have no legal standing, having failed to
allege any direct or potential injury which the IBP, as an institution,
or its members may suffer as a consequence of the issuance of
Presidential Proclamation No. 1017 and General Order No. 5.35
We note that while the petition raises vital constitutional and
statutory questions concerning the power of the President to fix the
compensation packages of GOCCs and GFIs with possible
implications on their officials and employees, the same cannot
"infuse" or give the petitioner locus standi under the transcendental
importance or paramount public interest doctrine. In Velarde v.
Social Justice Society,36 we held that even if the Court could have
exempted the case from the stringent locus standi requirement,
such heroic effort would be futile because the transcendental issue
could not be resolved any way, due to procedural infirmities and
shortcomings, as in the present case.37 In other words, giving due
course to the present petition which is saddled with formal and
procedural infirmities explained above in this Resolution, cannot but
be an exercise in futility that does not merit the Court’s liberality. As
we emphasized in Lozano v. Nograles,38 "while the Court has taken
an increasingly liberal approach to the rule of locus standi, evolving
from the stringent requirements of ‘personal injury’ to the broader
‘transcendental importance’ doctrine, such liberality is not to be
abused."39
Finally, since the petitioner has failed to demonstrate a material and
personal interest in the issue in dispute, he cannot also be
considered to have filed the present case as a representative of
PhilHealth. In this regard, we cannot ignore or excuse the blatant
failure of the petitioner to provide a Board Resolution or a
Secretary’s Certificate from PhilHealth to act as its representative.
C. The petition has a defective jurat.
The respondents claim that the petition should be dismissed for
failing to comply with Section 3, Rule 7 of the Rules of Civil
Procedure, which requires the party or the counsel representing him
to sign the pleading and indicate an address that should not be a
post office box. The petition also allegedly violated the Supreme
Court En Banc Resolution dated November 12, 2001, requiring
counsels to indicate in their pleadings their Roll of Attorneys
Number, their PTR Number and their IBP Official Receipt or Lifetime
Member Number; otherwise, the pleadings would be considered
unsigned and dismissible. Bar Matter No. 1922 likewise states that a
counsel should note down his MCLE Certificate of Compliance or
Certificate of Exemption in the pleading, but the petitioner had
failed to do so.40
We do not see any violation of Section 3, Rule 7 of the Rules of Civil
Procedure as the petition bears the petitioner’s signature and office
address. The present suit was brought before this Court by the
petitioner himself as a party litigant and not through counsel.
Therefore, the requirements under the Supreme Court En Banc
Resolution dated November 12, 2001 and Bar Matter No. 1922 do
not apply. In Bar Matter No. 1132, April 1, 2003, we clarified that a
party who is not a lawyer is not precluded from signing his own
pleadings as this is allowed by the Rules of Court; the purpose of
requiring a counsel to indicate his IBP Number and PTR Number is
merely to protect the public from bogus lawyers. A similar
construction should be given to Bar Matter No. 1922, which requires
lawyers to indicate their MCLE Certificate of Compliance or
Certificate of Exemption; otherwise, the provision that allows parties
to sign their own pleadings will be negated.
However, the point raised by the respondents regarding the
petitioner’s defective jurat is correct. Indeed, A.M. No. 02-8-13-SC,
dated February 19, 2008, calls for a current identification document
issued by an official agency bearing the photograph and signature of
the individual as competent evidence of identity. Nevertheless, we
hasten to clarify that the defective jurat in the
Verification/Certification of Non-Forum Shopping is not a fatal
defect, as we held in In-N-Out Burger, Inc. v. Sehwani,
Incorporated.41 The verification is only a formal, not a jurisdictional,
requirement that the Court may waive.
D. The petition has been mooted by supervening events.
Because of the transitory nature of EO 7, it has been pointed out
that the present case has already been rendered moot by these
supervening events: (1) the lapse on December 31, 2010 of Section
10 of EO 7 that suspended the allowances and bonuses of the
directors and trustees of GOCCs and GFIs; and (2) the enactment of
R.A. No. 10149 amending the provisions in the charters of GOCCs
and GFIs empowering their board of directors/trustees to determine
their own compensation system, in favor of the grant of authority to
the President to perform this act.
Rule 63 Full Text Cases andm36 of 88
With the enactment of the GOCC Governance Act of 2011, the
President is now authorized to fix the compensation framework of
GOCCs and GFIs. The pertinent provisions read:
Section 5. Creation of the Governance Commission for Government-
Owned or -Controlled Corporations. — There is hereby created an
advisory, monitoring, and oversight body with authority to
formulate, implement and coordinate policies to be known as the
Governance Commission for Government-Owned or-Controlled
Corporations, hereinafter referred to as the GCG, which shall be
attached to the Office of the President. The GCG shall have the
following powers and functions:
xxxx
h) Conduct compensation studies, develop and recommend to the
President a competitive compensation and remuneration system
which shall attract and retain talent, at the same time allowing the
GOCC to be financially sound and sustainable;
xxxx
Section 8. Coverage of the Compensation and Position Classification
System. — The GCG, after conducting a compensation study, shall
develop a Compensation and Position Classification System which
shall apply to all officers and employees of the GOCCs whether
under the Salary Standardization Law or exempt therefrom and shall
consist of classes of positions grouped into such categories as the
GCG may determine, subject to approval of the President.
Section 9. Position Titles and Salary Grades. — All positions in the
Positions Classification System, as determined by the GCG and as
approved by the President, shall be allocated to their proper
position titles and salary grades in accordance with an Index of
Occupational Services, Position Titles and Salary Grades of the
Compensation and Position Classification System, which shall be
prepared by the GCG and approved by the President.
xxxx
[N]o GOCC shall be exempt from the coverage of the Compensation
and Position Classification System developed by the GCG under this
Act.
As may be gleaned from these provisions, the new law amended
R.A. No. 7875 and other laws that enabled certain GOCCs and GFIs
to fix their own compensation frameworks; the law now authorizes
the President to fix the compensation and position classification
system for all GOCCs and GFIs, as well as other entities covered by
the law. This means that, the President can now reissue an EO
containing these same provisions without any legal
constraints.1âwphi1
A moot case is "one that ceases to present a justiciable controversy
by virtue of supervening events, so that a declaration thereon would
be of no practical use or value."42 "[A]n action is considered ‘moot’
when it no longer presents a justiciable controversy because the
issues involved have become academic or dead[,] or when the
matter in dispute has already been resolved and hence, one is not
entitled to judicial intervention unless the issue is likely to be raised
again between the parties x x x. Simply stated, there is nothing for
the x x x court to resolve as [its] determination x x x has been
overtaken by subsequent events."43
This is the present situation here. Congress, thru R.A. No. 10149, has
expressly empowered the President to establish the compensation
systems of GOCCs and GFIs. For the Court to still rule upon the
supposed unconstitutionality of EO 7 will merely be an academic
exercise. Any further discussion of the constitutionality of EO 7
serves no useful purpose since such issue is moot in its face in light
of the enactment of R.A. No. 10149. In the words of the eminent
constitutional law expert, Fr. Joaquin Bernas, S.J., "the Court
normally [will not] entertain a petition touching on an issue that has
become moot because x x x there would [be] no longer x x x a ‘flesh
and blood’ case for the Court to resolve."44
All told, in view of the supervening events rendering the petition
moot, as well as its patent formal and procedural infirmities, we no
longer see any reason for the Court to resolve the other issues
raised in the certiorari petition.
WHEREFORE, premises considered, the petition is DISMISSED. No
costs.
SO ORDERED.
THIRD DIVISION
G.R. No. 177056 September 18, 2009
THE OFFICE OF THE SOLICITOR GENERAL, Petitioner,
vs.
AYALA LAND INCORPORATED, ROBINSON'S LAND CORPORATION,
SHANGRI-LA PLAZA CORPORATION and SM PRIME HOLDINGS,
INC., Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari,1 under Rule
45 of the Revised Rules of Court, filed by petitioner Office of the
Solicitor General (OSG), seeking the reversal and setting aside of the
Decision2 dated 25 January 2007 of the Court of Appeals in CA-G.R.
CV No. 76298, which affirmed in toto the Joint Decision3 dated 29
May 2002 of the Regional Trial Court (RTC) of Makati City, Branch
138, in Civil Cases No. 00-1208 and No. 00-1210; and (2) the
Resolution4 dated 14 March 2007 of the appellate court in the same
case which denied the Motion for Reconsideration of the OSG. The
RTC adjudged that respondents Ayala Land Incorporated (Ayala
Land), Robinsons Land Corporation (Robinsons), Shangri-la Plaza
Corporation (Shangri-la), and SM Prime Holdings, Inc. (SM Prime)
could not be obliged to provide free parking spaces in their malls to
their patrons and the general public.
Respondents Ayala Land, Robinsons, and Shangri-la maintain and
operate shopping malls in various locations in Metro Manila.
Respondent SM Prime constructs, operates, and leases out
commercial buildings and other structures, among which, are SM
City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North
Avenue, Quezon City; and SM Southmall, Las Piñas.
Rule 63 Full Text Cases andm37 of 88
The shopping malls operated or leased out by respondents have
parking facilities for all kinds of motor vehicles, either by way of
parking spaces inside the mall buildings or in separate buildings
and/or adjacent lots that are solely devoted for use as parking
spaces. Respondents Ayala Land, Robinsons, and SM Prime spent for
the construction of their own parking facilities. Respondent Shangri-
la is renting its parking facilities, consisting of land and building
specifically used as parking spaces, which were constructed for the
lessor’s account.
Respondents expend for the maintenance and administration of
their respective parking facilities. They provide security personnel to
protect the vehicles parked in their parking facilities and maintain
order within the area. In turn, they collect the following parking fees
from the persons making use of their parking facilities, regardless of
whether said persons are mall patrons or not:
Respondent Parking Fees
Ayala Land On weekdays, ₱25.00 for the first four hours and
₱10.00 for every succeeding hour; on weekends, flat
rate of ₱25.00 per day
Robinsons ₱20.00 for the first three hours and ₱10.00 for every
succeeding hour
Shangri-la Flat rate of ₱30.00 per day
SM Prime ₱10.00 to ₱20.00 (depending on whether the parking
space is outdoors or indoors) for the first three hours
and 59 minutes, and ₱10.00 for every succeeding
hour or fraction thereof
The parking tickets or cards issued by respondents to vehicle owners
contain the stipulation that respondents shall not be responsible for
any loss or damage to the vehicles parked in respondents’ parking
facilities.
In 1999, the Senate Committees on Trade and Commerce and on
Justice and Human Rights conducted a joint investigation for the
following purposes: (1) to inquire into the legality of the prevalent
practice of shopping malls of charging parking fees; (2) assuming
arguendo that the collection of parking fees was legally authorized,
to find out the basis and reasonableness of the parking rates
charged by shopping malls; and (3) to determine the legality of the
policy of shopping malls of denying liability in cases of theft,
robbery, or carnapping, by invoking the waiver clause at the back of
the parking tickets. Said Senate Committees invited the top
executives of respondents, who operate the major malls in the
country; the officials from the Department of Trade and Industry
(DTI), Department of Public Works and Highways (DPWH), Metro
Manila Development Authority (MMDA), and other local
government officials; and the Philippine Motorists Association
(PMA) as representative of the consumers’ group.
After three public hearings held on 30 September, 3 November, and
1 December 1999, the afore-mentioned Senate Committees jointly
issued Senate Committee Report No. 2255 on 2 May 2000, in which
they concluded:
In view of the foregoing, the Committees find that the collection of
parking fees by shopping malls is contrary to the National Building
Code and is therefor [sic] illegal. While it is true that the Code
merely requires malls to provide parking spaces, without specifying
whether it is free or not, both Committees believe that the
reasonable and logical interpretation of the Code is that the parking
spaces are for free. This interpretation is not only reasonable and
logical but finds support in the actual practice in other countries like
the United States of America where parking spaces owned and
operated by mall owners are free of charge.
Figuratively speaking, the Code has "expropriated" the land for
parking – something similar to the subdivision law which require
developers to devote so much of the land area for parks.
Moreover, Article II of R.A. No. 9734 (Consumer Act of the
Philippines) provides that "it is the policy of the State to protect the
interest of the consumers, promote the general welfare and
establish standards of conduct for business and industry." Obviously,
a contrary interpretation (i.e., justifying the collection of parking
fees) would be going against the declared policy of R.A. 7394.
Section 201 of the National Building Code gives the responsibility for
the administration and enforcement of the provisions of the Code,
including the imposition of penalties for administrative violations
thereof to the Secretary of Public Works. This set up, however, is not
being carried out in reality.
In the position paper submitted by the Metropolitan Manila
Development Authority (MMDA), its chairman, Jejomar C. Binay,
accurately pointed out that the Secretary of the DPWH is
responsible for the implementation/enforcement of the National
Building Code. After the enactment of the Local Government Code
of 1991, the local government units (LGU’s) were tasked to
discharge the regulatory powers of the DPWH. Hence, in the local
level, the Building Officials enforce all rules/ regulations formulated
by the DPWH relative to all building plans, specifications and designs
including parking space requirements. There is, however, no single
national department or agency directly tasked to supervise the
enforcement of the provisions of the Code on parking,
notwithstanding the national character of the law.6
Senate Committee Report No. 225, thus, contained the following
recommendations:
In light of the foregoing, the Committees on Trade and Commerce
and Justice and Human Rights hereby recommend the following:
1. The Office of the Solicitor General should institute the
necessary action to enjoin the collection of parking fees as
well as to enforce the penal sanction provisions of the
National Building Code. The Office of the Solicitor General
should likewise study how refund can be exacted from
mall owners who continue to collect parking fees.
2. The Department of Trade and Industry pursuant to the
provisions of R.A. No. 7394, otherwise known as the
Consumer Act of the Philippines should enforce the
provisions of the Code relative to parking. Towards this
end, the DTI should formulate the necessary implementing
rules and regulations on parking in shopping malls, with
prior consultations with the local government units where
these are located. Furthermore, the DTI, in coordination
with the DPWH, should be empowered to regulate and
supervise the construction and maintenance of parking
establishments.
Rule 63 Full Text Cases andm38 of 88
 3. Finally, Congress should amend and update the National
Building Code to expressly prohibit shopping malls from
collecting parking fees by at the same time, prohibit them
from invoking the waiver of liability.7
Respondent SM Prime thereafter received information that,
pursuant to Senate Committee Report No. 225, the DPWH Secretary
and the local building officials of Manila, Quezon City, and Las Piñas
intended to institute, through the OSG, an action to enjoin
respondent SM Prime and similar establishments from collecting
parking fees, and to impose upon said establishments penal
sanctions under Presidential Decree No. 1096, otherwise known as
the National Building Code of the Philippines (National Building
Code), and its Implementing Rules and Regulations (IRR). With the
threatened action against it, respondent SM Prime filed, on 3
October 2000, a Petition for Declaratory Relief8 under Rule 63 of the
Revised Rules of Court, against the DPWH Secretary and local
building officials of Manila, Quezon City, and Las Piñas. Said Petition
was docketed as Civil Case No. 00-1208 and assigned to the RTC of
Makati City, Branch 138, presided over by Judge Sixto Marella, Jr.
(Judge Marella). In its Petition, respondent SM Prime prayed for
judgment:
a) Declaring Rule XIX of the Implementing Rules and
Regulations of the National Building Code as ultra vires,
hence, unconstitutional and void;
b) Declaring [herein respondent SM Prime]’s clear legal
right to lease parking spaces appurtenant to its
department stores, malls, shopping centers and other
commercial establishments; and
c) Declaring the National Building Code of the Philippines
Implementing Rules and Regulations as ineffective, not
having been published once a week for three (3)
consecutive weeks in a newspaper of general circulation,
as prescribed by Section 211 of Presidential Decree No.
1096.
[Respondent SM Prime] further prays for such other reliefs as may
be deemed just and equitable under the premises.9
The very next day, 4 October 2000, the OSG filed a Petition for
Declaratory Relief and Injunction (with Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction)10 against
respondents. This Petition was docketed as Civil Case No. 00-1210
and raffled to the RTC of Makati, Branch 135, presided over by Judge
Francisco B. Ibay (Judge Ibay). Petitioner prayed that the RTC:
1. After summary hearing, a temporary restraining order
and a writ of preliminary injunction be issued restraining
respondents from collecting parking fees from their
customers; and
2. After hearing, judgment be rendered declaring that the
practice of respondents in charging parking fees is violative
of the National Building Code and its Implementing Rules
and Regulations and is therefore invalid, and making
permanent any injunctive writ issued in this case.
Other reliefs just and equitable under the premises are likewise
prayed for.11
On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch
135, issued an Order consolidating Civil Case No. 00-1210 with Civil
Case No. 00-1208 pending before Judge Marella of RTC of Makati,
Branch 138.
As a result of the pre-trial conference held on the morning of 8
August 2001, the RTC issued a Pre-Trial Order12 of even date which
limited the issues to be resolved in Civil Cases No. 00-1208 and No.
00-1210 to the following:
1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210
to institute the present proceedings and relative thereto
whether the controversy in the collection of parking fees
by mall owners is a matter of public welfare.
2. Whether declaratory relief is proper.
3. Whether respondent Ayala Land, Robinsons, Shangri-La
and SM Prime are obligated to provide parking spaces in
their malls for the use of their patrons or the public in
general, free of charge.
4. Entitlement of the parties of [sic] award of damages.13
On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases
No. 00-1208 and No. 00-1210.
The RTC resolved the first two issues affirmatively. It ruled that the
OSG can initiate Civil Case No. 00-1210 under Presidential Decree
No. 478 and the Administrative Code of 1987.14 It also found that all
the requisites for an action for declaratory relief were present, to
wit:
The requisites for an action for declaratory relief are: (a) there is a
justiciable controversy; (b) the controversy is between persons
whose interests are adverse; (c) the party seeking the relief has a
legal interest in the controversy; and (d) the issue involved is ripe for
judicial determination.
SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator
who stands to be affected directly by the position taken by the
government officials sued namely the Secretary of Public Highways
and the Building Officials of the local government units where it
operates shopping malls. The OSG on the other hand acts on a
matter of public interest and has taken a position adverse to that of
the mall owners whom it sued. The construction of new and bigger
malls has been announced, a matter which the Court can take
judicial notice and the unsettled issue of whether mall operators
should provide parking facilities, free of charge needs to be
resolved.15
As to the third and most contentious issue, the RTC pronounced
that:
The Building Code, which is the enabling law and the Implementing
Rules and Regulations do not impose that parking spaces shall be
provided by the mall owners free of charge. Absent such directive[,]
Ayala Land, Robinsons, Shangri-la and SM [Prime] are under no
obligation to provide them for free. Article 1158 of the Civil Code is
clear:
Rule 63 Full Text Cases andm39 of 88
"Obligations derived from law are not presumed. Only those
expressly determined in this Code or in special laws are demandable
and shall be regulated by the precepts of the law which establishes
them; and as to what has not been foreseen, by the provisions of
this Book (1090).["]
xxxx
The provision on ratios of parking slots to several variables, like
shopping floor area or customer area found in Rule XIX of the
Implementing Rules and Regulations cannot be construed as a
directive to provide free parking spaces, because the enabling law,
the Building Code does not so provide. x x x.
To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to
provide parking spaces for free can be considered as an unlawful
taking of property right without just compensation.
Parking spaces in shopping malls are privately owned and for their
use, the mall operators collect fees. The legal relationship could be
either lease or deposit. In either case[,] the mall owners have the
right to collect money which translates into income. Should parking
spaces be made free, this right of mall owners shall be gone. This,
without just compensation. Further, loss of effective control over
their property will ensue which is frowned upon by law.
The presence of parking spaces can be viewed in another light. They
can be looked at as necessary facilities to entice the public to
increase patronage of their malls because without parking spaces,
going to their malls will be inconvenient. These are[,] however[,]
business considerations which mall operators will have to decide for
themselves. They are not sufficient to justify a legal conclusion, as
the OSG would like the Court to adopt that it is the obligation of the
mall owners to provide parking spaces for free.16
The RTC then held that there was no sufficient evidence to justify
any award for damages.
The RTC finally decreed in its 29 May 2002 Joint Decision in Civil
Cases No. 00-1208 and No. 00-1210 that:
FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc.,
Robinsons Land Corporation, Shangri-la Plaza Corporation and SM
Prime Holdings[,] Inc. are not obligated to provide parking spaces in
their malls for the use of their patrons or public in general, free of
charge.
All counterclaims in Civil Case No. 00-1210 are dismissed.
No pronouncement as to costs.17
CA-G.R. CV No. 76298 involved the separate appeals of the
OSG18 and respondent SM Prime19 filed with the Court of Appeals.
The sole assignment of error of the OSG in its Appellant’s Brief was:
THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL
BUILDING CODE DID NOT INTEND MALL PARKING SPACES TO BE
FREE OF CHARGE[;]20
while the four errors assigned by respondent SM Prime in its
Appellant’s Brief were:
I
THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE
IMPLEMENTING RULES AS HAVING BEEN ENACTED ULTRA VIRES,
HENCE, UNCONSTITUTIONAL AND VOID.
II
THE TRIAL COURT ERRED IN FAILING TO DECLARE THE
IMPLEMENTING RULES INEFFECTIVE FOR NOT HAVING BEEN
PUBLISHED AS REQUIRED BY LAW.
III
THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSG’S
PETITION FOR DECLARATORY RELIEF AND INJUNCTION FOR FAILURE
TO EXHAUST ADMINISTRATIVE REMEDIES.
IV
THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG
HAS NO LEGAL CAPACITY TO SUE AND/OR THAT IT IS NOT A REAL
PARTY-IN-INTEREST IN THE INSTANT CASE.21
Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG
on the ground that the lone issue raised therein involved a pure
question of law, not reviewable by the Court of Appeals.
The Court of Appeals promulgated its Decision in CA-G.R. CV No.
76298 on 25 January 2007. The appellate court agreed with
respondent Robinsons that the appeal of the OSG should suffer the
fate of dismissal, since "the issue on whether or not the National
Building Code and its implementing rules require shopping mall
operators to provide parking facilities to the public for free" was
evidently a question of law. Even so, since CA-G.R. CV No. 76298 also
included the appeal of respondent SM Prime, which raised issues
worthy of consideration, and in order to satisfy the demands of
substantial justice, the Court of Appeals proceeded to rule on the
merits of the case.
In its Decision, the Court of Appeals affirmed the capacity of the OSG
to initiate Civil Case No. 00-1210 before the RTC as the legal
representative of the government,22 and as the one deputized by
the Senate of the Republic of the Philippines through Senate
Committee Report No. 225.
The Court of Appeals rejected the contention of respondent SM
Prime that the OSG failed to exhaust administrative remedies. The
appellate court explained that an administrative review is not a
condition precedent to judicial relief where the question in dispute
is purely a legal one, and nothing of an administrative nature is to be
or can be done.
The Court of Appeals likewise refused to rule on the validity of the
IRR of the National Building Code, as such issue was not among
those the parties had agreed to be resolved by the RTC during the
pre-trial conference for Civil Cases No. 00-1208 and No. 00-1210.
Issues cannot be raised for the first time on appeal. Furthermore,
the appellate court found that the controversy could be settled on
other grounds, without touching on the issue of the validity of the
IRR. It referred to the settled rule that courts should refrain from
passing upon the constitutionality of a law or implementing rules,
Rule 63 Full Text Cases andm40 of 88
because of the principle that bars judicial inquiry into a
constitutional question, unless the resolution thereof is
indispensable to the determination of the case.
Lastly, the Court of Appeals declared that Section 803 of the
National Building Code and Rule XIX of the IRR were clear and
needed no further construction. Said provisions were only intended
to control the occupancy or congestion of areas and structures. In
the absence of any express and clear provision of law, respondents
could not be obliged and expected to provide parking slots free of
charge.
The fallo of the 25 January 2007 Decision of the Court of Appeals
reads:
WHEREFORE, premises considered, the instant appeals are DENIED.
Accordingly, appealed Decision is hereby AFFIRMED in toto.23
In its Resolution issued on 14 March 2007, the Court of Appeals
denied the Motion for Reconsideration of the OSG, finding that the
grounds relied upon by the latter had already been carefully
considered, evaluated, and passed upon by the appellate court, and
there was no strong and cogent reason to modify much less reverse
the assailed judgment.
The OSG now comes before this Court, via the instant Petition for
Review, with a single assignment of error:
THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE
RULING OF THE LOWER COURT THAT RESPONDENTS ARE NOT
OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS
OR THE PUBLIC.24
The OSG argues that respondents are mandated to provide free
parking by Section 803 of the National Building Code and Rule XIX of
the IRR.
According to Section 803 of the National Building Code:
SECTION 803. Percentage of Site Occupancy
(a) Maximum site occupancy shall be governed by the use,
type of construction, and height of the building and the
use, area, nature, and location of the site; and subject to
the provisions of the local zoning requirements and in
accordance with the rules and regulations promulgated by
the Secretary.
In connection therewith, Rule XIX of the old IRR,25 provides:
RULE XIX – PARKING AND LOADING SPACE REQUIREMENTS
Pursuant to Section 803 of the National Building Code (PD 1096)
providing for maximum site occupancy, the following provisions on
parking and loading space requirements shall be observed:
1. The parking space ratings listed below are minimum off-street
requirements for specific uses/occupancies for buildings/structures:
1.1 The size of an average automobile parking slot shall be
computed as 2.4 meters by 5.00 meters for perpendicular or
diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A
truck or bus parking/loading slot shall be computed at a minimum of
3.60 meters by 12.00 meters. The parking slot shall be drawn to
scale and the total number of which shall be indicated on the plans
and specified whether or not parking accommodations, are
attendant-managed. (See Section 2 for computation of parking
requirements).
xxxx
1.7 Neighborhood shopping center – 1 slot/100 sq. m. of shopping
floor area
The OSG avers that the aforequoted provisions should be read
together with Section 102 of the National Building Code, which
declares:
SECTION 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life,
health, property, and public welfare, consistent with the principles
of sound environmental management and control; and to this end,
make it the purpose of this Code to provide for all buildings and
structures, a framework of minimum standards and requirements to
regulate and control their location, site, design, quality of materials,
construction, use, occupancy, and maintenance.
The requirement of free-of-charge parking, the OSG argues, greatly
contributes to the aim of safeguarding "life, health, property, and
public welfare, consistent with the principles of sound
environmental management and control." Adequate parking spaces
would contribute greatly to alleviating traffic congestion when
complemented by quick and easy access thereto because of free-
charge parking. Moreover, the power to regulate and control the
use, occupancy, and maintenance of buildings and structures carries
with it the power to impose fees and, conversely, to control --
partially or, as in this case, absolutely -- the imposition of such fees.
The Court finds no merit in the present Petition.
The explicit directive of the afore-quoted statutory and regulatory
provisions, garnered from a plain reading thereof, is that
respondents, as operators/lessors of neighborhood shopping
centers, should provide parking and loading spaces, in accordance
with the minimum ratio of one slot per 100 square meters of
shopping floor area. There is nothing therein pertaining to the
collection (or non-collection) of parking fees by respondents. In fact,
the term "parking fees" cannot even be found at all in the entire
National Building Code and its IRR.
Statutory construction has it that if a statute is clear and
unequivocal, it must be given its literal meaning and applied without
any attempt at interpretation.26 Since Section 803 of the National
Building Code and Rule XIX of its IRR do not mention parking fees,
then simply, said provisions do not regulate the collection of the
same. The RTC and the Court of Appeals correctly applied Article
1158 of the New Civil Code, which states:
Art. 1158. Obligations derived from law are not presumed. Only
those expressly determined in this Code or in special laws are
demandable, and shall be regulated by the precepts of the law
Rule 63 Full Text Cases andm41 of 88
which establishes them; and as to what has not been foreseen, by
the provisions of this Book. (Emphasis ours.)
Hence, in order to bring the matter of parking fees within the ambit
of the National Building Code and its IRR, the OSG had to resort to
specious and feeble argumentation, in which the Court cannot
concur.
The OSG cannot rely on Section 102 of the National Building Code to
expand the coverage of Section 803 of the same Code and Rule XIX
of the IRR, so as to include the regulation of parking fees. The OSG
limits its citation to the first part of Section 102 of the National
Building Code declaring the policy of the State "to safeguard life,
health, property, and public welfare, consistent with the principles
of sound environmental management and control"; but totally
ignores the second part of said provision, which reads, "and to this
end, make it the purpose of this Code to provide for all buildings and
structures, a framework of minimum standards and requirements to
regulate and control their location, site, design, quality of materials,
construction, use, occupancy, and maintenance." While the first part
of Section 102 of the National Building Code lays down the State
policy, it is the second part thereof that explains how said policy
shall be carried out in the Code. Section 102 of the National Building
Code is not an all-encompassing grant of regulatory power to the
DPWH Secretary and local building officials in the name of life,
health, property, and public welfare. On the contrary, it limits the
regulatory power of said officials to ensuring that the minimum
standards and requirements for all buildings and structures, as set
forth in the National Building Code, are complied with.
Consequently, the OSG cannot claim that in addition to fixing the
minimum requirements for parking spaces for buildings, Rule XIX of
the IRR also mandates that such parking spaces be provided by
building owners free of charge. If Rule XIX is not covered by the
enabling law, then it cannot be added to or included in the
implementing rules. The rule-making power of administrative
agencies must be confined to details for regulating the mode or
proceedings to carry into effect the law as it has been enacted, and
it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the statute.
Administrative regulations must always be in harmony with the
provisions of the law because any resulting discrepancy between the
two will always be resolved in favor of the basic law.27
From the RTC all the way to this Court, the OSG repeatedly referred
to Republic v. Gonzales28 and City of Ozamis v. Lumapas29 to support
its position that the State has the power to regulate parking spaces
to promote the health, safety, and welfare of the public; and it is by
virtue of said power that respondents may be required to provide
free parking facilities. The OSG, though, failed to consider the
substantial differences in the factual and legal backgrounds of these
two cases from those of the Petition at bar.
In Republic, the Municipality of Malabon sought to eject the
occupants of two parcels of land of the public domain to give way to
a road-widening project. It was in this context that the Court
pronounced:
Indiscriminate parking along F. Sevilla Boulevard and other main
thoroughfares was prevalent; this, of course, caused the build up of
traffic in the surrounding area to the great discomfort and
inconvenience of the public who use the streets. Traffic congestion
constitutes a threat to the health, welfare, safety and convenience
of the people and it can only be substantially relieved by widening
streets and providing adequate parking areas.
The Court, in City of Ozamis, declared that the City had been clothed
with full power to control and regulate its streets for the purpose of
promoting public health, safety and welfare. The City can regulate
the time, place, and manner of parking in the streets and public
places; and charge minimal fees for the street parking to cover the
expenses for supervision, inspection and control, to ensure the
smooth flow of traffic in the environs of the public market, and for
the safety and convenience of the public.
Republic and City of Ozamis involved parking in the local streets; in
contrast, the present case deals with privately owned parking
facilities available for use by the general public. In Republic and City
of Ozamis, the concerned local governments regulated parking
pursuant to their power to control and regulate their streets; in the
instant case, the DPWH Secretary and local building officials regulate
parking pursuant to their authority to ensure compliance with the
minimum standards and requirements under the National Building
Code and its IRR. With the difference in subject matters and the
bases for the regulatory powers being invoked, Republic and City of
Ozamis do not constitute precedents for this case.
Indeed, Republic and City of Ozamis both contain pronouncements
that weaken the position of the OSG in the case at bar. In Republic,
the Court, instead of placing the burden on private persons to
provide parking facilities to the general public, mentioned the trend
in other jurisdictions wherein the municipal governments
themselves took the initiative to make more parking spaces available
so as to alleviate the traffic problems, thus:
Under the Land Transportation and Traffic Code, parking in
designated areas along public streets or highways is allowed which
clearly indicates that provision for parking spaces serves a useful
purpose. In other jurisdictions where traffic is at least as voluminous
as here, the provision by municipal governments of parking space is
not limited to parking along public streets or highways. There has
been a marked trend to build off-street parking facilities with the
view to removing parked cars from the streets. While the provision
of off-street parking facilities or carparks has been commonly
undertaken by private enterprise, municipal governments have been
constrained to put up carparks in response to public necessity where
private enterprise had failed to keep up with the growing public
demand. American courts have upheld the right of municipal
governments to construct off-street parking facilities as clearly
redounding to the public benefit.30
In City of Ozamis, the Court authorized the collection by the City of
minimal fees for the parking of vehicles along the streets: so why
then should the Court now preclude respondents from collecting
from the public a fee for the use of the mall parking facilities?
Undoubtedly, respondents also incur expenses in the maintenance
and operation of the mall parking facilities, such as electric
consumption, compensation for parking attendants and security,
and upkeep of the physical structures.
It is not sufficient for the OSG to claim that "the power to regulate
and control the use, occupancy, and maintenance of buildings and
structures carries with it the power to impose fees and, conversely,
to control, partially or, as in this case, absolutely, the imposition of
such fees." Firstly, the fees within the power of regulatory agencies
to impose are regulatory fees. It has been settled law in this
Rule 63 Full Text Cases andm42 of 88
jurisdiction that this broad and all-compassing governmental
competence to restrict rights of liberty and property carries with it
the undeniable power to collect a regulatory fee. It looks to the
enactment of specific measures that govern the relations not only as
between individuals but also as between private parties and the
political society.31 True, if the regulatory agencies have the power to
impose regulatory fees, then conversely, they also have the power
to remove the same. Even so, it is worthy to note that the present
case does not involve the imposition by the DPWH Secretary and
local building officials of regulatory fees upon respondents; but the
collection by respondents of parking fees from persons who use the
mall parking facilities. Secondly, assuming arguendo that the DPWH
Secretary and local building officials do have regulatory powers over
the collection of parking fees for the use of privately owned parking
facilities, they cannot allow or prohibit such collection arbitrarily or
whimsically. Whether allowing or prohibiting the collection of such
parking fees, the action of the DPWH Secretary and local building
officials must pass the test of classic reasonableness and propriety of
the measures or means in the promotion of the ends sought to be
accomplished.32
Keeping in mind the aforementioned test of reasonableness and
propriety of measures or means, the Court notes that Section 803 of
the National Building Code falls under Chapter 8 on Light and
Ventilation. Evidently, the Code deems it necessary to regulate site
occupancy to ensure that there is proper lighting and ventilation in
every building. Pursuant thereto, Rule XIX of the IRR requires that a
building, depending on its specific use and/or floor area, should
provide a minimum number of parking spaces. The Court, however,
fails to see the connection between regulating site occupancy to
ensure proper light and ventilation in every building vis-à-vis
regulating the collection by building owners of fees for the use of
their parking spaces. Contrary to the averment of the OSG, the
former does not necessarily include or imply the latter. It totally
escapes this Court how lighting and ventilation conditions at the
malls could be affected by the fact that parking facilities thereat are
free or paid for.
The OSG attempts to provide the missing link by arguing that:
Under Section 803 of the National Building Code, complimentary
parking spaces are required to enhance light and ventilation, that is,
to avoid traffic congestion in areas surrounding the building, which
certainly affects the ventilation within the building itself, which
otherwise, the annexed parking spaces would have served. Free-of-
charge parking avoids traffic congestion by ensuring quick and easy
access of legitimate shoppers to off-street parking spaces annexed
to the malls, and thereby removing the vehicles of these legitimate
shoppers off the busy streets near the commercial establishments. 33
The Court is unconvinced. The National Building Code regulates
buildings, by setting the minimum specifications and requirements
for the same. It does not concern itself with traffic congestion in
areas surrounding the building. It is already a stretch to say that the
National Building Code and its IRR also intend to solve the problem
of traffic congestion around the buildings so as to ensure that the
said buildings shall have adequate lighting and ventilation.
Moreover, the Court cannot simply assume, as the OSG has
apparently done, that the traffic congestion in areas around the
malls is due to the fact that respondents charge for their parking
facilities, thus, forcing vehicle owners to just park in the streets. The
Court notes that despite the fees charged by respondents, vehicle
owners still use the mall parking facilities, which are even fully
occupied on some days. Vehicle owners may be parking in the
streets only because there are not enough parking spaces in the
malls, and not because they are deterred by the parking fees
charged by respondents. Free parking spaces at the malls may even
have the opposite effect from what the OSG envisioned: more
people may be encouraged by the free parking to bring their own
vehicles, instead of taking public transport, to the malls; as a result,
the parking facilities would become full sooner, leaving more
vehicles without parking spaces in the malls and parked in the
streets instead, causing even more traffic congestion.
Without using the term outright, the OSG is actually invoking police
power to justify the regulation by the State, through the DPWH
Secretary and local building officials, of privately owned parking
facilities, including the collection by the owners/operators of such
facilities of parking fees from the public for the use thereof. The
Court finds, however, that in totally prohibiting respondents from
collecting parking fees from the public for the use of the mall
parking facilities, the State would be acting beyond the bounds of
police power.
Police power is the power of promoting the public welfare by
restraining and regulating the use of liberty and property. It is
usually exerted in order to merely regulate the use and enjoyment
of the property of the owner. The power to regulate, however, does
not include the power to prohibit. A fortiori, the power to regulate
does not include the power to confiscate. Police power does not
involve the taking or confiscation of property, with the exception of
a few cases where there is a necessity to confiscate private property
in order to destroy it for the purpose of protecting peace and order
and of promoting the general welfare; for instance, the confiscation
of an illegally possessed article, such as opium and firearms. 34
When there is a taking or confiscation of private property for public
use, the State is no longer exercising police power, but another of its
inherent powers, namely, eminent domain. Eminent domain enables
the State to forcibly acquire private lands intended for public use
upon payment of just compensation to the owner.35
Normally, of course, the power of eminent domain results in the
taking or appropriation of title to, and possession of, the
expropriated property; but no cogent reason appears why the said
power may not be availed of only to impose a burden upon the
owner of condemned property, without loss of title and
possession.36 It is a settled rule that neither acquisition of title nor
total destruction of value is essential to taking. It is usually in cases
where title remains with the private owner that inquiry should be
made to determine whether the impairment of a property is merely
regulated or amounts to a compensable taking. A regulation that
deprives any person of the profitable use of his property constitutes
a taking and entitles him to compensation, unless the invasion of
rights is so slight as to permit the regulation to be justified under the
police power. Similarly, a police regulation that unreasonably
restricts the right to use business property for business purposes
amounts to a taking of private property, and the owner may recover
therefor.371avvphi1
Although in the present case, title to and/or possession of the
parking facilities remain/s with respondents, the prohibition against
their collection of parking fees from the public, for the use of said
facilities, is already tantamount to a taking or confiscation of their
properties. The State is not only requiring that respondents devote a
portion of the latter’s properties for use as parking spaces, but is
also mandating that they give the public access to said parking
spaces for free. Such is already an excessive intrusion into the
Rule 63 Full Text Cases andm43 of 88
property rights of respondents. Not only are they being deprived of
the right to use a portion of their properties as they wish, they are
further prohibited from profiting from its use or even just recovering
therefrom the expenses for the maintenance and operation of the
required parking facilities.
The ruling of this Court in City Government of Quezon City v. Judge
Ericta38 is edifying. Therein, the City Government of Quezon City
passed an ordinance obliging private cemeteries within its
jurisdiction to set aside at least six percent of their total area for
charity, that is, for burial grounds of deceased paupers. According to
the Court, the ordinance in question was null and void, for it
authorized the taking of private property without just
compensation:
There is no reasonable relation between the setting aside of at least
six (6) percent of the total area of all private cemeteries for charity
burial grounds of deceased paupers and the promotion of' health,
morals, good order, safety, or the general welfare of the people. The
ordinance is actually a taking without compensation of a certain
area from a private cemetery to benefit paupers who are charges of
the municipal corporation. Instead of' building or maintaining a
public cemetery for this purpose, the city passes the burden to
private cemeteries.
'The expropriation without compensation of a portion of private
cemeteries is not covered by Section 12(t) of Republic Act 537, the
Revised Charter of Quezon City which empowers the city council to
prohibit the burial of the dead within the center of population of the
city and to provide for their burial in a proper place subject to the
provisions of general law regulating burial grounds and cemeteries.
When the Local Government Code, Batas Pambansa Blg. 337
provides in Section 177(q) that a sangguniang panlungsod may
"provide for the burial of the dead in such place and in such manner
as prescribed by law or ordinance" it simply authorizes the city to
provide its own city owned land or to buy or expropriate private
properties to construct public cemeteries. This has been the law,
and practise in the past. It continues to the present. Expropriation,
however, requires payment of just compensation. The questioned
ordinance is different from laws and regulations requiring owners of
subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to
buyers of subdivision lots. The necessities of public safety, health,
and convenience are very clear from said requirements which are
intended to insure the development of communities with salubrious
and wholesome environments. The beneficiaries of the regulation,
in turn, are made to pay by the subdivision developer when
individual lots are sold to homeowners.
In conclusion, the total prohibition against the collection by
respondents of parking fees from persons who use the mall parking
facilities has no basis in the National Building Code or its IRR. The
State also cannot impose the same prohibition by generally invoking
police power, since said prohibition amounts to a taking of
respondents’ property without payment of just compensation.
Given the foregoing, the Court finds no more need to address the
issue persistently raised by respondent SM Prime concerning the
unconstitutionality of Rule XIX of the IRR. In addition, the said issue
was not among those that the parties, during the pre-trial
conference for Civil Cases No. 12-08 and No. 00-1210, agreed to
submit for resolution of the RTC. It is likewise axiomatic that the
constitutionality of a law, a regulation, an ordinance or an act will
not be resolved by courts if the controversy can be, as in this case it
has been, settled on other grounds.39
WHEREFORE, the instant Petition for Review on Certiorari is hereby
DENIED. The Decision dated 25 January 2007 and Resolution dated
14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298,
affirming in toto the Joint Decision dated 29 May 2002 of the
Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 00-
1208 and No. 00-1210 are hereby AFFIRMED. No costs.
SO ORDERED.
EN BANC
G.R. No. 176579 October 9, 2012
HEIRS OF WILSON P. GAMBOA,* Petitioners,
vs.
FINANCE SECRETARYMARGARITO B. TEVES, FINANCE
UNDERSECRETARYJOHN P. SEVILLA, AND COMMISSIONER
RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT(PCGG) IN THEIR CAPACITIES AS CHAIR AND
MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION COUNCIL,
CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS
CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC.,
CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS
MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT
NAPOLEON L. NAZARENO OF PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES AND
EXCHANGE COMMISSION, and PRESIDENT FRANCIS LIM OF THE
PHILIPPINE STOCK EXCHANGE, Respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioner-in-
Intervention.
RESOLUTION
CARPIO, J.:
This resolves the motions for reconsideration of the 28 June 2011
Decision filed by (1) the Philippine Stock Exchange's (PSE)
President, 1 (2) Manuel V. Pangilinan (Pangilinan),2 (3) Napoleon L.
Nazareno (Nazareno ),3 and ( 4) the Securities and Exchange
Commission (SEC)4 (collectively, movants ).
The Office of the Solicitor General (OSG) initially filed a motion for
reconsideration on behalfofthe SEC,5 assailing the 28 June 2011
Decision. However, it subsequently filed a Consolidated Comment
on behalf of the State,6declaring expressly that it agrees with the
Court's definition of the term "capital" in Section 11, Article XII of
the Constitution. During the Oral Arguments on 26 June 2012, the
OSG reiterated its position consistent with the Court's 28 June 2011
Decision.
We deny the motions for reconsideration.
I.
Far-reaching implications of the legal issue justify
treatment of petition for declaratory relief as one for mandamus.
Rule 63 Full Text Cases andm44 of 88
As we emphatically stated in the 28 June 2011 Decision, the
interpretation of the term "capital" in Section 11, Article XII of the
Constitution has far-reaching implications to the national economy.
In fact, a resolution of this issue will determine whether Filipinos are
masters, or second-class citizens, in their own country. What is at
stake here is whether Filipinos or foreigners will have effective
control of the Philippine national economy. Indeed, if ever there is a
legal issue that has far-reaching implications to the entire nation,
and to future generations of Filipinos, it is the threshold legal issue
presented in this case.
Contrary to Pangilinan’s narrow view, the serious economic
consequences resulting in the interpretation of the term "capital" in
Section 11, Article XII of the Constitution undoubtedly demand an
immediate adjudication of this issue. Simply put, the far-reaching
implications of this issue justify the treatment of the petition as
one for mandamus.7
In Luzon Stevedoring Corp. v. Anti-Dummy Board,8 the Court deemed
it wise and expedient to resolve the case although the petition for
declaratory relief could be outrightly dismissed for being
procedurally defective. There, appellant admittedly had already
committed a breach of the Public Service Act in relation to the Anti-
Dummy Law since it had been employing non- American aliens long
before the decision in a prior similar case. However, the main issue
in Luzon Stevedoring was of transcendental importance, involving
the exercise or enjoyment of rights, franchises, privileges, properties
and businesses which only Filipinos and qualified corporations could
exercise or enjoy under the Constitution and the statutes.
Moreover, the same issue could be raised by appellant in an
appropriate action. Thus, in Luzon Stevedoring the Court deemed it
necessary to finally dispose of the case for the guidance of all
concerned, despite the apparent procedural flaw in the petition.
The circumstances surrounding the present case, such as the
supposed procedural defect of the petition and the pivotal legal
issue involved, resemble those in Luzon Stevedoring. Consequently,
in the interest of substantial justice and faithful adherence to the
Constitution, we opted to resolve this case for the guidance of the
public and all concerned parties.
II.
No change of any long-standing rule;
thus, no redefinition of the term "capital."
Movants contend that the term "capital" in Section 11, Article XII of
the Constitution has long been settled and defined to refer to the
total outstanding shares of stock, whether voting or non-voting. In
fact, movants claim that the SEC, which is the administrative agency
tasked to enforce the 60-40 ownership requirement in favor of
Filipino citizens in the Constitution and various statutes, has
consistently adopted this particular definition in its numerous
opinions. Movants point out that with the 28 June 2011 Decision,
the Court in effect introduced a "new" definition or "midstream
redefinition"9 of the term "capital" in Section 11, Article XII of the
Constitution.
This is egregious error.
For more than 75 years since the 1935 Constitution, the Court
has not interpreted or defined the term "capital" found in various
economic provisions of the 1935, 1973 and 1987 Constitutions.
There has never been a judicial precedent interpreting the term
"capital" in the 1935, 1973 and 1987 Constitutions, until now.
Hence, it is patently wrong and utterly baseless to claim that the
Court in defining the term "capital" in its 28 June 2011 Decision
modified, reversed, or set aside the purported long-standing
definition of the term "capital," which supposedly refers to the total
outstanding shares of stock, whether voting or non-voting. To
repeat, until the present case there has never been a Court ruling
categorically defining the term "capital" found in the various
economic provisions of the 1935, 1973 and 1987 Philippine
Constitutions.
The opinions of the SEC, as well as of the Department of Justice
(DOJ), on the definition of the term "capital" as referring to both
voting and non-voting shares (combined total of common and
preferred shares) are, in the first place, conflicting and inconsistent.
There is no basis whatsoever to the claim that the SEC and the DOJ
have consistently and uniformly adopted a definition of the term
"capital" contrary to the definition that this Court adopted in its 28
June 2011 Decision.
In DOJ Opinion No. 130, s. 1985,10 dated 7 October 1985, the scope
of the term "capital" in Section 9, Article XIV of the 1973
Constitution was raised, that is, whether the term "capital" includes
"both preferred and common stocks." The issue was raised in
relation to a stock-swap transaction between a Filipino and a
Japanese corporation, both stockholders of a domestic corporation
that owned lands in the Philippines. Then Minister of Justice Estelito
P. Mendoza ruled that the resulting ownership structure of the
corporation would be unconstitutional because 60% of the voting
stock would be owned by Japanese while Filipinos would own only
40% of the voting stock, although when the non-voting stock is
added, Filipinos would own 60% of the combined voting and non-
voting stock. This ownership structure is remarkably similar to the
current ownership structure of PLDT. Minister Mendoza ruled:
xxxx
Thus, the Filipino group still owns sixty (60%) of the entire
subscribed capital stock (common and preferred) while the Japanese
investors control sixty percent (60%) of the common (voting) shares.
It is your position that x x x since Section 9, Article XIV of the
Constitution uses the word "capital," which is construed "to
include both preferred and common shares" and "that where the
law does not distinguish, the courts shall not distinguish."
xxxx
In light of the foregoing jurisprudence, it is my opinion that the
stock-swap transaction in question may not be constitutionally
upheld. While it may be ordinary corporate practice to classify
corporate shares into common voting shares and preferred non-
voting shares, any arrangement which attempts to defeat the
constitutional purpose should be eschewed. Thus, the resultant
equity arrangement which would place ownership of 60%11 of the
common (voting) shares in the Japanese group, while retaining
60% of the total percentage of common and preferred shares in
Filipino hands would amount to circumvention of the principle of
control by Philippine stockholders that is implicit in the 60%
Philippine nationality requirement in the Constitution. (Emphasis
supplied)
Rule 63 Full Text Cases andm45 of 88
In short, Minister Mendoza categorically rejected the theory that and functions provided by this Code, Presidential Decree No. 902-A,
the term "capital" in Section 9, Article XIV of the 1973 Constitution the Corporation Code, the Investment Houses Law, the Financing
includes "both preferred and common stocks" treated as the same Company Act and other existing laws. Pursuant thereto the
class of shares regardless of differences in voting rights and Commission shall have, among others, the following powers and
privileges. Minister Mendoza stressed that the 60-40 ownership functions:
requirement in favor of Filipino citizens in the Constitution is not
complied with unless the corporation "satisfies the criterion of xxxx
beneficial ownership" and that in applying the same "the primordial
consideration is situs of control."
(g) Prepare, approve, amend or repeal rules, regulations and
orders, and issue opinions and provide guidance on and supervise
On the other hand, in Opinion No. 23-10 dated 18 August 2010, compliance with such rules, regulations and orders;
addressed to Castillo Laman Tan Pantaleon & San Jose, then SEC
General Counsel Vernette G. Umali-Paco applied the Voting Control
x x x x (Emphasis supplied)
Test, that is, using only the voting stock to determine whether a
corporation is a Philippine national. The Opinion states:
Thus, the act of the individual Commissioners or legal officers of the
SEC in issuing opinions that have the effect of SEC rules or
Applying the foregoing, particularly the Control Test, MLRC is
regulations is ultra vires. Under Sections 4.6 and 5.1(g) of the Code,
deemed as a Philippine national because: (1) sixty percent (60%) of
only the SEC en banc can "issue opinions" that have the force and
its outstanding capital stock entitled to vote is owned by a
effect of rules or regulations. Section 4.6 of the Code bars the SEC en
Philippine national, the Trustee; and (2) at least sixty percent (60%)
banc from delegating to any individual Commissioner or staff the
of the ERF will accrue to the benefit of Philippine nationals. Still
power to adopt rules or regulations. In short, any opinion of
pursuant to the Control Test, MLRC’s investment in 60% of BFDC’s
individual Commissioners or SEC legal officers does not constitute a
outstanding capital stock entitled to vote shall be deemed as of
rule or regulation of the SEC.
Philippine nationality, thereby qualifying BFDC to own private land.

The SEC admits during the Oral Arguments that only the SEC en
Further, under, and for purposes of, the FIA, MLRC and BFDC are
banc, and not any of its individual commissioners or legal staff, is
both Philippine nationals, considering that: (1) sixty percent (60%) of
empowered to issue opinions which have the same binding effect as
their respective outstanding capital stock entitled to vote is owned
SEC rules and regulations, thus:
by a Philippine national (i.e., by the Trustee, in the case of MLRC;
and by MLRC, in the case of BFDC); and (2) at least 60% of their
respective board of directors are Filipino citizens. (Boldfacing and JUSTICE CARPIO:
italicization supplied)
So, under the law, it is the Commission En Banc
Clearly, these DOJ and SEC opinions are compatible with the Court’s that can issue an
interpretation of the 60-40 ownership requirement in favor of
Filipino citizens mandated by the Constitution for certain economic SEC Opinion, correct?
activities. At the same time, these opinions highlight the conflicting,
contradictory, and inconsistent positions taken by the DOJ and the COMMISSIONER GAITE:13
SEC on the definition of the term "capital" found in the economic
provisions of the Constitution.
That’s correct, Your Honor.
The opinions issued by SEC legal officers do not have the force and
effect of SEC rules and regulations because only the SEC en banc can JUSTICE CARPIO:
adopt rules and regulations. As expressly provided in Section 4.6 of
the Securities Regulation Code,12 the SEC cannot delegate to any of Can the Commission En Banc delegate this
its individual Commissioner or staff the power to adopt any rule or function to an SEC officer?
regulation. Further, under Section 5.1 of the same Code, it is the
SEC as a collegial body, and not any of its legal officers, that is COMMISSIONER GAITE:
empowered to issue opinions and approve rules and
regulations. Thus:
Yes, Your Honor, we have delegated it to the
General Counsel.
4.6. The Commission may, for purposes of efficiency, delegate any of
its functions to any department or office of the Commission, an
JUSTICE CARPIO:
individual Commissioner or staff member of the
Commission except its review or appellate authority and its power
to adopt, alter and supplement any rule or regulation. It can be delegated. What cannot be delegated
by the Commission En Banc to a commissioner or
an individual employee of the Commission?
The Commission may review upon its own initiative or upon the
petition of any interested party any action of any department or
office, individual Commissioner, or staff member of the Commission. COMMISSIONER GAITE:

SEC. 5. Powers and Functions of the Commission.- 5.1. The Novel opinions that [have] to be decided by the
Commission shall act with transparency and shall have the powers En Banc...

Rule 63 Full Text Cases andm46 of 88

JUSTICE CARPIO:
What cannot be delegated, among others, is the
power to adopt or amend rules and regulations,
correct?
COMMISSIONER GAITE:
That’s correct, Your Honor.
JUSTICE CARPIO:
So, you combine the two (2), the SEC officer, if
delegated that power, can issue an opinion but
that opinion does not constitute a rule or
regulation, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, all of these opinions that you mentioned
they are not rules and regulations, correct?
COMMISSIONER GAITE:
They are not rules and regulations.
JUSTICE CARPIO:
If they are not rules and regulations, they apply
only to that particular situation and will not
constitute a precedent, correct?
COMMISSIONER GAITE:
Yes, Your Honor.14 (Emphasis supplied)
Significantly, the SEC en banc, which is the collegial body statutorily
empowered to issue rules and opinions on behalf of the SEC, has
adopted even the Grandfather Rule in determining compliance with
the 60-40 ownership requirement in favor of Filipino citizens
mandated by the Constitution for certain economic activities. This
prevailing SEC ruling, which the SEC correctly adopted to thwart any
circumvention of the required Filipino "ownership and control," is
laid down in the 25 March 2010 SEC en banc ruling in Redmont
Consolidated Mines, Corp. v. McArthur Mining, Inc., et al.,15 to wit:
The avowed purpose of the Constitution is to place in the hands of
Filipinos the exploitation of our natural resources. Necessarily,
therefore, the Rule interpreting the constitutional provision should
not diminish that right through the legal fiction of corporate
ownership and control. But the constitutional provision, as
interpreted and practiced via the 1967 SEC Rules, has favored
foreigners contrary to the command of the Constitution. Hence, the
Grandfather Rule must be applied to accurately determine the
actual participation, both direct and indirect, of foreigners in a
corporation engaged in a nationalized activity or business.
Compliance with the constitutional limitation(s) on engaging in
nationalized activities must be determined by ascertaining if 60% of
the investing corporation’s outstanding capital stock is owned by
"Filipino citizens", or as interpreted, by natural or individual Filipino
citizens. If such investing corporation is in turn owned to some
extent by another investing corporation, the same process must be
observed. One must not stop until the citizenships of the individual
or natural stockholders of layer after layer of investing corporations
have been established, the very essence of the Grandfather Rule.
Lastly, it was the intent of the framers of the 1987 Constitution to
adopt the Grandfather Rule. In one of the discussions on what is
now Article XII of the present Constitution, the framers made the
following exchange:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or
Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40
in Section 9, and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with the
question: ‘Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on the
paid-up capital stock of a corporation’? Will the Committee please
enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members
of the team from the UP Law Center who provided us a draft. The
phrase that is contained here which we adopted from the UP draft is
‘60 percent of voting stock.’
MR. NOLLEDO. That must be based on the subscribed capital stock,
because unless declared delinquent, unpaid capital stock shall be
entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you. With respect to an investment by one
corporation in another corporation, say, a corporation with 60-40
percent equity invests in another corporation which is permitted by
the Corporation Code, does the Committee adopt the grandfather
rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes. (Boldfacing and underscoring supplied;
italicization in the original)
This SEC en banc ruling conforms to our 28 June 2011 Decision that
the 60-40 ownership requirement in favor of Filipino citizens in the
Constitution to engage in certain economic activities applies not
only to voting control of the corporation, but also to the beneficial
ownership of the corporation. Thus, in our 28 June 2011 Decision
we stated:
Mere legal title is insufficient to meet the 60 percent Filipinoowned
"capital" required in the Constitution. Full beneficial ownership of
60 percent of the outstanding capital stock, coupled with 60
Rule 63 Full Text Cases andm47 of 88
percent of the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital stock must rest
in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is "considered
as non-Philippine national[s]." (Emphasis supplied)
Both the Voting Control Test and the Beneficial Ownership Test must
be applied to determine whether a corporation is a "Philippine
national."
The interpretation by legal officers of the SEC of the term "capital,"
embodied in various opinions which respondents relied upon, is
merely preliminary and an opinion only of such officers. To repeat,
any such opinion does not constitute an SEC rule or regulation. In
fact, many of these opinions contain a disclaimer which expressly
states: "x x x the foregoing opinion is based solely on facts disclosed
in your query and relevant only to the particular issue raised therein
and shall not be used in the nature of a standing rule binding upon
the Commission in other cases whether of similar or dissimilar
circumstances."16 Thus, the opinions clearly make a caveat that they
do not constitute binding precedents on any one, not even on the
SEC itself.
Likewise, the opinions of the SEC en banc, as well as of the DOJ,
interpreting the law are neither conclusive nor controlling and thus,
do not bind the Court. It is hornbook doctrine that any
interpretation of the law that administrative or quasi-judicial
agencies make is only preliminary, never conclusive on the Court.
The power to make a final interpretation of the law, in this case the
term "capital" in Section 11, Article XII of the 1987 Constitution, lies
with this Court, not with any other government entity.
In his motion for reconsideration, the PSE President cites the cases
of National Telecommunications Commission v. Court of
Appeals17 and Philippine Long Distance Telephone Company v.
National Telecommunications Commission18 in arguing that the
Court has already defined the term "capital" in Section 11, Article XII
of the 1987 Constitution.19
The PSE President is grossly mistaken. In both cases of National
Telecommunications v. Court of Appeals20 and Philippine Long
Distance Telephone Company v. National Telecommunications
Commission,21 the Court did not define the term "capital" as found in
Section 11, Article XII of the 1987 Constitution. In fact, these two
cases never mentioned, discussed or cited Section 11, Article XII of
the Constitution or any of its economic provisions, and thus cannot
serve as precedent in the interpretation of Section 11, Article XII of
the Constitution. These two cases dealt solely with the
determination of the correct regulatory fees under Section 40(e) and
(f) of the Public Service Act, to wit:
(e) For annual reimbursement of the expenses incurred by the
Commission in the supervision of other public services and/or in the
regulation or fixing of their rates, twenty centavos for each one
hundred pesos or fraction thereof, of the capital stock subscribed or
paid, or if no shares have been issued, of the capital invested, or of
the property and equipment whichever is higher.
(f) For the issue or increase of capital stock, twenty centavos for
each one hundred pesos or fraction thereof, of the increased capital.
(Emphasis supplied)
The Court’s interpretation in these two cases of the terms "capital
stock subscribed or paid," "capital stock" and "capital" does not
pertain to, and cannot control, the definition of the term "capital" as
used in Section 11, Article XII of the Constitution, or any of the
economic provisions of the Constitution where the term "capital" is
found. The definition of the term "capital" found in the Constitution
must not be taken out of context. A careful reading of these two
cases reveals that the terms "capital stock subscribed or paid,"
"capital stock" and "capital" were defined solely to determine the
basis for computing the supervision and regulation fees under
Section 40(e) and (f) of the Public Service Act.
III.
Filipinization of Public Utilities
The Preamble of the 1987 Constitution, as the prologue of the
supreme law of the land, embodies the ideals that the Constitution
intends to achieve.22 The Preamble reads:
We, the sovereign Filipino people, imploring the aid of Almighty
God, in order to build a just and humane society, and establish a
Government that shall embody our ideals and aspirations, promote
the common good, conserve and develop our patrimony, and
secure to ourselves and our posterity, the blessings of independence
and democracy under the rule of law and a regime of truth, justice,
freedom, love, equality, and peace, do ordain and promulgate this
Constitution. (Emphasis supplied)
Consistent with these ideals, Section 19, Article II of the 1987
Constitution declares as State policy the development of a national
economy "effectively controlled" by Filipinos:
Section 19. The State shall develop a self-reliant and independent
national economy effectively controlled by Filipinos.
Fortifying the State policy of a Filipino-controlled economy, the
Constitution decrees:
Section 10. The Congress shall, upon recommendation of the
economic and planning agency, when the national interest dictates,
reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by
such citizens, or such higher percentage as Congress may prescribe,
certain areas of investments. The Congress shall enact measures
that will encourage the formation and operation of enterprises
whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the
national economy and patrimony, the State shall give preference to
qualified Filipinos.
The State shall regulate and exercise authority over foreign
investments within its national jurisdiction and in accordance with
its national goals and priorities.23
Under Section 10, Article XII of the 1987 Constitution, Congress may
"reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by
such citizens, or such higher percentage as Congress may prescribe,
certain areas of investments." Thus, in numerous laws Congress has
reserved certain areas of investments to Filipino citizens or to
corporations at least sixty percent of the "capital" of which is owned
Rule 63 Full Text Cases andm48 of 88
by Filipino citizens. Some of these laws are: (1) Regulation of Award
of Government Contracts or R.A. No. 5183; (2) Philippine Inventors
Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small
and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas
Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping
Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology
Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage
Decree or P.D. No. 1521.
With respect to public utilities, the 1987 Constitution specifically
ordains:
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens; nor
shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any
such franchise or right be granted except under the condition that it
shall be subject to amendment, alteration, or repeal by the Congress
when the common good so requires. The State shall encourage
equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public
utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.
(Emphasis supplied)
This provision, which mandates the Filipinization of public utilities,
requires that any form of authorization for the operation of public
utilities shall be granted only to "citizens of the Philippines or to
corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by
such citizens." "The provision is [an express] recognition of the
sensitive and vital position of public utilities both in the national
economy and for national security."24
The 1987 Constitution reserves the ownership and operation of
public utilities exclusively to (1) Filipino citizens, or (2) corporations
or associations at least 60 percent of whose "capital" is owned by
Filipino citizens. Hence, in the case of individuals, only Filipino
citizens can validly own and operate a public utility. In the case of
corporations or associations, at least 60 percent of their "capital"
must be owned by Filipino citizens. In other words, under Section
11, Article XII of the 1987 Constitution, to own and operate a
public utility a corporation’s capital must at least be 60 percent
owned by Philippine nationals.
IV.
Definition of "Philippine National"
Pursuant to the express mandate of Section 11, Article XII of the
1987 Constitution, Congress enacted Republic Act No. 7042 or
the Foreign Investments Act of 1991 (FIA), as amended, which
defined a "Philippine national" as follows:
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the
Philippines; or a domestic partnership or association wholly owned
by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a corporation organized abroad and
registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the
capital stock outstanding and entitled to vote is wholly owned by
Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to
the benefit of Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own stocks in a
Securities and Exchange Commission (SEC) registered enterprise, at
least sixty percent (60%) of the capital stock outstanding and
entitled to vote of each of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent (60%) of
the members of the Board of Directors of each of both corporations
must be citizens of the Philippines, in order that the corporation,
shall be considered a "Philippine national." (Boldfacing, italicization
and underscoring supplied)
Thus, the FIA clearly and unequivocally defines a "Philippine
national" as a Philippine citizen, or a domestic corporation at least
"60% of the capital stock outstanding and entitled to vote" is
owned by Philippine citizens.
The definition of a "Philippine national" in the FIA reiterated the
meaning of such term as provided in its predecessor statute,
Executive Order No. 226 or the Omnibus Investments Code of
1987,25 which was issued by then President Corazon C. Aquino.
Article 15 of this Code states:
Article 15. "Philippine national" shall mean a citizen of the
Philippines or a diplomatic partnership or association wholly-owned
by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty per cent (60%) of the fund will
accrue to the benefit of Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own stock in a
registered enterprise, at least sixty per cent (60%) of the capital
stock outstanding and entitled to vote of both corporations must be
owned and held by the citizens of the Philippines and at least sixty
per cent (60%) of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that the
corporation shall be considered a Philippine national. (Boldfacing,
italicization and underscoring supplied)
Under Article 48(3)26 of the Omnibus Investments Code of 1987, "no
corporation x x x which is not a ‘Philippine national’ x x x shall do
business
x x x in the Philippines x x x without first securing from the Board of
Investments a written certificate to the effect that such business or
economic activity x x x would not conflict with the Constitution or
laws of the Philippines."27 Thus, a "non-Philippine national" cannot
own and operate a reserved economic activity like a public utility.
This means, of course, that only a "Philippine national" can own and
operate a public utility.
In turn, the definition of a "Philippine national" under Article 15 of
the Omnibus Investments Code of 1987 was a reiteration of the
Rule 63 Full Text Cases andm49 of 88
meaning of such term as provided in Article 14 of the Omnibus
Investments Code of 1981,28 to wit:
Article 14. "Philippine national" shall mean a citizen of the
Philippines; or a domestic partnership or association wholly owned
by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty per cent (60%) of the fund will
accrue to the benefit of Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own stock in a
registered enterprise, at least sixty per cent (60%) of the capital
stock outstanding and entitled to vote of both corporations must be
owned and held by the citizens of the Philippines and at least sixty
per cent (60%) of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that the
corporation shall be considered a Philippine national. (Boldfacing,
italicization and underscoring supplied)
Under Article 69(3) of the Omnibus Investments Code of 1981, "no
corporation x x x which is not a ‘Philippine national’ x x x shall do
business x x x in the Philippines x x x without first securing a written
certificate from the Board of Investments to the effect that such
business or economic activity x x x would not conflict with the
Constitution or laws of the Philippines."29 Thus, a "non-Philippine
national" cannot own and operate a reserved economic activity like
a public utility. Again, this means that only a "Philippine national"
can own and operate a public utility.
Prior to the Omnibus Investments Code of 1981, Republic Act No.
518630 or the Investment Incentives Act, which took effect on 16
September 1967, contained a similar definition of a "Philippine
national," to wit:
(f) "Philippine National" shall mean a citizen of the Philippines; or a
partnership or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty per cent of the capital stock
outstanding and entitled to vote is owned and held by citizens of
the Philippines; or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
National and at least sixty per cent of the fund will accrue to the
benefit of Philippine Nationals: Provided, That where a corporation
and its non-Filipino stockholders own stock in a registered
enterprise, at least sixty per cent of the capital stock outstanding
and entitled to vote of both corporations must be owned and held
by the citizens of the Philippines and at least sixty per cent of the
members of the Board of Directors of both corporations must be
citizens of the Philippines in order that the corporation shall be
considered a Philippine National. (Boldfacing, italicization and
underscoring supplied)
Under Section 3 of Republic Act No. 5455 or the Foreign Business
Regulations Act, which took effect on 30 September 1968, if the
investment in a domestic enterprise by non-Philippine nationals
exceeds 30% of its outstanding capital stock, such enterprise must
obtain prior approval from the Board of Investments before
accepting such investment. Such approval shall not be granted if the
investment "would conflict with existing constitutional provisions
and laws regulating the degree of required ownership by Philippine
nationals in the enterprise."31 A "non-Philippine national" cannot
own and operate a reserved economic activity like a public utility.
Again, this means that only a "Philippine national" can own and
operate a public utility.
The FIA, like all its predecessor statutes, clearly defines a
"Philippine national" as a Filipino citizen, or a domestic corporation
"at least sixty percent (60%) of the capital stock outstanding and
entitled to vote" is owned by Filipino citizens. A domestic
corporation is a "Philippine national" only if at least 60% of its voting
stock is owned by Filipino citizens. This definition of a "Philippine
national" is crucial in the present case because the FIA reiterates and
clarifies Section 11, Article XII of the 1987 Constitution, which limits
the ownership and operation of public utilities to Filipino citizens or
to corporations or associations at least 60% Filipino-owned.
The FIA is the basic law governing foreign investments in the
Philippines, irrespective of the nature of business and area of
investment. The FIA spells out the procedures by which non-
Philippine nationals can invest in the Philippines. Among the key
features of this law is the concept of a negative list or the Foreign
Investments Negative List.32 Section 8 of the law states:
SEC. 8. List of Investment Areas Reserved to Philippine
Nationals [Foreign Investment Negative List]. - The Foreign
Investment Negative List shall have two 2 component lists: A and B:
a. List A shall enumerate the areas of activities reserved to
Philippine nationals by mandate of the Constitution and specific
laws.
b. List B shall contain the areas of activities and enterprises
regulated pursuant to law:
1. which are defense-related activities, requiring prior clearance and
authorization from the Department of National Defense [DND] to
engage in such activity, such as the manufacture, repair, storage
and/or distribution of firearms, ammunition, lethal weapons,
military ordinance, explosives, pyrotechnics and similar materials;
unless such manufacturing or repair activity is specifically
authorized, with a substantial export component, to a non-
Philippine national by the Secretary of National Defense; or
2. which have implications on public health and morals, such as the
manufacture and distribution of dangerous drugs; all forms of
gambling; nightclubs, bars, beer houses, dance halls, sauna and
steam bathhouses and massage clinics. (Boldfacing, underscoring
and italicization supplied)
Section 8 of the FIA enumerates the investment areas "reserved to
Philippine nationals." Foreign Investment Negative List A consists of
"areas of activities reserved to Philippine nationals by mandate of
the Constitution and specific laws," where foreign equity
participation in any enterprise shall be limited to the maximum
percentage expressly prescribed by the Constitution and other
specific laws. In short, to own and operate a public utility in the
Philippines one must be a "Philippine national" as defined in the
FIA. The FIA is abundant notice to foreign investors to what extent
they can invest in public utilities in the Philippines.
To repeat, among the areas of investment covered by the Foreign
Investment Negative List A is the ownership and operation of public
utilities, which the Constitution expressly reserves to Filipino citizens
and to corporations at least 60% owned by Filipino citizens. In other
words, Negative List A of the FIA reserves the ownership and
Rule 63 Full Text Cases andm50 of 88
operation of public utilities only to "Philippine nationals," defined
in Section 3(a) of the FIA as "(1) a citizen of the Philippines; x x x or
(3) a corporation organized under the laws of the Philippines of
which at least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of
the Philippines; or (4) a corporation organized abroad and
registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the
capital stock outstanding and entitled to vote is wholly owned by
Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to
the benefit of Philippine nationals."
Clearly, from the effectivity of the Investment Incentives Act of 1967
to the adoption of the Omnibus Investments Code of 1981, to the
enactment of the Omnibus Investments Code of 1987, and to the
passage of the present Foreign Investments Act of 1991, or for more
than four decades, the statutory definition of the term "Philippine
national" has been uniform and consistent: it means a Filipino
citizen, or a domestic corporation at least 60% of the voting
stock is owned by Filipinos. Likewise, these same statutes have
uniformly and consistently required that only "Philippine
nationals" could own and operate public utilities in the
Philippines. The following exchange during the Oral Arguments is
revealing:
JUSTICE CARPIO:
Counsel, I have some questions. You are aware
of the Foreign Investments Act of 1991, x x x?
And the FIA of 1991 took effect in 1991, correct?
That’s over twenty (20) years ago, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And Section 8 of the Foreign Investments Act of
1991 states that []only Philippine nationals can
own and operate public utilities[], correct?
COMMISSIONER GAITE:
Yes, Your Honor.
JUSTICE CARPIO:
And the same Foreign Investments Act of 1991
defines a "Philippine national" either as a citizen
of the Philippines, or if it is a corporation at least
sixty percent (60%) of the voting stock is owned
by citizens of the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And, you are also aware that under the
predecessor law of the Foreign Investments Act
of 1991, the Omnibus Investments Act of 1987,
the same provisions apply: x x x only Philippine
nationals can own and operate a public utility
and the Philippine national, if it is a corporation,
x x x sixty percent (60%) of the capital stock of
that corporation must be owned by citizens of
the Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And even prior to the Omnibus Investments Act
of 1987, under the Omnibus Investments Act of
1981, the same rules apply: x x x only a
Philippine national can own and operate a public
utility and a Philippine national, if it is a
corporation, sixty percent (60%) of its x x x
voting stock, must be owned by citizens of the
Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
And even prior to that, under [the]1967
Investments Incentives Act and the Foreign
Company Act of 1968, the same rules applied,
correct?
COMMISSIONER GAITE:
Correct, Your Honor.
JUSTICE CARPIO:
So, for the last four (4) decades, x x x, the law
has been very consistent – only a Philippine
national can own and operate a public utility,
and a Philippine national, if it is a corporation, x
x x at least sixty percent (60%) of the voting
stock must be owned by citizens of the
Philippines, correct?
COMMISSIONER GAITE:
Correct, Your Honor.33 (Emphasis supplied)
Government agencies like the SEC cannot simply ignore Sections 3(a)
and 8 of the FIA which categorically prescribe that certain economic
activities, like the ownership and operation of public utilities, are
reserved to corporations "at least sixty percent (60%) of the capital
stock outstanding and entitled to vote is owned and held by citizens
of the Philippines." Foreign Investment Negative List A refers to
"activities reserved to Philippine nationals by mandate of the
Rule 63 Full Text Cases andm51 of 88
Constitution and specific laws." The FIA is the basic statute
regulating foreign investments in the Philippines. Government
agencies tasked with regulating or monitoring foreign investments,
as well as counsels of foreign investors, should start with the FIA in
determining to what extent a particular foreign investment is
allowed in the Philippines. Foreign investors and their counsels who
ignore the FIA do so at their own peril. Foreign investors and their
counsels who rely on opinions of SEC legal officers that obviously
contradict the FIA do so also at their own peril.
Occasional opinions of SEC legal officers that obviously contradict
the FIA should immediately raise a red flag. There are already
numerous opinions of SEC legal officers that cite the definition of a
"Philippine national" in Section 3(a) of the FIA in determining
whether a particular corporation is qualified to own and operate a
nationalized or partially nationalized business in the Philippines. This
shows that SEC legal officers are not only aware of, but also rely on
and invoke, the provisions of the FIA in ascertaining the eligibility of
a corporation to engage in partially nationalized industries. The
following are some of such opinions:
1. Opinion of 23 March 1993, addressed to Mr. Francis F.
How;
2. Opinion of 14 April 1993, addressed to Director Angeles
T. Wong of the Philippine Overseas Employment
Administration;
3. Opinion of 23 November 1993, addressed to Messrs.
Dominador Almeda and Renato S. Calma;
4. Opinion of 7 December 1993, addressed to Roco Bunag
Kapunan Migallos & Jardeleza;
5. SEC Opinion No. 49-04, addressed to Romulo Mabanta
Buenaventura Sayoc & De Los Angeles;
6. SEC-OGC Opinion No. 17-07, addressed to Mr. Reynaldo
G. David; and
7. SEC-OGC Opinion No. 03-08, addressed to Attys. Ruby
Rose J. Yusi and Rudyard S. Arbolado.
The SEC legal officers’ occasional but blatant disregard of the
definition of the term "Philippine national" in the FIA signifies their
lack of integrity and competence in resolving issues on the 60-40
ownership requirement in favor of Filipino citizens in Section 11,
Article XII of the Constitution.
The PSE President argues that the term "Philippine national" defined
in the FIA should be limited and interpreted to refer to corporations
seeking to avail of tax and fiscal incentives under investment
incentives laws and cannot be equated with the term "capital" in
Section 11, Article XII of the 1987 Constitution. Pangilinan similarly
contends that the FIA and its predecessor statutes do not apply to
"companies which have not registered and obtained special
incentives under the schemes established by those laws."
Both are desperately grasping at straws. The FIA does not grant tax
or fiscal incentives to any enterprise. Tax and fiscal incentives to
investments are granted separately under the Omnibus Investments
Code of 1987, not under the FIA. In fact, the FIA expressly repealed
Articles 44 to 56 of Book II of the Omnibus Investments Code of
1987, which articles previously regulated foreign investments in
nationalized or partially nationalized industries.
The FIA is the applicable law regulating foreign investments in
nationalized or partially nationalized industries. There is nothing in
the FIA, or even in the Omnibus Investments Code of 1987 or its
predecessor statutes, that states, expressly or impliedly, that the FIA
or its predecessor statutes do not apply to enterprises not availing of
tax and fiscal incentives under the Code. The FIA and its predecessor
statutes apply to investments in all domestic enterprises, whether or
not such enterprises enjoy tax and fiscal incentives under the
Omnibus Investments Code of 1987 or its predecessor statutes. The
reason is quite obvious – mere non-availment of tax and fiscal
incentives by a non-Philippine national cannot exempt it from
Section 11, Article XII of the Constitution regulating foreign
investments in public utilities. In fact, the Board of
Investments’ Primer on Investment Policies in the
Philippines,34 which is given out to foreign investors, provides:
PART III. FOREIGN INVESTMENTS WITHOUT INCENTIVES
Investors who do not seek incentives and/or whose chosen activities
do not qualify for incentives, (i.e., the activity is not listed in the IPP,
and they are not exporting at least 70% of their production) may go
ahead and make the investments without seeking incentives. They
only have to be guided by the Foreign Investments Negative List
(FINL).
The FINL clearly defines investment areas requiring at least 60%
Filipino ownership. All other areas outside of this list are fully open
to foreign investors. (Emphasis supplied)
V.
Right to elect directors, coupled with beneficial ownership,
translates to effective control.
The 28 June 2011 Decision declares that the 60 percent Filipino
ownership required by the Constitution to engage in certain
economic activities applies not only to voting control of the
corporation, but also to the beneficial ownership of the
corporation. To repeat, we held:
Mere legal title is insufficient to meet the 60 percent Filipino-owned
"capital" required in the Constitution. Full beneficial ownership of
60 percent of the outstanding capital stock, coupled with 60
percent of the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital stock must rest
in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is "considered
as non-Philippine national[s]." (Emphasis supplied)
This is consistent with Section 3 of the FIA which provides that
where 100% of the capital stock is held by "a trustee of funds for
pension or other employee retirement or separation benefits," the
trustee is a Philippine national if "at least sixty percent (60%) of the
fund will accrue to the benefit of Philippine nationals." Likewise,
Section 1(b) of the Implementing Rules of the FIA provides that "for
stocks to be deemed owned and held by Philippine citizens or
Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks,
coupled with appropriate voting rights, is essential."
Rule 63 Full Text Cases andm52 of 88
Since the constitutional requirement of at least 60 percent Filipino
ownership applies not only to voting control of the corporation but
also to the beneficial ownership of the corporation, it is therefore
imperative that such requirement apply uniformly and across the
board to all classes of shares, regardless of nomenclature and
category, comprising the capital of a corporation. Under the
Corporation Code, capital stock35 consists of all classes of shares
issued to stockholders, that is, common shares as well as preferred
shares, which may have different rights, privileges or restrictions as
stated in the articles of incorporation.36
The Corporation Code allows denial of the right to vote to preferred
and redeemable shares, but disallows denial of the right to vote in
specific corporate matters. Thus, common shares have the right to
vote in the election of directors, while preferred shares may be
denied such right. Nonetheless, preferred shares, even if denied the
right to vote in the election of directors, are entitled to vote on the
following corporate matters: (1) amendment of articles of
incorporation; (2) increase and decrease of capital stock; (3)
incurring, creating or increasing bonded indebtedness; (4) sale,
lease, mortgage or other disposition of substantially all corporate
assets; (5) investment of funds in another business or corporation or
for a purpose other than the primary purpose for which the
corporation was organized; (6) adoption, amendment and repeal of
by-laws; (7) merger and consolidation; and (8) dissolution of
corporation.37
Since a specific class of shares may have rights and privileges or
restrictions different from the rest of the shares in a corporation,
the 60-40 ownership requirement in favor of Filipino citizens in
Section 11, Article XII of the Constitution must apply not only to
shares with voting rights but also to shares without voting rights.
Preferred shares, denied the right to vote in the election of
directors, are anyway still entitled to vote on the eight specific
corporate matters mentioned above. Thus, if a corporation,
engaged in a partially nationalized industry, issues a mixture of
common and preferred non-voting shares, at least 60 percent of
the common shares and at least 60 percent of the preferred non-
voting shares must be owned by Filipinos. Of course, if a
corporation issues only a single class of shares, at least 60 percent of
such shares must necessarily be owned by Filipinos. In short, the 60-
40 ownership requirement in favor of Filipino citizens must apply
separately to each class of shares, whether common, preferred
non-voting, preferred voting or any other class of shares. This
uniform application of the 60-40 ownership requirement in favor of
Filipino citizens clearly breathes life to the constitutional command
that the ownership and operation of public utilities shall be reserved
exclusively to corporations at least 60 percent of whose capital is
Filipino-owned. Applying uniformly the 60-40 ownership
requirement in favor of Filipino citizens to each class of shares,
regardless of differences in voting rights, privileges and restrictions,
guarantees effective Filipino control of public utilities, as mandated
by the Constitution.
Moreover, such uniform application to each class of shares insures
that the "controlling interest" in public utilities always lies in the
hands of Filipino citizens. This addresses and extinguishes
Pangilinan’s worry that foreigners, owning most of the non-voting
shares, will exercise greater control over fundamental corporate
matters requiring two-thirds or majority vote of all shareholders.
VI.
Intent of the framers of the Constitution
While Justice Velasco quoted in his Dissenting Opinion38 a portion of
the deliberations of the Constitutional Commission to support his
claim that the term "capital" refers to the total outstanding shares
of stock, whether voting or non-voting, the following excerpts of the
deliberations reveal otherwise. It is clear from the following
exchange that the term "capital" refers to controlling interest of a
corporation, thus:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or
Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40
in Section 9 and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with this
question: "Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on the
paid-up capital stock of a corporation"? Will the Committee please
enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members
of the team from the UP Law Center who provided us a draft. The
phrase that is contained here which we adopted from the UP draft
is "60 percent of voting stock."
MR. NOLLEDO. That must be based on the subscribed capital stock,
because unless declared delinquent, unpaid capital stock shall be
entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another
corporation, say, a corporation with 60-40 percent equity invests in
another corporation which is permitted by the Corporation Code,
does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.39
xxxx
MR. AZCUNA. May I be clarified as to that portion that was accepted
by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the
deletion of the phrase "voting stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the
committee report would read: "corporations or associations at least
sixty percent of whose CAPITAL is owned by such citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with
60 percent of the capital to be owned by citizens.
Rule 63 Full Text Cases andm53 of 88
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if
they are the minority. Let us say 40 percent of the capital is owned
by them, but it is the voting capital, whereas, the Filipinos own the
nonvoting shares. So we can have a situation where the
corporation is controlled by foreigners despite being the minority
because they have the voting capital. That is the anomaly that
would result here.
MR. BENGZON. No, the reason we eliminated the word "stock" as
stated in the 1973 and 1935 Constitutions is that according to
Commissioner Rodrigo, there are associations that do not have
stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the phrase "controlling
interest."
MR. BENGZON. In the case of stock corporations, it is
assumed.40 (Boldfacing and underscoring supplied)
Thus, 60 percent of the "capital" assumes, or should result in, a
"controlling interest" in the corporation.
The use of the term "capital" was intended to replace the word
"stock" because associations without stocks can operate public
utilities as long as they meet the 60-40 ownership requirement in
favor of Filipino citizens prescribed in Section 11, Article XII of the
Constitution. However, this did not change the intent of the framers
of the Constitution to reserve exclusively to Philippine nationals the
"controlling interest" in public utilities.
During the drafting of the 1935 Constitution, economic
protectionism was "the battle-cry of the nationalists in the
Convention."41 The same battle-cry resulted in the nationalization of
the public utilities.42 This is also the same intent of the framers of
the 1987 Constitution who adopted the exact formulation embodied
in the 1935 and 1973 Constitutions on foreign equity limitations in
partially nationalized industries.
The OSG, in its own behalf and as counsel for the State,43 agrees fully
with the Court’s interpretation of the term "capital." In its
Consolidated Comment, the OSG explains that the deletion of the
phrase "controlling interest" and replacement of the word "stock"
with the term "capital" were intended specifically to extend the
scope of the entities qualified to operate public utilities to include
associations without stocks. The framers’ omission of the phrase
"controlling interest" did not mean the inclusion of all shares of
stock, whether voting or non-voting. The OSG reiterated essentially
the Court’s declaration that the Constitution reserved exclusively to
Philippine nationals the ownership and operation of public utilities
consistent with the State’s policy to "develop a self-reliant and
independent national economy effectively controlled by Filipinos."
As we held in our 28 June 2011 Decision, to construe broadly the
term "capital" as the total outstanding capital stock, treated as
a single class regardless of the actual classification of shares, grossly
contravenes the intent and letter of the Constitution that the "State
shall develop a self-reliant and independent national
economy effectively controlled by Filipinos." We illustrated the
glaring anomaly which would result in defining the term "capital" as
the total outstanding capital stock of a corporation, treated as
a single class of shares regardless of the actual classification of
shares, to wit:
Let us assume that a corporation has 100 common shares owned by
foreigners and 1,000,000 non-voting preferred shares owned by
Filipinos, with both classes of share having a par value of one peso
(₱ 1.00) per share. Under the broad definition of the term "capital,"
such corporation would be considered compliant with the 40
percent constitutional limit on foreign equity of public utilities since
the overwhelming majority, or more than 99.999 percent, of the
total outstanding capital stock is Filipino owned. This is obviously
absurd.
In the example given, only the foreigners holding the common
shares have voting rights in the election of directors, even if they
hold only 100 shares. The foreigners, with a minuscule equity of less
than 0.001 percent, exercise control over the public utility. On the
other hand, the Filipinos, holding more than 99.999 percent of the
equity, cannot vote in the election of directors and hence, have no
control over the public utility. This starkly circumvents the intent of
the framers of the Constitution, as well as the clear language of the
Constitution, to place the control of public utilities in the hands of
Filipinos. x x x
Further, even if foreigners who own more than forty percent of the
voting shares elect an all-Filipino board of directors, this situation
does not guarantee Filipino control and does not in any way cure the
violation of the Constitution. The independence of the Filipino board
members so elected by such foreign shareholders is highly doubtful.
As the OSG pointed out, quoting Justice George Sutherland’s words
in Humphrey’s Executor v. US,44 "x x x it is quite evident that one who
holds his office only during the pleasure of another cannot be
depended upon to maintain an attitude of independence against the
latter’s will." Allowing foreign shareholders to elect a controlling
majority of the board, even if all the directors are Filipinos, grossly
circumvents the letter and intent of the Constitution and defeats the
very purpose of our nationalization laws.
VII.
Last sentence of Section 11, Article XII of the Constitution
The last sentence of Section 11, Article XII of the 1987 Constitution
reads:
The participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate share
in its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.
During the Oral Arguments, the OSG emphasized that there was
never a question on the intent of the framers of the Constitution to
limit foreign ownership, and assure majority Filipino ownership and
control of public utilities. The OSG argued, "while the delegates
disagreed as to the percentage threshold to adopt, x x x the records
show they clearly understood that Filipino control of the public
utility corporation can only be and is obtained only through the
election of a majority of the members of the board."
Indeed, the only point of contention during the deliberations of the
Constitutional Commission on 23 August 1986 was the extent of
majority Filipino control of public utilities. This is evident from the
following exchange:
Rule 63 Full Text Cases andm54 of 88
THE PRESIDENT. Commissioner Jamir is recognized.
MR. JAMIR. Madam President, my proposed amendment on lines 20
and 21 is to delete the phrase "two thirds of whose voting stock or
controlling interest," and instead substitute the words "SIXTY
PERCENT OF WHOSE CAPITAL" so that the sentence will read: "No
franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the
laws of the Philippines at least SIXTY PERCENT OF WHOSE CAPITAL is
owned by such citizens."
xxxx
THE PRESIDENT: Will Commissioner Jamir first explain?
MR. JAMIR. Yes, in this Article on National Economy and Patrimony,
there were two previous sections in which we fixed the Filipino
equity to 60 percent as against 40 percent for foreigners. It is only in
this Section 15 with respect to public utilities that the committee
proposal was increased to two-thirds. I think it would be better to
harmonize this provision by providing that even in the case of public
utilities, the minimum equity for Filipino citizens should be 60
percent.
MR. ROMULO. Madam President.
THE PRESIDENT. Commissioner Romulo is recognized.
MR. ROMULO. My reason for supporting the amendment is based
on the discussions I have had with representatives of the Filipino
majority owners of the international record carriers, and the
subsequent memoranda they submitted to me. x x x
Their second point is that under the Corporation Code, the
management and control of a corporation is vested in the board of
directors, not in the officers but in the board of directors. The
officers are only agents of the board. And they believe that with 60
percent of the equity, the Filipino majority stockholders undeniably
control the board. Only on important corporate acts can the 40-
percent foreign equity exercise a veto, x x x.
x x x x45
MS. ROSARIO BRAID. Madam President.
THE PRESIDENT. Commissioner Rosario Braid is recognized.
MS. ROSARIO BRAID. Yes, in the interest of equal time, may I also
read from a memorandum by the spokesman of the Philippine
Chamber of Communications on why they would like to maintain the
present equity, I am referring to the 66 2/3. They would prefer to
have a 75-25 ratio but would settle for 66 2/3. x x x
xxxx
THE PRESIDENT. Just to clarify, would Commissioner Rosario Braid
support the proposal of two-thirds rather than the 60 percent?
MS. ROSARIO BRAID. I have added a clause that will put
management in the hands of Filipino citizens.
x x x x46
While they had differing views on the percentage of Filipino
ownership of capital, it is clear that the framers of the Constitution
intended public utilities to be majority Filipino-owned and
controlled. To ensure that Filipinos control public utilities, the
framers of the Constitution approved, as additional safeguard, the
inclusion of the last sentence of Section 11, Article XII of the
Constitution commanding that "[t]he participation of foreign
investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or association
must be citizens of the Philippines." In other words, the last
sentence of Section 11, Article XII of the Constitution mandates that
(1) the participation of foreign investors in the governing body of the
corporation or association shall be limited to their proportionate
share in the capital of such entity; and (2) all officers of the
corporation or association must be Filipino citizens.
Commissioner Rosario Braid proposed the inclusion of the phrase
requiring the managing officers of the corporation or association to
be Filipino citizens specifically to prevent management contracts,
which were designed primarily to circumvent the Filipinization of
public utilities, and to assure Filipino control of public utilities, thus:
MS. ROSARIO BRAID. x x x They also like to suggest that we amend
this provision by adding a phrase which states: "THE MANAGEMENT
BODY OF EVERY CORPORATION OR ASSOCIATION SHALL IN ALL
CASES BE CONTROLLED BY CITIZENS OF THE PHILIPPINES." I have
with me their position paper.
THE PRESIDENT. The Commissioner may proceed.
MS. ROSARIO BRAID. The three major international record carriers in
the Philippines, which Commissioner Romulo mentioned – Philippine
Global Communications, Eastern Telecommunications, Globe
Mackay Cable – are 40-percent owned by foreign multinational
companies and 60-percent owned by their respective Filipino
partners. All three, however, also have management contracts with
these foreign companies – Philcom with RCA, ETPI with Cable and
Wireless PLC, and GMCR with ITT. Up to the present time, the
general managers of these carriers are foreigners. While the
foreigners in these common carriers are only minority owners, the
foreign multinationals are the ones managing and controlling their
operations by virtue of their management contracts and by virtue of
their strength in the governing bodies of these carriers.47
xxxx
MR. OPLE. I think a number of us have agreed to ask Commissioner
Rosario Braid to propose an amendment with respect to the
operating management of public utilities, and in this amendment,
we are associated with Fr. Bernas, Commissioners Nieva and
Rodrigo. Commissioner Rosario Braid will state this amendment
now.
Thank you.
MS. ROSARIO BRAID. Madam President.
THE PRESIDENT. This is still on Section 15.
Rule 63 Full Text Cases andm55 of 88
MS. ROSARIO BRAID. Yes.
MR. VILLEGAS. Yes, Madam President.
xxxx
MS. ROSARIO BRAID. Madam President, I propose a new section to
read: ‘THE MANAGEMENT BODY OF EVERY CORPORATION OR
ASSOCIATION SHALL IN ALL CASES BE CONTROLLED BY CITIZENS OF
THE PHILIPPINES."
This will prevent management contracts and assure control by
Filipino citizens. Will the committee assure us that this amendment
will insure that past activities such as management contracts will no
longer be possible under this amendment?
xxxx
FR. BERNAS. Madam President.
THE PRESIDENT. Commissioner Bernas is recognized.
FR. BERNAS. Will the committee accept a reformulation of the first
part?
MR. BENGZON. Let us hear it.
FR. BERNAS. The reformulation will be essentially the formula of the
1973 Constitution which reads: "THE PARTICIPATION OF FOREIGN
INVESTORS IN THE GOVERNING BODY OF ANY PUBLIC UTILITY
ENTERPRISE SHALL BE LIMITED TO THEIR PROPORTIONATE SHARE IN
THE CAPITAL THEREOF AND..."
MR. VILLEGAS. "ALL THE EXECUTIVE AND MANAGING OFFICERS OF
SUCH CORPORATIONS AND ASSOCIATIONS MUST BE CITIZENS OF
THE PHILIPPINES."
MR. BENGZON. Will Commissioner Bernas read the whole thing
again?
FR. BERNAS. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE
GOVERNING BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE
LIMITED TO THEIR PROPORTIONATE SHARE IN THE CAPITAL
THEREOF..." I do not have the rest of the copy.
MR. BENGZON. "AND ALL THE EXECUTIVE AND MANAGING
OFFICERS OF SUCH CORPORATIONS OR ASSOCIATIONS MUST BE
CITIZENS OF THE PHILIPPINES." Is that correct?
MR. VILLEGAS. Yes.
MR. BENGZON. Madam President, I think that was said in a more
elegant language. We accept the amendment. Is that all right with
Commissioner Rosario Braid?
MS. ROSARIO BRAID. Yes.
xxxx
MR. DE LOS REYES. The governing body refers to the board of
directors and trustees.
MR. VILLEGAS. That is right.
MR. BENGZON. Yes, the governing body refers to the board of
directors.
MR. REGALADO. It is accepted.
MR. RAMA. The body is now ready to vote, Madam President.
VOTING
xxxx
The results show 29 votes in favor and none against; so the
proposed amendment is approved.
xxxx
THE PRESIDENT. All right. Can we proceed now to vote on Section
15?
MR. RAMA. Yes, Madam President.
THE PRESIDENT. Will the chairman of the committee please read
Section 15?
MR. VILLEGAS. The entire Section 15, as amended, reads: "No
franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the
laws of the Philippines at least 60 PERCENT OF WHOSE CAPITAL is
owned by such citizens." May I request Commissioner Bengzon to
please continue reading.
MR. BENGZON. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE
GOVERNING BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE
LIMITED TO THEIR PROPORTIONATE SHARE IN THE CAPITAL
THEREOF AND ALL THE EXECUTIVE AND MANAGING OFFICERS OF
SUCH CORPORATIONS OR ASSOCIATIONS MUST BE CITIZENS OF THE
PHILIPPINES."
MR. VILLEGAS. "NOR SHALL SUCH FRANCHISE, CERTIFICATE OR
AUTHORIZATION BE EXCLUSIVE IN CHARACTER OR FOR A PERIOD
LONGER THAN TWENTY-FIVE YEARS RENEWABLE FOR NOT MORE
THAN TWENTY-FIVE YEARS. Neither shall any such franchise or right
be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by Congress when the common
good so requires. The State shall encourage equity participation in
public utilities by the general public."
VOTING
xxxx
The results show 29 votes in favor and 4 against; Section 15, as
amended, is approved.48 (Emphasis supplied)
Rule 63 Full Text Cases andm56 of 88
The last sentence of Section 11, Article XII of the 1987 Constitution,
particularly the provision on the limited participation of foreign
investors in the governing body of public utilities, is a reiteration of
the last sentence of Section 5, Article XIV of the 1973
Constitution,49 signifying its importance in reserving ownership and
control of public utilities to Filipino citizens.
VIII.
The undisputed facts
There is no dispute, and respondents do not claim the contrary, that
(1) foreigners own 64.27% of the common shares of PLDT, which
class of shares exercises the sole right to vote in the election of
directors, and thus foreigners control PLDT; (2) Filipinos own only
35.73% of PLDT’s common shares, constituting a minority of the
voting stock, and thus Filipinos do not control PLDT; (3) preferred
shares, 99.44% owned by Filipinos, have no voting rights; (4)
preferred shares earn only 1/70 of the dividends that common
shares earn;50 (5) preferred shares have twice the par value of
common shares; and (6) preferred shares constitute 77.85% of the
authorized capital stock of PLDT and common shares only 22.15%.
Despite the foregoing facts, the Court did not decide, and in fact
refrained from ruling on the question of whether PLDT violated the
60-40 ownership requirement in favor of Filipino citizens in Section
11, Article XII of the 1987 Constitution. Such question indisputably
calls for a presentation and determination of evidence through a
hearing, which is generally outside the province of the Court’s
jurisdiction, but well within the SEC’s statutory powers. Thus, for
obvious reasons, the Court limited its decision on the purely legal
and threshold issue on the definition of the term "capital" in Section
11, Article XII of the Constitution and directed the SEC to apply such
definition in determining the exact percentage of foreign ownership
in PLDT.
IX.
PLDT is not an indispensable party;
SEC is impleaded in this case.
In his petition, Gamboa prays, among others:
xxxx
5. For the Honorable Court to issue a declaratory relief that
ownership of common or voting shares is the sole basis in
determining foreign equity in a public utility and that any other
government rulings, opinions, and regulations inconsistent with this
declaratory relief be declared unconstitutional and a violation of the
intent and spirit of the 1987 Constitution;
6. For the Honorable Court to declare null and void all sales of
common stocks to foreigners in excess of 40 percent of the total
subscribed common shareholdings; and
7. For the Honorable Court to direct the Securities and Exchange
Commission and Philippine Stock Exchange to require PLDT to make
a public disclosure of all of its foreign shareholdings and their
actual and real beneficial owners.
Other relief(s) just and equitable are likewise prayed for. (Emphasis
supplied)
As can be gleaned from his prayer, Gamboa clearly asks this Court to
compel the SEC to perform its statutory duty to investigate whether
"the required percentage of ownership of the capital stock to be
owned by citizens of the Philippines has been complied with [by
PLDT] as required by x x x the Constitution."51 Such plea clearly
negates SEC’s argument that it was not impleaded.
Granting that only the SEC Chairman was impleaded in this case, the
Court has ample powers to order the SEC’s compliance with its
directive contained in the 28 June 2011 Decision in view of the far-
reaching implications of this case. In Domingo v. Scheer,52 the Court
dispensed with the amendment of the pleadings to implead the
Bureau of Customs considering (1) the unique backdrop of the case;
(2) the utmost need to avoid further delays; and (3) the issue of
public interest involved. The Court held:
The Court may be curing the defect in this case by adding the BOC as
party-petitioner. The petition should not be dismissed because the
second action would only be a repetition of the first. In Salvador, et
al., v. Court of Appeals, et al., we held that this Court has full
powers, apart from that power and authority which is inherent, to
amend the processes, pleadings, proceedings and decisions by
substituting as party-plaintiff the real party-in-interest. The Court
has the power to avoid delay in the disposition of this case, to
order its amendment as to implead the BOC as party-respondent.
Indeed, it may no longer be necessary to do so taking into account
the unique backdrop in this case, involving as it does an issue of
public interest. After all, the Office of the Solicitor General has
represented the petitioner in the instant proceedings, as well as in
the appellate court, and maintained the validity of the deportation
order and of the BOC’s Omnibus Resolution. It cannot, thus, be
claimed by the State that the BOC was not afforded its day in court,
simply because only the petitioner, the Chairperson of the BOC, was
the respondent in the CA, and the petitioner in the instant recourse.
In Alonso v. Villamor, we had the occasion to state:
There is nothing sacred about processes or pleadings, their forms
or contents. Their sole purpose is to facilitate the application of
justice to the rival claims of contending parties. They were created,
not to hinder and delay, but to facilitate and promote, the
administration of justice. They do not constitute the thing itself,
which courts are always striving to secure to litigants. They are
designed as the means best adapted to obtain that thing. In other
words, they are a means to an end. When they lose the character of
the one and become the other, the administration of justice is at
fault and courts are correspondingly remiss in the performance of
their obvious duty.53 (Emphasis supplied)
In any event, the SEC has expressly manifested54 that it will abide
by the Court’s decision and defer to the Court’s definition of the
term "capital" in Section 11, Article XII of the Constitution. Further,
the SEC entered its special appearance in this case and argued
during the Oral Arguments, indicating its submission to the Court’s
jurisdiction. It is clear, therefore, that there exists no legal
impediment against the proper and immediate implementation of
the Court’s directive to the SEC.
PLDT is an indispensable party only insofar as the other issues,
particularly the factual questions, are concerned. In other words,
PLDT must be impleaded in order to fully resolve the issues on (1)
whether the sale of 111,415 PTIC shares to First Pacific violates the
constitutional limit on foreign ownership of PLDT; (2) whether the
sale of common shares to foreigners exceeded the 40 percent limit
on foreign equity in PLDT; and (3) whether the total percentage of
Rule 63 Full Text Cases andm57 of 88
the PLDT common shares with voting rights complies with the 60-40
ownership requirement in favor of Filipino citizens under the
Constitution for the ownership and operation of PLDT. These issues
indisputably call for an examination of the parties’ respective
evidence, and thus are clearly within the jurisdiction of the SEC. In
short, PLDT must be impleaded, and must necessarily be heard, in
the proceedings before the SEC where the factual issues will be
thoroughly threshed out and resolved.
JUSTICE CARPIO:
I would like also to get from you Dr. Villegas if you have additional
information on whether this high FDI59 countries in East Asia have
allowed foreigners x x x control [of] their public utilities, so that we
can compare apples with apples.
DR. VILLEGAS:

Notably, the foregoing issues were left untouched by the Court.

Correct, but let me just make a comment. When these neighbors of
The Court did not rule on the factual issues raised by Gamboa,
ours find an industry strategic, their solution is not to "Filipinize" or
except the single and purely legal issue on the definition of the term
"Vietnamize" or "Singaporize." Their solution is to make sure that
"capital" in Section 11, Article XII of the Constitution. The Court
those industries are in the hands of state enterprises. So, in these
confined the resolution of the instant case to this threshold legal
countries, nationalization means the government takes over. And
issue in deference to the fact-finding power of the SEC.
because their governments are competent and honest enough to
the public, that is the solution. x x x 60 (Emphasis supplied)
Needless to state, the Court can validly, properly, and fully dispose
of the fundamental legal issue in this case even without the
If government ownership of public utilities is the solution, then
participation of PLDT since defining the term "capital" in Section 11,
foreign investments in our public utilities serve no purpose.
Article XII of the Constitution does not, in any way, depend on
Obviously, there can never be foreign investments in public utilities
whether PLDT was impleaded. Simply put, PLDT is not indispensable
if, as Dr. Villegas claims, the "solution is to make sure that those
for a complete resolution of the purely legal question in this
industries are in the hands of state enterprises." Dr. Villegas’s
case.55 In fact, the Court, by treating the petition as one for
argument that foreign investments in telecommunication companies
mandamus,56 merely directed the SEC to apply the Court’s definition
like PLDT are badly needed to save our ailing economy contradicts
of the term "capital" in Section 11, Article XII of the Constitution in
his own theory that the solution is for government to take over
determining whether PLDT committed any violation of the said
these companies. Dr. Villegas is barking up the wrong tree since
constitutional provision. The dispositive portion of the Court’s
State ownership of public utilities and foreign investments in such
ruling is addressed not to PLDT but solely to the SEC, which is the
industries are diametrically opposed concepts, which cannot
administrative agency tasked to enforce the 60-40 ownership
possibly be reconciled.
requirement in favor of Filipino citizens in Section 11, Article XII of
the Constitution.
In any event, the experience of our neighboring countries cannot be
used as argument to decide the present case differently for two
Since the Court limited its resolution on the purely legal issue on the
reasons. First, the governments of our neighboring countries have,
definition of the term "capital" in Section 11, Article XII of the 1987
as claimed by Dr. Villegas, taken over ownership and control of their
Constitution, and directed the SEC to investigate any violation by
strategic public utilities like the telecommunications industry.
PLDT of the 60-40 ownership requirement in favor of Filipino citizens
Second, our Constitution has specific provisions limiting foreign
under the Constitution,57 there is no deprivation of PLDT’s property
ownership in public utilities which the Court is sworn to uphold
or denial of PLDT’s right to due process, contrary to Pangilinan and
regardless of the experience of our neighboring countries.
Nazareno’s misimpression. Due process will be afforded to PLDT
when it presents proof to the SEC that it complies, as it claims here,
with Section 11, Article XII of the Constitution. In our jurisdiction, the Constitution expressly reserves the ownership
and operation of public utilities to Filipino citizens, or corporations
or associations at least 60 percent of whose capital belongs to
X.
Filipinos. Following Dr. Villegas’s claim, the Philippines appears to be
Foreign Investments in the Philippines
more liberal in allowing foreign investors to own 40 percent of
public utilities, unlike in other Asian countries whose governments
Movants fear that the 28 June 2011 Decision would spell disaster to own and operate such industries.
our economy, as it may result in a sudden flight of existing foreign
investors to "friendlier" countries and simultaneously deterring new
XI.
foreign investors to our country. In particular, the PSE claims that
Prospective Application of Sanctions
the 28 June 2011 Decision may result in the following: (1) loss of
more than ₱ 630 billion in foreign investments in PSE-listed shares;
(2) massive decrease in foreign trading transactions; (3) lower PSE In its Motion for Partial Reconsideration, the SEC sought to clarify
Composite Index; and (4) local investors not investing in PSE-listed the reckoning period of the application and imposition of
shares.58 appropriate sanctions against PLDT if found violating Section 11,
Article XII of the Constitution.1avvphi1
Dr. Bernardo M. Villegas, one of the amici curiae in the Oral
Arguments, shared movants’ apprehension. Without providing As discussed, the Court has directed the SEC to investigate and
specific details, he pointed out the depressing state of the Philippine determine whether PLDT violated Section 11, Article XII of the
economy compared to our neighboring countries which boast of Constitution. Thus, there is no dispute that it is only after the SEC
growing economies. Further, Dr. Villegas explained that the solution has determined PLDT’s violation, if any exists at the time of the
to our economic woes is for the government to "take-over" strategic commencement of the administrative case or investigation, that the
industries, such as the public utilities sector, thus: SEC may impose the statutory sanctions against PLDT. In other
words, once the 28 June 2011 Decision becomes final, the SEC shall
impose the appropriate sanctions only if it finds after due hearing
Rule 63 Full Text Cases andm58 of 88
that, at the start of the administrative case or investigation, there is
an existing violation of Section 11, Article XII of the Constitution.
Under prevailing jurisprudence, public utilities that fail to comply
with the nationality requirement under Section 11, Article XII and
the FIA can cure their deficiencies prior to the start of the
administrative case or investigation.61
XII.
Final Word
The Constitution expressly declares as State policy the development
of an economy "effectively controlled" by Filipinos. Consistent with
such State policy, the Constitution explicitly reserves the ownership
and operation of public utilities to Philippine nationals, who are
defined in the Foreign Investments Act of 1991 as Filipino citizens, or
corporations or associations at least 60 percent of whose
capital with voting rights belongs to Filipinos. The FIA’s
implementing rules explain that "[f]or stocks to be deemed owned
and held by Philippine citizens or Philippine nationals, mere legal
title is not enough to meet the required Filipino equity. Full
beneficial ownership of the stocks, coupled with appropriate
voting rights is essential." In effect, the FIA clarifies, reiterates and
confirms the interpretation that the term "capital" in Section 11,
Article XII of the 1987 Constitution refers to shares with voting
rights, as well as with full beneficial ownership. This is precisely
because the right to vote in the election of directors, coupled with
full beneficial ownership of stocks, translates to effective control of
a corporation.
Any other construction of the term "capital" in Section 11, Article XII
of the Constitution contravenes the letter and intent of the
Constitution. Any other meaning of the term "capital" openly invites
alien domination of economic activities reserved exclusively to
Philippine nationals. Therefore, respondents’ interpretation will
ultimately result in handing over effective control of our national
economy to foreigners in patent violation of the Constitution,
making Filipinos second-class citizens in their own country.
Filipinos have only to remind themselves of how this country was
exploited under the Parity Amendment, which gave Americans the
same rights as Filipinos in the exploitation of natural resources, and
in the ownership and control of public utilities, in the Philippines. To
do this the 1935 Constitution, which contained the same 60 percent
Filipino ownership and control requirement as the present 1987
Constitution, had to be amended to give Americans parity rights
with Filipinos. There was bitter opposition to the Parity
Amendment62 and many Filipinos eagerly awaited its expiration. In
late 1968, PLDT was one of the American-controlled public utilities
that became Filipino-controlled when the controlling American
stockholders divested in anticipation of the expiration of the Parity
Amendment on 3 July 1974.63 No economic suicide happened when
control of public utilities and mining corporations passed to
Filipinos’ hands upon expiration of the Parity Amendment.
Movants’ interpretation of the term "capital" would bring us back to
the same evils spawned by the Parity Amendment, effectively giving
foreigners parity rights with Filipinos, but this time even without
any amendment to the present Constitution. Worse, movants’
interpretation opens up our national economy to effective
control not only by Americans but also by all foreigners, be they
Indonesians, Malaysians or Chinese, even in the absence of
reciprocal treaty arrangements. At least the Parity Amendment, as
implemented by the Laurel-Langley Agreement, gave the capital-
starved Filipinos theoretical parity – the same rights as Americans to
exploit natural resources, and to own and control public utilities, in
the United States of America. Here, movants’ interpretation would
effectively mean a unilateral opening up of our national economy to
all foreigners, without any reciprocal arrangements. That would
mean that Indonesians, Malaysians and Chinese nationals could
effectively control our mining companies and public utilities while
Filipinos, even if they have the capital, could not control similar
corporations in these countries.
The 1935, 1973 and 1987 Constitutions have the same 60 percent
Filipino ownership and control requirement for public utilities like
PLOT. Any deviation from this requirement necessitates an
amendment to the Constitution as exemplified by the Parity
Amendment. This Court has no power to amend the Constitution for
its power and duty is only to faithfully apply and interpret the
Constitution.
WHEREFORE, we DENY the motions for reconsideration WITH
FINALITY. No further pleadings shall be entertained.
SO ORDERED.
THIRD DIVISION
G.R. No. 167391 June 8, 2011
PHIL-VILLE DEVELOPMENT AND HOUSING
CORPORATION, Petitioner,
vs.
MAXIMO BONIFACIO, CEFERINO R. BONIFACIO, APOLONIO B. TAN,
BENITA B. CAINA, CRISPINA B. PASCUAL, ROSALIA B. DE GRACIA,
TERESITA S. DORONIA, CHRISTINA GOCO AND ARSENIO C.
BONIFACIO, in their capacity as the surviving heirs of the late
ELEUTERIA RIVERA VDA. DE BONIFACIO,Respondents.
VILLARAMA, JR., J.:
This petition for review on certiorari1 seeks to set aside the
Decision2 dated January 31, 2005 and Resolution3dated March 15,
2005 of the Court of Appeals in CA-G.R. SP No. 62211. The Court of
Appeals dismissed the Complaint4 for Quieting of Title and Damages
filed by Phil-Ville Development and Housing Corporation (Phil-Ville)
and denied its Motion for Reconsideration.5
The factual antecedents, as culled from the records, are as follows.
Phil-Ville Development and Housing Corporation is the registered
owner of three parcels of land designated as Lots 1-G-1, 1-G-2 and 1-
G-3 of the subdivision plan Psd-1-13-006209, located in Caloocan
City, having a total area of 8,694 square meters and covered by
Transfer Certificates of Title (TCT) Nos. 270921,6 2709227 and
270923.8 Prior to their subdivision, the lots were collectively
designated as Lot 1-G of the subdivision plan Psd-2731 registered in
the name of Phil-Ville under TCT No. T-148220.9 Said parcels of land
form part of Lot 23-A of the Maysilo Estate originally covered by
Original Certificate of Title (OCT) No. 99410 registered on May 3,
1917 in the name of Isabel Gil de Sola as the judicial administratrix
of the estate of Gonzalo Tuason and thirty-one (31) others. Phil-Ville
acquired the lots by purchase from N. Dela Merced and Sons, Inc. on
July 24, 1984.
Rule 63 Full Text Cases andm59 of 88
Earlier, on September 27, 1961, a group composed of Eleuteria
Rivera, Bartolome P. Rivera, Josefa R. Aquino, Gregorio R. Aquino,
Pelagia R. Angeles, Modesta R. Angeles, Venancio R. Angeles, Felipe
R. Angeles Fidela R. Angeles and Rosauro R. Aquino, claiming to be
the heirs of Maria de la Concepcion Vidal, a co-owner to the extent
of 1-189/1000% of the properties covered by OCT Nos. 982, 983,
984, 985 and 994 of the Hacienda Maysilo, filed a petition with the
Court of First Instance (CFI) of Rizal in Land Registration Case No.
4557. They prayed for the substitution of their names on OCT No.
994 in place of Maria de la Concepcion Vidal. Said petition was
granted by the CFI in an Order11 dated May 25, 1962.
Afterwards, the alleged heirs of Maria de la Concepcion Vidal filed a
petition for the partition of the properties covered by OCT Nos. 982,
983, 984, 985 and 994. The case was docketed as Civil Case No. C-
424 in the CFI of Rizal, Branch 12, Caloocan City. On December 29,
1965, the CFI granted the petition and appointed three
commissioners to determine the most equitable division of the
properties.12 Said commissioners, however, failed to submit a
recommendation.
Thirty-one (31) years later, on May 22, 1996, Eleuteria Rivera filed a
Supplemental Motion13 in Civil Case No. C-424, for the partition and
segregation of portions of the properties covered by OCT No. 994.
The Regional Trial Court (RTC), Branch 120, of Caloocan City, through
Judge Jaime D. Discaya, to whom the case was transferred, granted
said motion. In an Order14 dated September 9, 1996, Judge Discaya
directed the segregation of portions of Lots 23, 28-A-1 and 28-A-2
and ordered the Register of Deeds of Caloocan City to issue to
Eleuteria Rivera new certificates of title over them. Three days later,
the Register of Deeds of Caloocan, Yolanda O. Alfonso, issued to
Eleuteria Rivera TCT No. C-31453715 covering a portion of Lot 23
with an area of 14,391.54 square meters. On December 12, 1996,
the trial court issued another Order directing the acting Branch Clerk
to issue a Certificate of Finality of the Order dated September 9,
1996.
Thereafter, one Rosauro R. Aquino filed a petition for certiorari
contesting said Order of December 12, 1996 and impugning the
partial partition and adjudication to Eleuteria Rivera of Lots 23, 28-
A-1 and 28-A-2 of the Maysilo Estate. The case was docketed as CA-
G.R. SP No. 43034 at the Court of Appeals.
Meanwhile, a writ of possession16 was issued in Eleuteria Rivera’s
favor on December 26, 1996 upon the Order17of Judge Discaya
issued on the same date. Accordingly, Sheriff Cesar L. Cruz served a
Notice to Vacate18 dated January 2, 1997 upon Phil-Ville, requiring it
to vacate Lots 23-A and 28. Bonifacio Shopping Center, Inc., which
occupied Lot 28-A-2, was also served a copy of the notice.
Aggrieved, Bonifacio Shopping Center, Inc. filed a petition for
certiorari and prohibition, docketed as CA-G.R. SP No. 43009, before
the Court of Appeals. In a Decision19 dated February 19, 1997, the
appellate court set aside and declared as void the Order and Writ of
Possession dated December 26, 1996 and the Notice to Vacate
dated January 2, 1997. The appellate court explained that a party
who has not been impleaded in a case cannot be bound by a writ of
possession issued in connection therewith.
Subsequently, on February 22, 1997, Eleuteria Rivera
Vda. de Bonifacio died at the age of 96.20
On April 23, 1997, the Secretary of Justice issued Department Order
No. 137 creating a special committee to investigate the
circumstances surrounding the issuance of OCT No. 994 and its
derivative titles.
On April 29, 1997, the Court of Appeals rendered a Decision21 in CA-
G.R. SP No. 43034 granting Rosauro R. Aquino’s petition and setting
aside the RTC’s Order of September 9, 1996, which granted Eleuteria
Rivera’s prayer for partition and adjudicated in her favor portions of
Lots 23, 28-A-1 and 28-A-2 of the Maysilo Estate. The appellate court
likewise set aside the Order and the Writ of Possession dated
December 26, 1996.
Nonetheless, on June 5, 1997, petitioner filed a complaint for
quieting of title and damages against the surviving heirs of Eleuteria
Rivera Vda. de Bonifacio (namely Maximo R. Bonifacio, Ceferino R.
Bonifacio, Apolonia B. Tan, Benita B. Caina, Crispina B. Pascual,
Rosalia B. de Gracia, Teresita S. Doronia, Christina B. Goco, Arsenio
C. Bonifacio, Carmen B. Bernardino and Danilo C. Bonifacio) and the
Register of Deeds of Caloocan City. The case was docketed as Civil
Case No. C-507 in the RTC of Caloocan City, Branch 122.
On October 7, 1997, then Senator Marcelo B. Fernan filed P.S.
Resolution No. 1032 directing the Senate Committees on Justice and
Human Rights and on Urban Planning, Housing and Resettlement to
conduct a thorough investigation, in aid of legislation, of the
irregularities surrounding the titling of the properties in the Maysilo
Estate.
In a Decision22 dated March 24, 2000, the Caloocan RTC ordered the
quieting of Phil-Ville’s titles over Lots 1-G-1, 1-G-2 and 1-G-3,
declaring as valid TCT Nos. 270921, 270922 and 270923 in Phil-Ville’s
name. The fallo of said Decision reads:
WHEREFORE, and in view of the foregoing, judgment is hereby
rendered as follows:
1. Ordering the quieting of title of the plaintiff over Lots 1-
G-1, 1-G-2 and 1-G-3, all the subd. plan Psd-1-13-006209,
being a portion of Lot 1-G, Psd-2731, LRC Rec. No. 4429,
situated in Kalookan City, as owner thereof in fee simple
and with full faith and credit;
2. Declaring Transfer Ce[r]tificates of Title Nos. 270921,
270922 and 270923 in the name of Phil-Ville Development
and Housing Corporation over the foregoing parcels of
land issued by the Registry of Deeds for Kalookan City, as
valid and effective;
3. Declaring Transfer Certificate of Title No. C-314537 over
Lot 23, being a portion of Maysilo Estate situated in
Maysilo, Kalookan City, in the name of Eleuteria Rivera,
issued by the Registry of Deeds for Kalookan City, as null
and void and with no force and effect;
4. Ordering the private defendants to surrender to the
Registry of Deeds for Kalookan City, thru this Court, the
Owner’s Duplicate Certificate of said Transfer Certificate of
Title No. C-314537 in the name of Eleuteria Rivera;
5. Directing the public defendant, Register of Deeds of
Kalookan City to cancel both Transfer Certificate of Title
Nos. C-314537 in the name of Eleuteria Rivera on file with
the Register of Deeds for Kalookan City, and the Owner’s
Rule 63 Full Text Cases andm60 of 88
 Duplicate copy of Transfer Certificate of Title No. C-314537
being required to be surrendered by the private
defendants; and
6. Ordering the private defendants to pay plaintiff, jointly
and severally, the sum of ₱10,000.00, as and by way of
attorney’s fees, plus the costs of suit.
SO ORDERED.23
In upholding Phil-Ville’s titles, the trial court adopted the conclusion
in Senate Committee Report No. 103124 dated May 25, 1998 that
there is only one OCT No. 994, registered on May 3, 1917, and that
OCT No. 994, purportedly registered on April 19, 1917 (from which
Eleuteria Rivera’s title originated) does not exist. The trial court also
found that it was physically impossible for respondents to be the
heirs of Eleuteria Rivera’s grandmother, Maria de la Concepcion
Vidal, one of the registered owners of OCT No. 994, because Maria
de la Concepcion was born sometime in 1903, later than Eleuteria
Rivera who was born in 1901.25 Lastly, the RTC pointed out that
contrary to the contentions of Rivera’s heirs, there is no overlapping
of titles inasmuch as Lot 23 lies far from Lot 23-A, where Phil-Ville’s
lands are located.
On April 13, 2000, Atty. K.V. Faylona, on behalf of respondents,
addressed a letter26 to the Branch Clerk of Court of the Caloocan City
RTC requesting the complete address of Phil-Ville and its counsel.
Supposedly, respondents’ counsels of record, Attys. Nicomedes
Tolentino and Jerry D. Bañares, had abandoned the defense but still
kept the records of the case. Thus, the Notice of Appeal27 on behalf
of respondents was filed by Atty. Faylona while two of the heirs,
Danilo Bonifacio and Carmen Bernardino, filed a separate Notice of
Appeal28 through their own counsel. The appeals were consolidated
and docketed as CA-G.R. CV No. 66547.
On April 17, 2000, respondents withdrew their appeal and instead
filed before this Court a Petition for Review on Certiorari,29 which
was docketed as G.R. No. 142640. In a Resolution30 dated
September 25, 2000, the Court referred the petition to the Court of
Appeals for adjudication on the merits since the case does not
involve pure questions of law. Respondents moved for
reconsideration of the Resolution, but the Court denied their
motion. Thus, respondents’ petition was transferred to the Court of
Appeals and docketed as CA-G.R. SP No. 62211.
Meanwhile, on October 17, 2002, the Court of Appeals rendered a
Decision31 in CA-G.R. CV No. 66547, dismissing the appeal as regards
Danilo Bonifacio and Carmen Bernardino. Yet, along with Danilo and
Carmen, respondents moved for reconsideration on the contention
that they are not bound by the judgment since they had withdrawn
their appeal therein. The Court of Appeals denied said motion in a
Resolution dated June 7, 2004. Danilo, Carmen and respondents
elevated the case to the Supreme Court through a Petition for
Review on Certiorari, which was docketed as G.R. No. 163397. Said
petition, however, was denied by this Court in a Resolution dated
September 8, 2004 for being filed out of time.
Subsequently, on January 31, 2005, the Court of Appeals
promulgated its assailed Decision in CA-G.R. SP No. 62211, setting
aside the RTC judgment and dismissing Phil-Ville’s complaint. The
appellate court held that the RTC had no jurisdiction to hear Phil-
Ville’s complaint as it effectively seeks to annul the Order dated May
25, 1962 of the CFI in LRC No. 4557, which directed the substitution
of the late Eleuteria Rivera and her co-heirs in place of Maria de la
Concepcion Vidal as registered owners on OCT No. 994. The
appellate court likewise affirmed the validity of OCT No. 994
registered on April 19, 1917 citing the Supreme Court Decisions
in Metropolitan Waterworks and Sewerage Systems v. Court of
Appeals32 and Heirs of Luis J. Gonzaga v. Court of Appeals33 as
precedents.
Phil-Ville sought reconsideration34 of the decision, but the Court of
Appeals denied its motion in the assailed Resolution dated March
15, 2005. Hence, this petition.
Petitioner alleges that:
I.
THE HONORABLE COURT OF APPEALS (FORMER NINTH
DIVISION) ACTED WITHOUT JURISDICTION ON THE
PETITION FOR REVIEW OF RESPONDENTS MAXIMO
BONIFACIO, ET AL. IN CA-G.R SP NO. 62211 BECAUSE OF
THE EARLIER DISMISSAL OF THEIR APPEAL IN CA-G.R NO.
66547.
II.
THE HONORABLE COURT OF APPEALS (FORMER NINTH
DIVISION) ACTED WITHOUT JURISDICTION ON THE
PETITION FOR REVIEW FILED BY RESPONDENTS MAXIMO
BONIFACIO, ET AL. IN CA-G.R. NO. SP 62211 WHICH DOES
NOT RAISE PURE QUESTION[S] OF LAW OR ISSUE[S] OF
JURISDICTION AND THEREFORE THE PROPER REMEDY
AVAILABLE TO THEM IS ORDINARY APPEAL WHICH, AS
STATED, HAD ALREADY BEEN DISMISSED IN CA-G.R. CV NO.
66547.
III.
THE HONORABLE COURT OF APPEALS (FORMER NINTH
DIVISION) COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
HOLDING THAT THE TRIAL COURT HAS NO JURISDICTION
ON THE COMPLAINT FOR QUIETING OF TITLE FILED BY
PETITIONER PHIL-VILLE IN CIVIL CASE NO. C-507, OR IN THE
ALTERNATIVE, IN FAILING TO DECLARE RESPONDENTS
MAXIMO [BONIFACIO], ET AL. ALREADY IN ESTOPPEL TO
RAISE THE SAID ISSUE OF JURISDICTION.35
Condensed, petitioner puts in issue the following: (1) whether the
Court of Appeals committed grave abuse of discretion in taking
cognizance of respondents’ petition; and (2) whether the Court of
Appeals committed grave abuse of discretion in declaring that the
trial court had no jurisdiction over Civil Case No. C-507.
Pertinently, however, the genuine issue in this case is whether TCT
No. C-314537 in the name of Eleuteria Rivera constitutes a cloud
over petitioner’s titles over portions of Lot 23-A of the Maysilo
Estate.
Petitioner argues mainly that the Court of Appeals acted without
jurisdiction in resolving respondents’ petition for review since it had
dismissed their appeal in CA-G.R. CV No. 66547 for failure to file
brief. Petitioner also points out that respondents’ petition is
Rule 63 Full Text Cases andm61 of 88
defective because Maximo Bonifacio alone signed its verification and
certification of non-forum shopping without proof that he was
authorized to sign for the other respondents. It contends that the
ruling in MWSS v. Court of Appeals and Heirs of Gonzaga v. Court of
Appeals will not invalidate its titles because it is not a party to any of
said cases. As well, petitioner invokes the finding in the joint
investigation by the Senate and the Department of Justice (DOJ) that
there is only one OCT No. 994, that is, the one registered on May 3,
1917. It maintains that the trial court had jurisdiction to hear its
action since it is one for quieting of title and not for annulment of
the CFI Order dated May 25, 1962.
Conversely, respondents rely on MWSS v. Court of Appeals and Heirs
of Gonzaga v. Court of Appeals that upheld the titles emanating
from OCT No. 994 registered on April 19, 1917. Therefore, they insist
that petitioner has no cause of action to seek the nullification of
their title which is a derivative of said OCT. Respondents reiterate
that since they had withdrawn their appeal in CA-G.R. CV No. 66547,
the Court of Appeals decision therein applies only to Danilo
Bonifacio and Carmen Bernardino. Lastly, they believe that
petitioner’s action is one for annulment of judgment, which is
foreign to the jurisdiction of the trial court.
Petitioner argues in its first two assignments of errors that the Court
of Appeals acted with grave abuse of discretion in entertaining
respondents’ petition. However, said contention deserves scant
consideration since the Court of Appeals, in CA-G.R. SP No. 62211,
properly assumed jurisdiction over respondents’ case after the same
was referred to it by this Court through our Resolution dated
September 25, 2000. The issue raised by respondents, as petitioners
in G.R. No. 142640, was purely a question of fact that is beyond the
power of this Court to resolve. Essentially, respondents asked the
Court to determine the ownership of the lots purportedly covered
by petitioner’s titles.
Neither do we find merit in petitioner’s contention that the dismissal
of the appeal in CA-G.R. CV No. 66547 is binding on respondents.
The appellate court itself recognized the withdrawal of appeal filed
by respondents, thus:
… However, defendants Maximo R. Bonifacio, et al. withdrew their
appeal so that the only appellants herein are defendants-appellants
Danilo R. Bonifacio, et al.36
So did the trial court err in taking cognizance of petitioner’s action
for quieting of title contrary to respondents’ assertion that it is
actually one for annulment of the CFI Order dated May 25, 1962? To
this query, we rule in the negative.
The nature of an action is determined by the material allegations of
the complaint and the character of the relief sought by plaintiff, and
the law in effect when the action was filed irrespective of whether
he is entitled to all or only some of such relief. 37
In its complaint, petitioner alleges:
27. That said TCT No. C-314537 of the late Eleuteria Rivera, although
apparently valid and effective, are in truth and in fact invalid and
ineffective[;]
27.1. An examination of Decree No. 36455 issued on April
19, 1917 in LRC Case No. 4429 and also of OCT No. 994
which was issued … pursuant thereto will show that Lot 23
covered by the said TCT No. C-3145[3]7 of the late
Eleuteria Rivera is not one of the 34 parcels of land
covered by said Decree No. 36455 and OCT 994;
27.2. That, as hereinbefore stated, the same TCT No. C-
314537 of the late Eleuteria Rivera is a direct transfer from
OCT No. 994 which was registered on April 19, 1917. The
fact, however, is that there is only one OCT No. 994 which
was issued … pursuant to Decree No. 36455 in LRC Case
No. 4429 and said OCT 994 was registered with the
Register of Deeds of Rizal on May 3, 1917. The Office of
the Register of Deeds of Caloocan City or of Malabon or of
Pasig City has no record of any OCT No. 994 that was
allegedly registered on April 19, 1917;
27.3. That said TCT No. C-314537 of the late Eleuteria
Rivera could not cover Lot 23-A or any portion/s thereof
because, as hereinbefore recited, the whole of Lot 23-A
had been totally disposed of as early as July 24, 1923 and
she and/or any of her alleged predecessors-in-interest is
not among those named in the memorandum of
encumbrances of OCT No. 994 as vendees or vendors of
said Lot 23-A;38
Ultimately, petitioner submits that a cloud exists over its titles
because TCT No. C-314537 in the name of Eleuteria Rivera purports
to cover the same parcels of land covered by petitioner’s TCT Nos.
270921, 270922 and 270923. It points out that what appears to be a
valid and effective TCT No. C-314537 is, in truth, invalid because it
covers Lot 23 which is not among those described in the OCT No.
994 on file with the Register of Deeds of Rizal and registered on May
3, 1917. Petitioner notes that the OCT No. 994 allegedly registered
on April 19, 1917 and from which TCT No. C-314537 was derived, is
not found in the records of the Register of Deeds. In other words,
the action seeks the removal of a cloud from Phil-Ville’s title and/or
the confirmation of its ownership over the disputed properties as
the successor-in-interest of N. Dela Merced and Sons, Inc.
Quieting of title is a common law remedy for the removal of any
cloud upon, doubt, or uncertainty affecting title to real property.
Whenever there is a cloud on title to real property or any interest in
real property by reason of any instrument, record, claim,
encumbrance, or proceeding that is apparently valid or effective, but
is, in truth and in fact, invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title. In such action,
the competent court is tasked to determine the respective rights of
the complainant and the other claimants, not only to place things in
their proper places, and make the claimant, who has no rights to
said immovable, respect and not disturb the one so entitled, but also
for the benefit of both, so that whoever has the right will see every
cloud of doubt over the property dissipated, and he can thereafter
fearlessly introduce any desired improvements, as well as use, and
even abuse the property.39
In order that an action for quieting of title may prosper, two
requisites must concur: (1) the plaintiff or complainant has a legal or
equitable title or interest in the real property subject of the action;
and (2) the deed, claim, encumbrance, or proceeding claimed to be
casting cloud on his title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal
efficacy.40
Rule 63 Full Text Cases andm62 of 88
As regards the first requisite, we find that petitioner was able to
establish its title over the real properties subject of this action.
Petitioner submitted in evidence the Deed of Absolute Sale41 by
which it acquired the subject property from N. Dela Merced and
Sons, Inc., as well as copies of OCT No. 994 dated May 3, 1917 and
all the derivative titles leading to the issuance of TCT Nos. 270921,
270922 and 270923 in petitioner’s name as follows:
also includes a Plan45 prepared by the Chief of the Geodetic Surveys
Division showing that Lot 23-A of the Maysilo Estate is remotely
situated from Lot 23 portion of the Maysilo Estate. Petitioner ties
these pieces of evidence to the finding in the DOJ Committee
Report46 dated August 28, 1997 and Senate Committee Report No.
1031 dated May 25, 1998 that, indeed, there is only one OCT No.
994, that is, the one registered on May 3, 1917.

1avvphi1 On the other hand, respondents have not adduced competent

Title No. Registration Date Holder evidence to establish their title to the contested property or to
dispute petitioner’s claim over the same. It must be noted that the
8004 July 24, 1923 Vedasto Galino RTC Order dated September 9, 1996 in Civil Case No. C-424, which
resulted in the issuance of TCT No. C-314537 in the name of
8059 September 3, 1923 -ditto- Eleuteria Rivera had long been set aside by the Court of Appeals in
8160 October 24, 1923 -ditto- CA-G.R. SP No. 43034. Clearly, respondents’ claim anchored
primarily on TCT No. C-314537 lacks legal basis. Rather, they rely
8164 November 6, 1923 Juan Cruz Sanchez simply on the Court’s pronouncement in MWSS v. Court of
Appeals and Heirs of Gonzaga v. Court of Appeals that OCT No. 994
8321 February 26, 1924 -ditto- registered on May 3, 1917 and all titles emanating from it are void.
8734 September 11, 1924 Emilio Sanchez
The Supreme Court sustained said decisions in the case of Manotok
12946 November 21, 1927 -ditto- Realty, Inc. v. CLT Realty Development Corporation47 promulgated on
November 29, 2005. In said case, the Court declared void the titles
28315 July 16, 1935 Eastern Syndicate
of the Manotoks and Aranetas which were derived from OCT No.
Mining Co., Inc.
994 registered on May 3, 1917 consistent with its ruling
39163 November 18, 1939 Royal Lawrence in MWSSand Gonzaga. The Court disregarded the DOJ and Senate
Rutter reports on the alleged anomalies surrounding the titling of the
Maysilo Estate.
43559 July 26, 1941 Mapua Institute of
Technology However, on motion for reconsideration, the Court issued a
18767 June 16, 1950 Sofia Nepomuceno Resolution48 dated December 14, 2007 which created a Special
Division of the Court of Appeals to hear the consolidated cases on
57541 March 13, 1958 Leona N. de Jesus, remand. The Special Division was tasked to hear and receive
Pacifico evidence, conclude the proceedings and submit to the Court a
Nepomuceno, Sofia report on its findings as well as recommend conclusions within three
Nepomuceno, months from the finality of said Resolution. However, to guide the
Soledad proceedings before the Special Division, the Court laid the following
Nepomuceno de definitive conclusions:
Jesus

81679 December 15, 1960 Pacifico … First, there is only one OCT 994. As it appears on the record, that
Nepomuceno, Sofia mother title was received for transcription by the Register of Deeds
N. Jugo, Soledad N. on 3 May 1917, and that should be the date which should be
de Jesus reckoned as the date of registration of the title. It may also be
acknowledged, as appears on the title, that OCT No. 994 resulted
(81680) 17745 December 15, 1960 Pacifico Nepomuceno from the issuance of the decree of registration on [19] April 1917,
& Co. although such date cannot be considered as the date of the title or
the date when the title took effect.
C-13794 April 21, 1978 Pacifico Nepomuceno
& Co. Inc.
Second. Any title that traces its source to OCT No. 994 dated [19]
C-14603 May 16, 1978 N. de La Merced & April 1917 is void, for such mother title is inexistent. The fact that
Sons, Inc. the Dimson and CLT titles made specific reference to an OCT No. 994
dated [19] April 1917 casts doubt on the validity of such titles since
T-148220 April 22, 1987 Phil-Ville they refer to an inexistent OCT. This error alone is, in fact, sufficient
Development and to invalidate the Dimson and CLT claims over the subject property if
Housing Corp.42 singular reliance is placed by them on the dates appearing on their
respective titles.
Petitioner likewise presented the Proyecto de particion de la
Hacienda de Maysilo43 to prove that Lot 23-A, of which petitioner’s Third. The decisions of this Court in MWSS v. Court of Appeals and
Lots 1-G-1, 1-G-2 and 1-G-3 form part, is among the 34 lots covered Gonzaga v. Court of Appeals cannot apply to the cases at bar,
by OCT No. 994 registered on May 3, 1917. It produced tax receipts especially in regard to their recognition of an OCT No. 994 dated 19
accompanied by a Certification44 dated September 15, 1997 issued April 1917, a title which we now acknowledge as inexistent. Neither
by the City Treasurer of Caloocan stating that Phil-Ville has been could the conclusions in MWSS [and] Gonzaga with respect to an
religiously paying realty taxes on the lots. Its documentary evidence OCT No. 994 dated 19 April 1917 bind any other case operating

Rule 63 Full Text Cases andm63 of 88

under the factual setting the same as or similar to that at
bar.49 (Emphasis supplied.)
Eventually, on March 31, 2009, the Supreme Court issued a
Resolution50 reversing its Decision of November 29, 2005 and
declaring certain titles in the names of Araneta and Manotok valid.
In the course of discussing the flaws of Jose Dimson’s title based on
his alleged 25% share in the hereditary rights of Bartolome Rivera,
Eleuteria Rivera’s co-petitioner in LRC No. 4557, the Court noted:
… However, the records of these cases would somehow negate the
rights of Rivera to claim from Vidal. The Verification Report of the
Land Registration Commission dated 3 August 1981 showed that
Rivera was 65 years old on 17 May 1963 (as gathered from the
records of Civil Case Nos. 4429 and 4496). It can thus be deduced
that, if Rivera was already 65 years old in 1963, then he must have
been born around 1898. On the other hand, Vidal was only nine (9)
years in 1912; hence, she could have been born only on [1903]. This
alone creates an unexplained anomalous, if not ridiculous, situation
wherein Vidal, Rivera’s alleged grandmother, was seven (7) years
younger than her alleged grandson. Serious doubts existed as to
whether Rivera was in fact an heir of Vidal, for him to claim a share
in the disputed portions of the Maysilo Estate.51
The same is true in this case. The Death Certificate52 of Eleuteria
Rivera reveals that she was 96 years old when she died on February
22, 1997. That means that she must have been born in 1901. That
makes Rivera two years older than her alleged grandmother Maria
de la Concepcion Vidal who was born in 1903. Hence, it was
physically impossible for Eleuteria Rivera to be an heir of Maria de la
Concepcion Vidal.
Moreover, the Partition Plan of the Maysilo Estate shows that Lot
23-A was awarded, not to Maria de la Concepcion Vidal, but to
Isabel Tuason, Esperanza Tuason, Trinidad Jurado, Juan O’ Farrell
and Angel O’ Farrell.53 What Vidal received as her share were Lot 6
and portions of Lots 10 and 17, all subject to the usufructuary right
of her mother Mercedes Delgado. This was not at all disputed by
respondents.
On the other hand, Vedasto Galino, who was the holder of TCT No.
8004 registered on July 24, 1923 and to whom petitioner traces its
titles, was among the successful petitioners in Civil Case No. 391
entitled Rosario Negrao, et al. v. Concepcion Vidal, et al., who
sought the issuance of bills of sale in favor of the actual occupants of
certain portions of the Maysilo Estate.
Be that as it may, the second requisite in an action for quieting of
title requires that the deed, claim, encumbrance, or proceeding
claimed to be casting cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity
or legal efficacy. Article 476 of the Civil Code provides:
Art. 476. Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim,
encumbrance or proceeding which is apparently valid or effective
but is in truth and in fact invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast
upon title to real property or any interest therein.
Thus, the cloud on title consists of: (1) any instrument, record, claim,
encumbrance or proceeding; (2) which is apparently valid or
effective; (3) but is in truth and in fact invalid, ineffective, voidable,
or unenforceable; and (4) may be prejudicial to the title sought to be
quieted. The fourth element is not present in the case at bar.
While it is true that TCT No. C-314537 in the name of Eleuteria
Rivera is an instrument that appeared to be valid but was
subsequently shown to be invalid, it does not cover the same parcels
of land that are described in petitioner’s titles. Foremost, Rivera’s
title embraces a land measuring 14,391.54 square meters while
petitioner’s lands has an aggregate area of only 8,694 square
meters. On the one hand, it may be argued that petitioner’s land
could be subsumed within Rivera’s 14,391.54-square meter
property. Yet, a comparison of the technical descriptions of the
parties’ titles negates an overlapping of their boundaries.
The technical description of respondents’ TCT No. C-314537 reads:
A parcel of land (Lot 23, being a portion of Maysilo Estate) situated
in Maysilo, Caloocan, Metro Manila, Island of Luzon. Bounded on the
NW., along line 1-2 by Blk. 2; on the SW., along line 2-3 by Jacinto
Street, along lines 3-4-5 by Blk. 4; along line 5-6 by Bustan St., and
San Diego St., on the S., along lines 6-7-8 by Blk. 13, all of Caloocan
Cadastre; on the NE., along line 8-9 by Caloocan Cadastre; and on
the N., along line 9-1 by Epifanio de los Santos Avenue. Beginning at
a point marked "1" on plan, being S. 28 deg. 30’E., 530.50 m. from
MBM No. 1, Caloocan Cadastre; thence S. 07 deg. 20’W., 34.00 m. to
point 2; S. 17 deg. 10’E., 12.00 m. to point 3; (0/illegible)
S. 15 deg. 31’E., 31.00 m. to point 4; S. 27 deg. 23’E., 22.50
m. to point 5;
S. 38 deg. 41’E., 43.20 m. to point 6; S. 71 deg. 35’E., 10.60
m. to point 7;
N. 84 deg. 30’E., 38.80 m. to point 8; N. 11 deg. 40’W.,
131.20 m. to point 9;
N. 89 deg. 10’W., 55.00 m. to the point of beginning;
containing an area of FOURTEEN THOUSAND THREE
HUNDRED NINETY ONE SQUARE METERS AND FIFTY
FOUR SQUARE DECIMETERS (14,391.54). more or less. All
points referred to are indicated on the plan and are
marked on the ground by Old Ps. cyl. conc. mons. 15 x 60
cm.; bearings true;54 (Emphasis supplied).
On the other hand, the technical description of petitioner’s lands
before they were subdivided under TCT No. T-148220 is as follows:
A parcel of land (Lot No. 1-G of the subdivision plan Psd-2731, being
a portion of Lot 23-A, Maysilo Estate, GLRO Rec. No. 4429), situated
in the Municipality of Caloocan, Province of Rizal. Bounded on the
North., by Calle A. Samson; on the East., by properties of Gregoria
de Jesus, Arcadio de Jesus and Felix de Jesus; on the South.,
by properties of Lucas Bustamante and Patricio Galauran; and on
the West., by property of Patricio Galauran; and Lot No. 1-E of the
subdivision plan. Beginning at a point marked "1" on plan, being
N.69 deg. 27’E., 1600.19 m. from BLLM No. 1, Mp. of Caloocan, more
or less, thence S. 21 deg. 25’E., 44.78 m. to point 2; thence S. 14 deg.
57’E., 37.24 m. to point 3; thence S. 81 deg. 11’W., 20.28 m. to point
4; thence S. 86 deg. 06’W., 15.45 m. to point 5; thence N. 67 deg.
20’W., 15.91 m. to point 6; thence N. 35 deg. 19’W., 37.56 m. to
Rule 63 Full Text Cases andm64 of 88
point 7; thence N. 27 deg. 11’W., 12.17 m. to point 8; thence N. 19
deg. 26’W., 23.32 m. to point 9; thence N. 13 deg. 08’W., 28.25 m. to
point 10; thence S. 78 deg. 45’W., 13.00 m. to point 11; thence N. 0
deg. 56’E., 48.92 m. to point 12; thence N. 89 deg. 13’E., 53.13 m. to
point 13; thence S. 21 deg. 24’E., 67.00 m. to the point of beginning;
containing an area of EIGHT THOUSAND SIX HUNDRED NINETY
FOUR (8,694) SQUARE METERS, more or less. All points referred to
are indicated on the plan and are marked on the ground points 1,2,3
and 13 by Old PLS conc. mons. point 4,6,7,8 and 9 by Old PLS stone
mons.; points 5 to 10 and old stakes points 11 and 12 by PLS conc.
mons. bearings true, declination 1 deg. 08’E., date of the original
survey, Sept. 8-27, Oct. 4-21 and Nov. 17-18, 1911 and that of the
subdivision survey, Oct. 14 and 15, 1927.55 (Emphasis supplied).
Such disparity in location is more vividly illustrated in the Plan
prepared by Engr. Privadi J.G. Dalire, Chief of the Geodetic Surveys
Division, showing the relative positions of Lots 23 and 23-A. As it
appears on the Plan, the land covered by respondents’ TCT No. C-
314537 lies far west of petitioner’s lands under TCT Nos. 270921,
270922 and 270923. Strictly speaking, therefore, the existence of
TCT No. C-314537 is not prejudicial to petitioner’s titles insofar as it
pertains to a different land.
Significantly, an action to quiet title is characterized as a
proceeding quasi in rem.56 In an action quasi in rem, an individual is
named a defendant and the purpose of the proceeding is to subject
his interests to the obligation or loan burdening the property.
Actions quasi in rem deal with the status, ownership or liability of a
particular property but which are intended to operate on these
questions only as between the particular parties to the proceedings
and not to ascertain or cut off the rights or interests of all possible
claimants. The judgment therein is binding only upon the parties
who joined in the action.57
Yet, petitioner was well aware that the lots encompassed by its titles
are not the same as that covered by respondents’ title. In its
complaint, Phil-Ville alleges:
27.4. That Lot 23, being a portion of Maysilo Estate, as described in
said TCT No. C-314537 of the late Eleuteria Rivera when plotted
using its tie line to MBM No. 1, Caloocan Cadastre is outside Lot 23-
A of the Maysilo Estate. This must be so because Lot 23 is not [a]
portion of Lot 23-A, Maysilo Estate….58
This brings petitioner’s action within the purview of Rule 63 of
the Rules of Court on Declaratory Relief. Section 1 of Rule 63
provides:
SECTION 1. Who may file petition.-Any person interested under a
deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance or
any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial
Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties,
thereunder.
An action for the reformation of an instrument, to quiet title to real
property or remove clouds therefrom, or to consolidate ownership
under Article 1607 of the Civil Code, may be brought under this
Rule. (Emphasis supplied).
An action for declaratory relief presupposes that there has been no
actual breach of the instruments involved or of the rights arising
thereunder. Since the purpose of an action for declaratory relief is to
secure an authoritative statement of the rights and obligations of
the parties under a statute, deed, or contract for their guidance in
the enforcement thereof, or compliance therewith, and not to settle
issues arising from an alleged breach thereof, it may be entertained
before the breach or violation of the statute, deed or contract to
which it refers. A petition for declaratory relief gives a practical
remedy for ending controversies that have not reached the state
where another relief is immediately available; and supplies the need
for a form of action that will set controversies at rest before they
lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs.
In the present case, petitioner filed a complaint for quieting of title
after it was served a notice to vacate but before it could be
dispossessed of the subject properties. Notably, the Court of
Appeals, in CA-G.R. SP No. 43034, had earlier set aside the Order
which granted partial partition in favor of Eleuteria Rivera and the
Writ of Possession issued pursuant thereto. And although
petitioner’s complaint is captioned as Quieting of Title and Damages,
all that petitioner prayed for, is for the court to uphold the validity
of its titles as against that of respondents’. This is consistent with the
nature of the relief in an action for declaratory relief where the
judgment in the case can be carried into effect without requiring the
parties to pay damages or to perform any act.59
Thus, while petitioner was not able to demonstrate that
respondents’ TCT No. C-314537 in the name of Eleuteria Rivera
constitutes a cloud over its title, it has nevertheless successfully
established its ownership over the subject properties and the
validity of its titles which entitles it to declaratory relief.
WHEREFORE, the petition for review on certiorari is GRANTED. The
Decision dated January 31, 2005 and Resolution dated March 15,
2005 of the Court of Appeals in CA-G.R. SP No. 62211 are SET ASIDE.
The Decision dated March 24, 2000 of the Caloocan RTC in Civil Case
No. C-507 is hereby REINSTATED and UPHELD.
No pronouncement as to costs.
SO ORDERED.
EN BANC
G.R. No. 169466 May 9, 2007
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by
SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL POLICE,
represented by POLICE DIRECTOR GENERAL ARTURO L. LOMIBAO,
NATIONAL POLICE COMMISSION, represented by CHAIRMAN
ANGELO T. REYES, AND CIVIL SERVICE COMMISSION, represented
by CHAIRPERSON KARINA C. DAVID, Petitioners,
vs.
MANILA’S FINEST RETIREES ASSOCIATION, INC., represented by
P/COL. FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP
RETIREES, Respondents.
DECISION
GARCIA, J.:
Rule 63 Full Text Cases andm65 of 88
Assailed and sought to be set aside in this petition for review on
certiorari under Rule 45 of the Rules of Court are the following
issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to
wit:
1. Decision1 dated July 7, 2005 which affirmed in toto the
decision of the Regional Trial Court of Manila, Branch 32,
in Civil Case No. 02-103702, a suit for declaratory relief,
declaring the herein respondents entitled to the same
retirement benefits accorded upon retirees of the
Philippine National Police (PNP) under Republic Act (R.A.)
No. 6975, as amended by R.A. No. 8551, and ordering the
herein petitioners to implement the proper adjustments
on respondents’ retirement benefits; and
2. Resolution2 dated August 24, 2005 which denied the
petitioners’ motion for reconsideration.
The antecedent facts:
In 1975, Presidential Decree (P.D.) No. 765 was issued constituting
the Integrated National Police (INP) to be composed of the
Philippine Constabulary (PC) as the nucleus and the integrated police
forces as components thereof. Complementing P.D. No. 765 was
P.D. No. 11843 dated August 26, 1977 (INP Law, hereinafter) issued
to professionalize the INP and promote career development therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN
ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A
REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to
as PNP Law, was enacted. Under Section 23 of said law, the
Philippine National Police (PNP) would initially consist of the
members of the INP, created under P.D. No. 765, as well as the
officers and enlisted personnel of the PC. In part, Section 23 reads:
SEC. 23. Composition. – Subject to the limitation provided for in this
Act, the Philippine National Police, hereinafter referred to as the
PNP, is hereby established, initially consisting of the members of the
police forces who were integrated into the Integrated National
Police (INP) pursuant to Presidential Decree No. 765, and the
officers and enlisted personnel of the Philippine Constabulary (PC).
A little less than eight (8) years later, or on February 25, 1998, R.A.
No. 6975 was amended by R.A. No. 8551, otherwise known as the
"PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION ACT
OF 1998." Among other things, the amendatory law reengineered
the retirement scheme in the police organization. Relevantly, PNP
personnel, under the new law, stood to collect more retirement
benefits than what INP members of equivalent rank, who had
retired under the INP Law, received.
The INP retirees illustrated the resulting disparity in the retirement
benefits between them and the PNP retirees as follows:4
Retirement Rank Monthly Pension Difference
INP PNP INP PNP
Corporal SPO3 P 3,225.00 P 11,310.00 P 8,095.00
Captain P. Sr. Insp. P 5,248.00 P 15,976.00 P10,628.00
Brig.
P. Chief Supt. P 10,054.24 P 18,088.00 P 8,033.76
Gen.
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila,
all INP retirees, spearheaded by the Manila’s Finest Retirees
Association, Inc., or the MFRAI (hereinafter collectively referred to
as the INP Retirees), filed a petition for declaratory
relief,5 thereunder impleading, as respondents, the Department of
Budget and Management (DBM), the PNP, the National Police
Commission (NAPOLCOM), the Civil Service Commission (CSC) and
the Government Service Insurance System (GSIS). Docketed in the
RTC as Civil Case No. 02-103702, which was raffled to Branch 22
thereof, the petition alleged in gist that INP retirees were equally
situated as the PNP retirees but whose retirement benefits prior to
the enactment of R.A. No. 6975, as amended by R.A. No. 8551, were
unconscionably and arbitrarily excepted from the higher rates and
adjusted benefits accorded to the PNP retirees. Accordingly, in their
petition, the petitioning INP retirees pray that a –
DECLARATORY JUDGMENT be rendered in their favor, DECLARING
with certainty that they, as INP-retirees, are truly absorbed and
equally considered as PNP-retirees and thus, entitled to enjoy the
SAME or IDENTICAL retirement benefits being bestowed to PNP-
retirees by virtue of said PNP Law or Republic Act No. 6975, as
amended by Republic Act 8551, with the corollary mandate for the
respondents-government agencies to effect the immediate
adjustment on their previously received disparate retirement
benefits, retroactive to its effectivity, and with due payment thereof.
The GSIS moved to dismiss the petition on grounds of lack of
jurisdiction and cause of action. On the other hand, the CSC, DBM,
NAPOLCOM and PNP, in their respective answers, asserted that the
petitioners could not claim the more generous retirement benefits
under R.A. No. 6975 because at no time did they become PNP
members, having retired prior to the enactment of said law. DBM,
NAPOLCOM and PNP afterwards filed their respective pre-trial
briefs.
The ensuing legal skirmish is not relevant to the disposition of the
instant case. The bottom line is that, on March 21, 2003, the RTC
came out with its decision6 holding that R.A. No. 6975, as amended,
did not abolish the INP but merely provided for the absorption of its
police functions by the PNP, and accordingly rendered judgment for
the INP retirees, to wit:
WHEREFORE, this Court hereby renders JUDGMENT DECLARING the
INP Retirees entitled to the same or identical retirement benefits
and such other benefits being granted, accorded and bestowed
upon the PNP Retirees under the PNP Law (RA No. 6975, as
amended).
The respondents Government Departments and Agencies shall
IMMEDIATELY EFFECT and IMPLEMENT the proper adjustments on
the INP Retirees’ retirement and such other benefits, RETROACTIVE
to its date of effectivity, and RELEASE and PAY to the INP Retirees
the due payments of the amounts.
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as
Supplement to the Decision whereunder it granted the GSIS’ motion
Rule 63 Full Text Cases andm66 of 88
to dismiss and thus considered the basic petition as withdrawn with
respect to the latter.
From the adverse decision of the trial court, the remaining
respondents, namely, DBM, PNP, NAPOLCOM and CSC, interposed
an appeal to the CA whereat their appellate recourse was docketed
as CA-G.R. CV No. 78203.
As stated at the threshold hereof, the CA, in its decision of July 7,
2005,7 affirmed that of the trial court upholding the entitlement of
the INP retirees to the same or identical retirement benefits
accorded upon PNP retirees under R.A. No. 6975, as amended.
Their motion for reconsideration having been denied by the CA in`
its equally assailed resolution of August 24, 2005,8 herein petitioners
are now with this Court via the instant recourse on their singular
submission that -
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN
AFFIRMING THE DECISION OF THE TRIAL COURT NOTWITHSTANDING
THAT IT IS CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
We DENY.
In the main, it is petitioners’ posture that R.A. No. 6975 clearly
abolished the INP and created in its stead a new police force, the
PNP. Prescinding therefrom, petitioners contend that since the PNP
is an organization entirely different from the INP, it follows that INP
retirees never became PNP members. Ergo, they cannot avail
themselves of the retirement benefits accorded to PNP members
under R.A. No. 6975 and its amendatory law, R.A. No. 8551.
A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on
December 13, 1990, or just about four (4) years after the 1986 Edsa
Revolution toppled down the dictatorship regime. Egged on by the
current sentiment of the times generated by the long period of
martial rule during which the police force, the PC-INP, had a military
character, being then a major service of the Armed Forces of the
Philippines, and invariably moved by a fresh constitutional mandate
for the establishment of one police force which should be national in
scope and, most importantly, purely civilian in character,9 Congress
enacted R.A. No. 6975 establishing the PNP and placing it under the
Department of Interior and Local Government. To underscore the
civilian character of the PNP, R.A. No. 6975 made it emphatically
clear in its declaration of policy the following:
Section 2. Declaration of policy - It is hereby declared to be the
policy of the State to promote peace and order, ensure public safety
and further strengthen local government capability aimed towards
the effective delivery of the basic services to the citizenry through
the establishment of a highly efficient and competent police force
that is national in scope and civilian in character. xxx.
The police force shall be organized, trained and equipped primarily
for the performance of police functions. Its national scope and
civilian character shall be paramount. No element of the police force
shall be military nor shall any position thereof be occupied by active
members of the [AFP]. (Emphasis and word in bracket supplied.)
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially
consisted of the members of the police forces who were integrated
into the INP by virtue of P.D. No. 765, while Section 86 10 of the same
law provides for the assumption by the PNP of the police functions
of the INP and its absorption by the former, including its
appropriations, funds, records, equipment, etc., as well as its
personnel.11 And to govern the statute’s implementation, Section 85
of the Act spelled out the following absorption phases:
Phase I – Exercise of option by the uniformed members of the [PC],
the PC elements assigned with the Narcotics Command, CIS, and the
personnel of the technical services of the AFP assigned with the PC
to include the regular CIS investigating agents and the operatives
and agents of the NAPOLCOM Inspection. Investigation and
Intelligence Branch, and the personnel of the absorbed National
Action Committee on Anti-Hijacking (NACAH) of the Department of
National Defense to be completed within six (6) months from the
date of the effectivity of this Act. At the end of this phase, all
personnel from the INP, PC, AFP Technical Services, NACAH, and
NAPOLCOM Inspection, Investigation and Intelligence Branch shall
have been covered by official orders assigning them to the PNP, Fire
and Jail Forces by their respective units.
Phase II – Approval of the table of organization and equipment of all
bureaus and offices created under this Act, preparation and filling up
of their staffing pattern, transfer of assets to the [DILG] and
organization of the Commission, to be completed within twelve (12)
months from the effectivity date hereof. At the end of this phase, all
personnel to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the PNP
shall be fully operational.
The PC officers and enlisted personnel who have not opted to join
the PNP shall be reassigned to the Army, Navy or Air Force, or shall
be allowed to retire under existing AFP rules and regulations. Any
PC-INP officer or enlisted personnel may, within the twelve-month
period from the effectivity of this Act, retire and be paid retirement
benefits corresponding to a position two (2) ranks higher than his
present grade, subject to the conditions that at the time he applies
for retirement, he has rendered at least twenty (20) years of service
and still has, at most, twenty-four (24) months of service remaining
before the compulsory retirement age as provided by existing law
for his office.
Phase III – Adjustment of ranks and establishment of one (1) lineal
roster of officers and another for non-officers, and the
rationalization of compensation and retirement systems; taking into
consideration the existing compensation schemes and retirement
and separation benefit systems of the different components of the
PNP, to ensure that no member of the PNP shall suffer any
diminution in basic longevity and incentive pays, allowances and
retirement benefits due them before the creations of the PNP, to be
completed within eighteen (18) months from the effectivity of this
Act. xxx.
Upon the effectivity of this Act, the [DILG] Secretary shall exercise
administrative supervision as well as operational control over the
transferred, merged and/or absorbed AFP and INP units. The
incumbent Director General of the PC-INP shall continue to act as
Director General of the PNP until … replaced …. (Emphasis and
words in brackets supplied.)
Rule 63 Full Text Cases andm67 of 88
From the foregoing, it appears clear to us that the INP was never, as
posited by the petitioners, abolished or terminated out of existence
by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the words
"abolish" or "terminate" appear in reference to the INP. Instead,
what the law provides is for the "absorption," "transfer," and/or
"merger" of the INP, as well as the other offices comprising the PC-
INP, with the PNP. To "abolish" is to do away with, to annul,
abrogate or destroy completely;12 to "absorb" is to assimilate,
incorporate or to take in.13 "Merge" means to cause to combine or
unite to become legally absorbed or extinguished by merger14 while
"transfer" denotes movement from one position to another. Clearly,
"abolition" cannot be equated with "absorption."
True it is that Section 9015 of R.A. No. 6975 speaks of the INP
"[ceasing] to exist" upon the effectivity of the law. It ought to be
stressed, however, that such cessation is but the logical
consequence of the INP being absorbed by the PNP.1a\^/phi1.net
Far from being abolished then, the INP, at the most, was merely
transformed to become the PNP, minus of course its military
character and complexion.
Even the petitioners’ effort at disclosing the legislative intent behind
the enactment of R.A. No. 6975 cannot support their theory of
abolition. Rather, the Senate and House deliberations on the bill that
eventually became R.A. No. 6975 reveal what has correctly been
held by the CA in its assailed decision: that the PNP was precisely
created to erase the stigma spawned by the militarization of the
police force under the PC-INP structure. The rationale behind the
passage of R.A. No. 6975 was adequately articulated by no less than
the sponsor16 of the corresponding House bill in his sponsorship
speech, thus:
By removing the police force from under the control and supervision
of military officers, the bill seeks to restore and underscore the
civilian character of police work - an otherwise universal concept
that was muddled up by the martial law years.
Indeed, were the legislative intent was for the INP’s abolition such
that nothing would be left of it, the word "abolish" or what passes
for it could have easily found its way into the very text of the law
itself, what with the abundant use of the word during the legislative
deliberations. But as can be gleaned from said deliberations, the
lawmakers’ concern centered on the fact that if the entire PC-INP
corps join the PNP, then the PC-INP will necessarily be abolished, for
who then would be its members? Of more consequence, the
lawmakers were one in saying that there should never be two
national police agencies at the same time.
With the conclusion herein reached that the INP was not in fact
abolished but was merely transformed to become the PNP,
members of the INP which include the herein respondents are,
therefore, not excluded from availing themselves of the retirement
benefits accorded to PNP retirees under Sections 7417 and 7518 of
R.A. No. 6975, as amended by R.A. No. 8551. It may be that
respondents were no longer in the government service at the time
of the enactment of R.A. No. 6975. This fact, however, without
more, would not pose as an impediment to the respondents’
entitlement to the new retirement scheme set forth under the
aforecited sections. As correctly ratiocinated by the CA to which we
are in full accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did not
impose a new obligation to pay the INP retirees the difference
between what they received when they retired and what would now
be due to them after R.A. No. 6975 was enacted. Even so, that did
not render the RTC’s interpretation of R.A. No. 6975 any less valid.
The [respondents’] retirement prior to the passage of R.A. No. 6975
did not exclude them from the benefits provided by R.A. No. 6975,
as amended by R.A. No. 8551, since their membership in the INP was
an antecedent fact that nonetheless allowed them to avail
themselves of the benefits of the subsequent laws. R.A. No. 6975
considered them as PNP members, always referring to their
membership and service in the INP in providing for their retirement
benefits. 19
Petitioners maintain, however, that NAPOLCOM Resolution No.
8,20 particularly Section 1121 thereof, bars the payment of any
differential in retirement pay to officers and non-officers who are
already retired prior to the effectivity of R.A. No. 6975.
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of
rationalized retirement benefits to PNP members who have
meanwhile retired before its (R.A. No. 8551) enactment was not
prohibited. In fact, its Section 3822 explicitly states that the
rationalized retirement benefits schedule and program "shall have
retroactive effect in favor of PNP members and officers retired or
separated from the time specified in the law." To us, the aforesaid
provision should be made applicable to INP members who had
retired prior to the effectivity of R.A. No. 6975. For, as afore-held,
the INP was, in effect, merely absorbed by the PNP and not
abolished.
Indeed, to bar payment of retirement pay differential to INP
members who were already retired before R.A. No. 6975 became
effective would even run counter to the purpose of NAPOLCOM
Resolution No. 8 itself, as expressed in its preambulatory clause,
which is to rationalize the retirement system of the PNP taking into
consideration existing retirement and benefit systems (including R.A.
No. 6975 and P.D. No. 1184) of the different components thereof "to
ensure that no member of the PNP shall suffer any diminution in the
retirement benefits due them before the creation of the PNP." 23
Most importantly, the perceived restriction could not plausibly
preclude the respondents from asserting their entitlement to
retirement benefits adjusted to the level when R.A. No. 6975 took
effect. Such adjustment hews with the constitutional warrant that
"the State shall, from time to time, review to upgrade the pensions
and other benefits due to retirees of both the government and
private sectors,"24 and the implementing mandate under the Senior
Citizen’s Law25 that "to the extent practicable and feasible,
retirement benefits xxx shall be upgraded to be at par with the
current scale enjoyed by those in actual service."1awphi1.nét
Certainly going for the respondents in their bid to enjoy the same
retirement benefits granted to PNP retirees, either under R.A. No.
6975 or R.A. No. 8551, is Section 34 of the latter law which amended
Section 75 of R.A. No. 6975 by adding thereto the following proviso:
Section 75. Retirement benefits. x x x: Provided, finally, That
retirement pay of the officers/non-officers of the PNP shall be subject
to adjustments based on the prevailing scale of base pay of police
personnel in the active service.
Rule 63 Full Text Cases andm68 of 88
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the retiree
because their intention is to provide for his sustenance and
hopefully, even comfort, when he no longer has the stamina to
continue earning his livelihood. The liberal approach aims to achieve
the humanitarian purposes of the law in order that efficiency,
security and well-being of government employees may be
enhanced.26
The petitioners parlay the notion of prospective application of
statutes, noting in this regard that R.A. No. 6975, as amended,
cannot be applied retroactively, there being no provision to that
effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself
contextually provides for its retroactive application to cover those
who had retired prior to its effectivity. In this regard, we invite
attention to the three (3) phases of implementation under Section
85 for the absorption and continuation in the service of, among
others, the INP members under the newly-established PNP.
In a further bid to scuttle respondents’ entitlement to the desired
retirement benefits, the petitioners fault the trial court for ordering
the immediate adjustments of the respondents’ retirement benefits
when the basic petition filed before it was one for declaratory relief.
To the petitioners, such petition does not essentially entail an
executory process, the only relief proper under that setting being a
declaration of the parties’ rights and duties.
Petitioners’ above posture is valid to a point. However, the
execution of judgments in a petition for declaratory relief is not
necessarily indefensible. In Philippine Deposit Insurance
Corporation[PDIC] v. Court of Appeals,27 wherein the Court affirmed
the order for the petitioners therein to pay the balance of the
deposit insurance to the therein respondents, we categorically
ruled:
Now, there is nothing in the nature of a special civil action for
declaratory relief that proscribes the filing of a counterclaim based
on the same transaction, deed or contract subject of the complaint.
A special civil action is after all not essentially different from an
ordinary civil action, which is generally governed by Rules 1 to 56 of
the Rules of Court, except that the former deals with a special
subject matter which makes necessary some special regulation. But
the identity between their fundamental nature is such that the same
rules governing ordinary civil suits may and do apply to special civil
actions if not inconsistent with or if they may serve to supplement
the provisions of the peculiar rules governing special civil actions. 28
Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of
Malabang, Lanao del Sur:29 the Court upheld the lower court’s order
for a party to refund the amounts paid by the adverse party under
the municipal ordinance therein questioned, stating:
x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be
converted into an ordinary action and the parties allowed to file
such pleadings as may be necessary or proper, if before the final
termination of the case "a breach or violation of an … ordinance,
should take place." In the present case, no breach or violation of the
ordinance occurred. The petitioner decided to pay "under protest"
the fees imposed by the ordinance. Such payment did not affect the
case; the declaratory relief action was still proper because the
applicability of the ordinance to future transactions still remained to
be resolved, although the matter could also be threshed out in an
ordinary suit for the recovery of taxes paid …. In its petition for
declaratory relief, petitioner-appellee alleged that by reason of the
enforcement of the municipal ordinance by respondents it was
forced to pay under protest the fees imposed pursuant to the said
ordinance, and accordingly, one of the reliefs prayed for by the
petitioner was that the respondents be ordered to refund all the
amounts it paid to respondent Municipal Treasurer during the
pendency of the case. The inclusion of said allegation and prayer in
the petition was not objected to by the respondents in their answer.
During the trial, evidence of the
payments made by the petitioner was introduced. Respondents
were thus fully aware of the petitioner's claim for refund and of
what would happen if the ordinance were to be declared invalid by
the court.
The Court sees no reason for treating this case differently from PDIC
and Matalin.1awphi1.nét This disposition becomes all the more
appropriate considering that the respondents, as petitioners in the
RTC, pleaded for the immediate adjustment of their retirement
benefits which, significantly, the herein petitioners, as respondents
in the same court, did not object to. Being aware of said prayer, the
petitioners then already knew the logical consequence if, as it
turned out, a declaratory judgment is rendered in the respondents’
favor.
At bottom then, the trial court’s judgment forestalled multiplicity of
suits which, needless to stress, would only entail a long and arduous
process. Considering their obvious advanced years, the respondents
can hardly afford another protracted proceedings. It is thus for this
Court to already write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed
decision and resolution of the CA, respectively dated July 7, 2005
and August 24, 2005, are AFFIRMED.
No costs.
SO ORDERED.
EN BANC
G.R. No. 159357 April 28, 2004
Brother MARIANO "MIKE" Z. VELARDE, petitioner,
vs.
SOCIAL JUSTICE SOCIETY, respondent.
DECISION
PANGANIBAN, J.:
A decision that does not conform to the form and substance
required by the Constitution and the law is void and deemed legally
inexistent. To be valid, decisions should comply with the form, the
procedure and the substantive requirements laid out in the
Constitution, the Rules of Court and relevant circulars/orders of the
Rule 63 Full Text Cases andm69 of 88
Supreme Court. For the guidance of the bench and the bar, the
Court hereby discusses these forms, procedures and requirements.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of
Court, assailing the June 12, 2003 Decision2 and July 29, 2003
Order3 of the Regional Trial Court (RTC) of Manila (Branch 49).4
there is no justiciable controversy. They were ordered to
submit a pleading by way of advisement, which was closely
followed by another Order denying all the Motions to
Dismiss. Bro. Mike Velarde, Bro. Eddie Villanueva and
Executive Minister Eraño Manalo moved to reconsider the
denial. His Eminence Jaime Cardinal L. Sin, asked for
extension to file memorandum. Only Bro. Eli Soriano
complied with the first Order by submitting his
Memorandum. x x x.

The challenged Decision was the offshoot of a Petition for

"x x x the Court denied the Motions to Dismiss, and the
Declaratory Relief5 filed before the RTC-Manila by herein
Motions for Reconsideration filed by Bro. Mike Velarde,
Respondent Social Justice Society (SJS) against herein Petitioner
Bro. Eddie Villanueva and Executive Minister Eraño
Mariano "Mike" Z. Velarde, together with His Eminence, Jaime
Manalo, which raised no new arguments other than those
Cardinal Sin, Executive Minister Eraño Manalo, Brother Eddie
already considered in the motions to dismiss x x x."9
Villanueva and Brother Eliseo F. Soriano as co-respondents. The
Petition prayed for the resolution of the question "whether or not
the act of a religious leader like any of herein respondents, in After narrating the above incidents, the trial court said that it had
endorsing the candidacy of a candidate for elective office or in jurisdiction over the Petition, because "in praying for a
urging or requiring the members of his flock to vote for a specified determination as to whether the actions imputed to the
candidate, is violative of the letter or spirit of the constitutional respondents are violative of Article II, Section 6 of the Fundamental
provisions x x x."6 Law, [the Petition] has raised only a question of law."10 It then
proceeded to a lengthy discussion of the issue raised in the Petition
– the separation of church and state – even tracing, to some extent,
Alleging that the questioned Decision did not contain a statement of
the historical background of the principle. Through its discourse, the
facts and a dispositive portion, herein petitioner filed a Clarificatory
court a quo opined at some point that the "[e]ndorsement of
Motion and Motion for Reconsideration before the trial court.
specific candidates in an election to any public office is a clear
Soriano, his co-respondent, similarly filed a separate Motion for
violation of the separation clause."11
Reconsideration. In response, the trial court issued the assailed
Order, which held as follows:
After its essay on the legal issue, however, the trial court failed to
include a dispositive portion in its assailed Decision. Thus, Velarde
"x x x [T]his Court cannot reconsider, because what it was
and Soriano filed separate Motions for Reconsideration which, as
asked to do, was only to clarify a Constitutional provision
mentioned earlier, were denied by the lower court.
and to declare whether acts are violative thereof. The
Decision did not make a dispositive portion because a
dispositive portion is required only in coercive reliefs, Hence, this Petition for Review.12
where a redress from wrong suffered and the benefit that
the prevailing party wronged should get. The step that This Court, in a Resolution13 dated September 2, 2003, required SJS
these movants have to take, is direct appeal under Rule 45 and the Office of the Solicitor General (OSG) to submit their
of the Rules of Court, for a conclusive interpretation of the respective comments. In the same Resolution, the Court gave the
Constitutional provision to the Supreme Court."7 other parties -- impleaded as respondents in the original case below
--the opportunity to comment, if they so desired.
The Antecedent Proceedings
On April 13, 2004, the Court en banc conducted an Oral Argument.14
On January 28, 2003, SJS filed a Petition for Declaratory Relief ("SJS
Petition") before the RTC-Manila against Velarde and his aforesaid The Issues
co-respondents. SJS, a registered political party, sought the
interpretation of several constitutional provisions,8 specifically on In his Petition, Brother Mike Velarde submits the following issues for
the separation of church and state; and a declaratory judgment on this Court’s resolution:
the constitutionality of the acts of religious leaders endorsing a
candidate for an elective office, or urging or requiring the members
"1. Whether or not the Decision dated 12 June 2003
of their flock to vote for a specified candidate.
rendered by the court a quo was proper and valid;

The subsequent proceedings were recounted in the challenged

"2. Whether or not there exists justiceable controversy in
Decision in these words:
herein respondent’s Petition for declaratory relief;

"x x x. Bro. Eddie Villanueva submitted, within the original

"3. Whether or not herein respondent has legal interest in
period [to file an Answer], a Motion to Dismiss.
filing the Petition for declaratory relief;
Subsequently, Executive Minister Eraño Manalo and Bro.
Mike Velarde, filed their Motions to Dismiss. While His
Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. "4. Whether or not the constitutional question sought to
Eli Soriano, filed an Answer within the extended period be resolved by herein respondent is ripe for judicial
and similarly prayed for the dismissal of the Petition. All determination;
sought the dismissal of the Petition on the common
grounds that it does not state a cause of action and that
Rule 63 Full Text Cases andm70 of 88
 "5. Whether or not there is adequate remedy other than
the declaratory relief; and,
"6. Whether or not the court a quo has jurisdiction over
the Petition for declaratory relief of herein respondent."15
During the Oral Argument, the issues were narrowed down and
classified as follows:
"A. Procedural Issues
"Did the Petition for Declaratory Relief raise a justiciable
controversy? Did it state a cause of action? Did respondent
have any legal standing to file the Petition for Declaratory
Relief?
"B. Substantive Issues
"1. Did the RTC Decision conform to the form
and substance required by the Constitution, the
law and the Rules of Court?
"2. May religious leaders like herein petitioner,
Bro. Mike Velarde, be prohibited from endorsing
candidates for public office? Corollarily, may
they be banned from campaigning against said
candidates?"
The Court’s Ruling
The Petition of Brother Mike Velarde is meritorious.
Procedural Issues:
Requisites of Petitions for Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with petitions
for declaratory relief, provides in part:
"Section 1. Who may file petition.- Any person interested
under a deed, will, contract or other written instrument,
whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental
regulation may, before breach or violation thereof, bring
an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising,
and for a declaration of his rights or duties thereunder."
Based on the foregoing, an action for declaratory relief should be
filed by a person interested under a deed, a will, a contract or other
written instrument, and whose rights are affected by a statute, an
executive order, a regulation or an ordinance. The purpose of the
remedy is to interpret or to determine the validity of the written
instrument and to seek a judicial declaration of the parties’ rights or
duties thereunder.16 The essential requisites of the action are as
follows: (1) there is a justiciable controversy; (2) the controversy is
between persons whose interests are adverse; (3) the party seeking
the relief has a legal interest in the controversy; and (4) the issue is
ripe for judicial determination.17
Justiciable Controversy
Brother Mike Velarde contends that the SJS Petition failed to allege,
much less establish before the trial court, that there existed a
justiciable controversy or an adverse legal interest between them;
and that SJS had a legal right that was being violated or threatened
to be violated by petitioner. On the contrary, Velarde alleges that
SJS premised its action on mere speculations, contingent events, and
hypothetical issues that had not yet ripened into an actual
controversy. Thus, its Petition for Declaratory Relief must fail.
A justiciable controversy refers to an existing case or controversy
that is appropriate or ripe for judicial determination, not one that is
conjectural or merely anticipatory.18 The SJS Petition for Declaratory
Relief fell short of this test. It miserably failed to allege an existing
controversy or dispute between the petitioner and the named
respondents therein. Further, the Petition did not sufficiently state
what specific legal right of the petitioner was violated by the
respondents therein; and what particular act or acts of the latter
were in breach of its rights, the law or the Constitution.
As pointed out by Brother Eliseo F. Soriano in his Comment,19 what
exactly has he done that merited the attention of SJS? He confesses
that he does not know the answer, because the SJS Petition (as well
as the assailed Decision of the RTC) "yields nothing in this respect."
His Eminence, Jaime Cardinal Sin, adds that, at the time SJS filed its
Petition on January 28, 2003, the election season had not even
started yet; and that, in any event, he has not been actively involved
in partisan politics.
An initiatory complaint or petition filed with the trial court should
contain "a plain, concise and direct statement of the ultimate facts
on which the party pleading relies for his claim x x x."20 Yet, the SJS
Petition stated no ultimate facts.
Indeed, SJS merely speculated or anticipated without factual
moorings that, as religious leaders, the petitioner and his co-
respondents below had endorsed or threatened to endorse a
candidate or candidates for elective offices; and that such actual or
threatened endorsement "will enable [them] to elect men to public
office who [would] in turn be forever beholden to their leaders,
enabling them to control the government"[;]21 and "pos[ing] a clear
and present danger of serious erosion of the people’s faith in the
electoral process[;] and reinforc[ing] their belief that religious
leaders determine the ultimate result of elections,"22 which would
then be violative of the separation clause.
Such premise is highly speculative and merely theoretical, to say the
least. Clearly, it does not suffice to constitute a justiciable
controversy. The Petition does not even allege any indication or
manifest intent on the part of any of the respondents below to
champion an electoral candidate, or to urge their so-called flock to
vote for, or not to vote for, a particular candidate. It is a time-
honored rule that sheer speculation does not give rise to an
actionable right.
Obviously, there is no factual allegation that SJS’ rights are being
subjected to any threatened, imminent and inevitable violation that
should be prevented by the declaratory relief sought. The judicial
power and duty of the courts to settle actual controversies involving
rights that are legally demandable and enforceable23 cannot be
exercised when there is no actual or threatened violation of a legal
right.
Rule 63 Full Text Cases andm71 of 88
All that the 5-page SJS Petition prayed for was "that the question
raised in paragraph 9 hereof be resolved."24 In other words, it
merely sought an opinion of the trial court on whether the
speculated acts of religious leaders endorsing elective candidates for
political offices violated the constitutional principle on the
separation of church and state. SJS did not ask for a declaration of its
rights and duties; neither did it pray for the stoppage of any
threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion.25
Cause of Action
Respondent SJS asserts that in order to maintain a petition for
declaratory relief, a cause of action need not be alleged or proven.
Supposedly, for such petition to prosper, there need not be any
violation of a right, breach of duty or actual wrong committed by
one party against the other.
Petitioner, on the other hand, argues that the subject matter of an
action for declaratory relief should be a deed, a will, a contract (or
other written instrument), a statute, an executive order, a regulation
or an ordinance. But the subject matter of the SJS Petition is "the
constitutionality of an act of a religious leader to endorse the
candidacy of a candidate for elective office or to urge or require the
members of the flock to vote for a specified candidate."26According
to petitioner, this subject matter is "beyond the realm of an action
for declaratory relief."27 Petitioner avers that in the absence of a
valid subject matter, the Petition fails to state a cause of action and,
hence, should have been dismissed outright by the court a quo.
A cause of action is an act or an omission of one party in violation of
the legal right or rights of another, causing injury to the latter. 28 Its
essential elements are the following: (1) a right in favor of the
plaintiff; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) such defendant’s act or
omission that is violative of the right of the plaintiff or constituting a
breach of the obligation of the former to the latter.29
The failure of a complaint to state a cause of action is a ground for
its outright dismissal.30 However, in special civil actions for
declaratory relief, the concept of a cause of action under ordinary
civil actions does not strictly apply. The reason for this exception is
that an action for declaratory relief presupposes that there has been
no actual breach of the instruments involved or of rights arising
thereunder.31 Nevertheless, a breach or violation should be
impending, imminent or at least threatened.
A perusal of the Petition filed by SJS before the RTC discloses no
explicit allegation that the former had any legal right in its favor that
it sought to protect. We can only infer the interest, supposedly in its
favor, from its bare allegation that it "has thousands of members
who are citizens-taxpayers-registered voters and who are keenly
interested in a judicial clarification of the constitutionality of the
partisan participation of religious leaders in Philippine politics and in
the process to insure adherence to the Constitution by everyone x x
x."32
Such general averment does not, however, suffice to constitute a
legal right or interest. Not only is the presumed interest not personal
in character; it is likewise too vague, highly speculative and
uncertain.33 The Rules require that the interest must be material to
the issue and affected by the questioned act or instrument, as
distinguished from simple curiosity or incidental interest in the
question raised.34
To bolster its stance, SJS cites the Corpus Juris Secundum and
submits that the "[p]laintiff in a declaratory judgment action does
not seek to enforce a claim against [the] defendant, but seeks a
judicial declaration of [the] rights of the parties for the purpose of
guiding [their] future conduct, and the essential distinction between
a ‘declaratory judgment action’ and the usual ‘action’ is that no
actual wrong need have been committed or loss have occurred in
order to sustain the declaratory judgment action, although there
must be no uncertainty that the loss will occur or that the asserted
rights will be invaded."35
SJS has, however, ignored the crucial point of its own reference –
that there must be no uncertainty that the loss will occur or that the
asserted rights will be invaded. Precisely, as discussed earlier, it
merely conjectures that herein petitioner (and his co-respondents
below) might actively participate in partisan politics, use "the
awesome voting strength of its faithful flock [to] enable it to elect
men to public office x x x, enabling [it] to control the government." 36
During the Oral Argument, though, Petitioner Velarde and his co-
respondents below all strongly asserted that they had not in any
way engaged or intended to participate in partisan politics. They all
firmly assured this Court that they had not done anything to trigger
the issue raised and to entitle SJS to the relief sought.
Indeed, the Court finds in the Petition for Declaratory Relief no
single allegation of fact upon which SJS could base a right of relief
from the named respondents. In any event, even granting that it
sufficiently asserted a legal right it sought to protect, there was
nevertheless no certainty that such right would be invaded by the
said respondents. Not even the alleged proximity of the elections to
the time the Petition was filed below (January 28, 2003) would have
provided the certainty that it had a legal right that would be
jeopardized or violated by any of those respondents.
Legal Standing
Legal standing or locus standi has been defined as a personal and
substantial interest in the case, such that the party has sustained or
will sustain direct injury as a result of the challenged
act.37 Interest means a material interest in issue that is affected by
the questioned act or instrument, as distinguished from a mere
incidental interest in the question involved.38
Petitioner alleges that "[i]n seeking declaratory relief as to the
constitutionality of an act of a religious leader to endorse, or require
the members of the religious flock to vote for a specific candidate,
herein Respondent SJS has no legal interest in the controversy";39 it
has failed to establish how the resolution of the proffered question
would benefit or injure it.
Parties bringing suits challenging the constitutionality of a law, an
act or a statute must show "not only that the law [or act] is invalid,
but also that [they have] sustained or [are] in immediate or
imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that [they] suffer thereby in some
indefinite way."40 They must demonstrate that they have been, or
are about to be, denied some right or privilege to which they are
lawfully entitled, or that they are about to be subjected to some
burdens or penalties by reason of the statute or act complained of.41
Rule 63 Full Text Cases andm72 of 88
First, parties suing as taxpayers must specifically prove that they
have sufficient interest in preventing the illegal expenditure of
money raised by taxation.42 A taxpayer’s action may be properly
brought only when there is an exercise by Congress of its taxing or
spending power.43 In the present case, there is no allegation,
whether express or implied, that taxpayers’ money is being illegally
disbursed.
Second, there was no showing in the Petition for Declaratory Relief
that SJS as a political party or its members as registered voters
would be adversely affected by the alleged acts of the respondents
below, if the question at issue was not resolved. There was no
allegation that SJS had suffered or would be deprived of votes due
to the acts imputed to the said respondents. Neither did it allege
that any of its members would be denied the right of suffrage or the
privilege to be voted for a public office they are seeking.
Finally, the allegedly keen interest of its "thousands of members
who are citizens-taxpayers-registered voters" is too general44 and
beyond the contemplation of the standards set by our
jurisprudence. Not only is the presumed interest impersonal in
character; it is likewise too vague, highly speculative and uncertain
to satisfy the requirement of standing.45
Transcendental Importance
In any event, SJS urges the Court to take cognizance of the Petition,
even sans legal standing, considering that "the issues raised are of
paramount public interest."
In not a few cases, the Court has liberalized the locus standi
requirement when a petition raises an issue of transcendental
significance or paramount importance to the people.46 Recently,
after holding that the IBP had no locus standi to bring the suit, the
Court in IBP v. Zamora47 nevertheless entertained the Petition
therein. It noted that "the IBP has advanced constitutional issues
which deserve the attention of this Court in view of their
seriousness, novelty and weight as precedents."48
Similarly in the instant case, the Court deemed the constitutional
issue raised in the SJS Petition to be of paramount interest to the
Filipino people. The issue did not simply concern a delineation of the
separation between church and state, but ran smack into the
governance of our country. The issue was both transcendental in
importance and novel in nature, since it had never been decided
before.
The Court, thus, called for Oral Argument to determine with
certainty whether it could resolve the constitutional issue despite
the barren allegations in the SJS Petition as well as the abbreviated
proceedings in the court below. Much to its chagrin, however,
counsels for the parties -- particularly for Respondent SJS -- made no
satisfactory allegations or clarifications that would supply the
deficiencies hereinabove discussed. Hence, even if the Court would
exempt this case from the stringent locus standi requirement, such
heroic effort would be futile because the transcendental issue
cannot be resolved anyway.
Proper Proceedings Before the Trial Court
To prevent a repetition of this waste of precious judicial time and
effort, and for the guidance of the bench and the bar, the Court
reiterates the elementary procedure49 that must be followed by trial
courts in the conduct of civil cases.50
Prefatorily, the trial court may -- motu proprio or upon motion of the
defendant -- dismiss a complaint51 (or petition, in a special civil
action) that does not allege the plaintiff’s (or petitioner’s) cause or
causes of action.52 A complaint or petition should contain "a plain,
concise and direct statement of the ultimate facts on which the
party pleading relies for his claim or defense."53 It should likewise
clearly specify the relief sought.54
Upon the filing of the complaint/petition and the payment of the
requisite legal fees, the clerk of court shall forthwith issue the
corresponding summons to the defendants or the respondents, with
a directive that the defendant answer55 within 15 days, unless a
different period is fixed by the court.56 The summons shall also
contain a notice that if such answer is not filed, the
plaintiffs/petitioners shall take a judgment by default and may be
granted the relief applied for.57 The court, however, may -- upon
such terms as may be just -- allow an answer to be filed after the
time fixed by the Rules.58
If the answer sets forth a counterclaim or cross-claim, it must be
answered within ten (10) days from service.59 A reply may be filed
within ten (10) days from service of the pleading responded to.60
When an answer fails to tender an issue or admits the material
allegations of the adverse party’s pleading, the court may, on
motion of that party, direct judgment on such pleading (except in
actions for declaration of nullity or annulment of marriage or for
legal separation).61 Meanwhile, a party seeking to recover upon a
claim, a counterclaim or crossclaim -- or to obtain a declaratory
relief -- may, at any time after the answer thereto has been served,
move for a summary judgment in its favor.62 Similarly, a party
against whom a claim, a counterclaim or crossclaim is asserted -- or
a declaratory relief sought -- may, at any time, move for a summary
judgment in its favor.63 After the motion is heard, the judgment
sought shall be rendered forthwith if there is a showing that, except
as to the amount of damages, there is no genuine issue as to any
material fact; and that the moving party is entitled to a judgment as
a matter of law.64
Within the time for -- but before -- filing the answer to the complaint
or petition, the defendant may file a motion to dismiss based on any
of the grounds stated in Section 1 of Rule 16 of the Rules of Court.
During the hearing of the motion, the parties shall submit their
arguments on the questions of law, and their evidence on the
questions of fact.65 After the hearing, the court may dismiss the
action or claim, deny the motion, or order the amendment of the
pleadings. It shall not defer the resolution of the motion for the
reason that the ground relied upon is not indubitable. In every case,
the resolution shall state clearly and distinctly the reasons
therefor.66
If the motion is denied, the movant may file an answer within the
balance of the period originally prescribed to file an answer, but not
less than five (5) days in any event, computed from the receipt of
the notice of the denial. If the pleading is ordered to be amended,
the defendant shall file an answer within fifteen (15) days, counted
from the service of the amended pleading, unless the court provides
a longer period.67
Rule 63 Full Text Cases andm73 of 88
After the last pleading has been served and filed, the case shall be
set for pretrial,68 which is a mandatory proceeding.69 A plaintiff’s/
petitioner’s (or its duly authorized representative’s) non-appearance
at the pretrial, if without valid cause, shall result in the dismissal of
the action with prejudice, unless the court orders otherwise. A
similar failure on the part of the defendant shall be a cause for
allowing the plaintiff/petitioner to present evidence ex parte, and
the court to render judgment on the basis thereof.70
The parties are required to file their pretrial briefs; failure to do so
shall have the same effect as failure to appear at the pretrial.71 Upon
the termination thereof, the court shall issue an order reciting in
detail the matters taken up at the conference; the action taken on
them, the amendments allowed to the pleadings; and the
agreements or admissions, if any, made by the parties regarding any
of the matters considered.72 The parties may further avail
themselves of any of the modes of discovery,73 if they so wish.
Thereafter, the case shall be set for trial,74 in which the parties shall
adduce their respective evidence in support of their claims and/or
defenses. By their written consent or upon the application of either
party, or on its own motion, the court may also order any or all of
the issues to be referred to a commissioner, who is to be appointed
by it or to be agreed upon by the parties.75 The trial or hearing
before the commissioner shall proceed in all respects as it would if
held before the court.76
Upon the completion of such proceedings, the commissioner shall
file with the court a written report on the matters referred by the
parties.77 The report shall be set for hearing, after which the court
shall issue an order adopting, modifying or rejecting it in whole or in
part; or recommitting it with instructions; or requiring the parties to
present further evidence before the commissioner or the court.78
Finally, a judgment or final order determining the merits of the case
shall be rendered. The decision shall be in writing, personally and
directly prepared by the judge, stating clearly and distinctly the facts
and the law on which it is based, signed by the issuing magistrate,
and filed with the clerk of court.79
Based on these elementary guidelines, let us examine the
proceedings before the trial court in the instant case.
First, with respect to the initiatory pleading of the SJS. Even a
cursory perusal of the Petition immediately reveals its gross
inadequacy. It contained no statement of ultimate facts upon which
the petitioner relied for its claim. Furthermore, it did not specify the
relief it sought from the court, but merely asked it to answer a
hypothetical question.
Relief, as contemplated in a legal action, refers to a specific coercive
measure prayed for as a result of a violation of the rights of a
plaintiff or a petitioner.80 As already discussed earlier, the Petition
before the trial court had no allegations of fact81 or of any specific
violation of the petitioner’s rights, which the respondents had a duty
to respect. Such deficiency amounted to a failure to state a cause of
action; hence, no coercive relief could be sought and adjudicated.
The Petition evidently lacked substantive requirements and, we
repeat, should have been dismissed at the outset.
Second, with respect to the trial court proceedings. Within the
period set to file their respective answers to the SJS Petition,
Velarde, Villanueva and Manalo filed Motions to Dismiss; Cardinal
Sin, a Comment; and Soriano, within a priorly granted extended
period, an Answer in which he likewise prayed for the dismissal of
the Petition.82 SJS filed a Rejoinder to the Motion of Velarde, who
subsequently filed a Sur-Rejoinder. Supposedly, there were "several
scheduled settings, in which the "[c]ourt was apprised of the
respective positions of the parties."83 The nature of such settings --
whether pretrial or trial hearings -- was not disclosed in the records.
Before ruling on the Motions to Dismiss, the trial court issued an
Order84 dated May 8, 2003, directing the parties to submit their
memoranda. Issued shortly thereafter was another Order85 dated
May 14, 2003, denying all the Motions to Dismiss.
In the latter Order, the trial court perfunctorily ruled:
"The Court now resolves to deny the Motions to Dismiss,
and after all the memoranda are submitted, then, the case
shall be deemed as submitted for resolution."86
Apparently, contrary to the requirement of Section 2 of Rule 16 of
the Rules of Court, the Motions were not heard. Worse, the Order
purportedly resolving the Motions to Dismiss did not state any
reason at all for their denial, in contravention of Section 3 of the said
Rule 16. There was not even any statement of the grounds relied
upon by the Motions; much less, of the legal findings and
conclusions of the trial court.
Thus, Velarde, Villanueva and Manalo moved for reconsideration.
Pending the resolution of these Motions for Reconsideration,
Villanueva filed a Motion to suspend the filing of the parties’
memoranda. But instead of separately resolving the pending
Motions fairly and squarely, the trial court again transgressed the
Rules of Court when it immediately proceeded to issue its Decision,
even before tackling the issues raised in those Motions.
Furthermore, the RTC issued its "Decision" without allowing the
parties to file their answers. For this reason, there was no joinder of
the issues. If only it had allowed the filing of those answers, the trial
court would have known, as the Oral Argument revealed, that the
petitioner and his co-respondents below had not committed or
threatened to commit the act attributed to them (endorsing
candidates) -- the act that was supposedly the factual basis of the
suit.
Parenthetically, the court a quo further failed to give a notice of the
Petition to the OSG, which was entitled to be heard upon questions
involving the constitutionality or validity of statutes and other
measures.87
Moreover, as will be discussed in more detail, the questioned
Decision of the trial court was utterly wanting in the requirements
prescribed by the Constitution and the Rules of Court.
All in all, during the loosely abbreviated proceedings of the case, the
trial court indeed acted with inexplicable haste, with total ignorance
of the law -- or, worse, in cavalier disregard of the rules of procedure
-- and with grave abuse of discretion.
Contrary to the contentions of the trial judge and of SJS, proceedings
for declaratory relief must still follow the process described above --
the petition must state a cause of action; the proceedings must
undergo the procedure outlined in the Rules of Court; and the
decision must adhere to constitutional and legal requirements.
Rule 63 Full Text Cases andm74 of 88
 First Substantive Issue:
Fundamental Requirements of a Decision
The Constitution commands that "[n]o decision shall be rendered by
any court without expressing therein clearly and distinctly the facts
and the law on which it is based. No petition for review or motion
for reconsideration of a decision of the court shall be refused due
course or denied without stating the basis therefor."88
Consistent with this constitutional mandate, Section 1 of Rule 36 of
the Rules on Civil Procedure similarly provides:
"Sec. 1. Rendition of judgments and final orders. – A
judgment or final order determining the merits of the case
shall be in writing personally and directly prepared by the
judge, stating clearly and distinctly the facts and the law
on which it is based, signed by him and filed with the clerk
of court."
In the same vein, Section 2 of Rule 120 of the Rules of Court on
Criminal Procedure reads as follows:
"Sec. 2. Form and contents of judgments. -- The judgment
must be written in the official language, personally and
directly prepared by the judge and signed by him and shall
contain clearly and distinctly a statement of the facts
proved or admitted by the accused and the law upon
which the judgment is based.
"x x x xxx x x x."
Pursuant to the Constitution, this Court also issued on January 28,
1988, Administrative Circular No. 1, prompting all judges "to make
complete findings of facts in their decisions, and scrutinize closely
the legal aspects of the case in the light of the evidence presented.
They should avoid the tendency to generalize and form conclusions
without detailing the facts from which such conclusions are
deduced."
In many cases,89 this Court has time and time again reminded
"magistrates to heed the demand of Section 14, Article VIII of the
Constitution." The Court, through Chief Justice Hilario G. Davide Jr.
in Yao v. Court of Appeals,90discussed at length the implications of
this provision and strongly exhorted thus:
"Faithful adherence to the requirements of Section 14, Article VIII of
the Constitution is indisputably a paramount component of due
process and fair play. It is likewise demanded by the due process
clause of the Constitution. The parties to a litigation should be
informed of how it was decided, with an explanation of the factual
and legal reasons that led to the conclusions of the court. The court
cannot simply say that judgment is rendered in favor of X and
against Y and just leave it at that without any justification
whatsoever for its action. The losing party is entitled to know why
he lost, so he may appeal to the higher court, if permitted, should he
believe that the decision should be reversed. A decision that does
not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is
precisely prejudicial to the losing party, who is unable to pinpoint
the possible errors of the court for review by a higher tribunal. More
than that, the requirement is an assurance to the parties that, in
reaching judgment, the judge did so through the processes of legal
reasoning. It is, thus, a safeguard against the impetuosity of the
judge, preventing him from deciding ipse dixit. Vouchsafed neither
the sword nor the purse by the Constitution but nonetheless vested
with the sovereign prerogative of passing judgment on the life,
liberty or property of his fellowmen, the judge must ultimately
depend on the power of reason for sustained public confidence in
the justness of his decision."
In People v. Bugarin,91 the Court also explained:
"The requirement that the decisions of courts must be in
writing and that they must set forth clearly and distinctly
the facts and the law on which they are based serves many
functions. It is intended, among other things, to inform the
parties of the reason or reasons for the decision so that if
any of them appeals, he can point out to the appellate
court the finding of facts or the rulings on points of law
with which he disagrees. More than that, the requirement
is an assurance to the parties that, in reaching judgment,
the judge did so through the processes of legal reasoning.
x x x."
Indeed, elementary due process demands that the parties to a
litigation be given information on how the case was decided, as well
as an explanation of the factual and legal reasons that led to the
conclusions of the court.92
In Madrid v. Court of Appeals,93 this Court had instructed
magistrates to exert effort to ensure that their decisions would
present a comprehensive analysis or account of the factual and legal
findings that would substantially address the issues raised by the
parties.
In the present case, it is starkly obvious that the assailed Decision
contains no statement of facts -- much less an assessment or
analysis thereof -- or of the court’s findings as to the probable facts.
The assailed Decision begins with a statement of the nature of the
action and the question or issue presented. Then follows a brief
explanation of the constitutional provisions involved, and what the
Petition sought to achieve. Thereafter, the ensuing procedural
incidents before the trial court are tracked. The Decision proceeds to
a full-length opinion on the nature and the extent of the separation
of church and state. Without expressly stating the final conclusion
she has reached or specifying the relief granted or denied, the trial
judge ends her "Decision" with the clause "SO ORDERED."
What were the antecedents that necessitated the filing of the
Petition? What exactly were the distinct facts that gave rise to the
question sought to be resolved by SJS? More important, what were
the factual findings and analysis on which the trial court based its
legal findings and conclusions? None were stated or implied. Indeed,
the RTC’s Decision cannot be upheld for its failure to express clearly
and distinctly the facts on which it was based. Thus, the trial court
clearly transgressed the constitutional directive.
The significance of factual findings lies in the value of the decision as
a precedent. How can it be so if one cannot apply the ruling to
similar circumstances, simply because such circumstances are
unknown? Otherwise stated, how will the ruling be applied in the
future, if there is no point of factual comparison?
Rule 63 Full Text Cases andm75 of 88
Moreover, the court a quo did not include a resolutory or dispositive
portion in its so-called Decision. The importance of such portion was
explained in the early case Manalang v. Tuason de Rickards,94 from
which we quote:
"The resolution of the Court on a given issue as embodied
in the dispositive part of the decision or order is the
investitive or controlling factor that determines and settles
the rights of the parties and the questions presented
therein, notwithstanding the existence of statements or
declaration in the body of said order that may be
confusing."
The assailed Decision in the present case leaves us in the dark as to
its final resolution of the Petition. To recall, the original Petition was
for declaratory relief. So, what relief did the trial court grant or
deny? What rights of the parties did it conclusively declare? Its final
statement says, "SO ORDERED." But what exactly did the court
order? It had the temerity to label its issuance a "Decision," when
nothing was in fact decided.
Respondent SJS insists that the dispositive portion can be found in
the body of the assailed Decision. It claims that the issue is disposed
of and the Petition finally resolved by the statement of the trial
court found on page 10 of its 14-page Decision, which reads:
"Endorsement of specific candidates in an election to any public
office is a clear violation of the separation clause."95
We cannot agree.
In Magdalena Estate, Inc. v. Caluag,96 the obligation of the party
imposed by the Court was allegedly contained in the text of the
original Decision. The Court, however, held:
"x x x The quoted finding of the lower court cannot supply
deficiencies in the dispositive portion. It is a mere opinion
of the court and the rule is settled that where there is a
conflict between the dispositive part and the opinion, the
former must prevail over the latter on the theory that the
dispositive portion is the final order while the opinion is
merely a statement ordering nothing." (Italics in the
original)
Thus, the dispositive portion cannot be deemed to be the statement
quoted by SJS and embedded in the last paragraph of page 10 of the
assailed 14-page Decision. If at all, that statement is merely an
answer to a hypothetical legal question and just a part of the
opinion of the trial court. It does not conclusively declare the rights
(or obligations) of the parties to the Petition. Neither does it grant
any -- much less, the proper -- relief under the circumstances, as
required of a dispositive portion.
Failure to comply with the constitutional injunction is a grave abuse
of discretion amounting to lack or excess of jurisdiction. Decisions or
orders issued in careless disregard of the constitutional mandate are
a patent nullity and must be struck down as void.97
Parts of a Decision
In general, the essential parts of a good decision consist of the
following: (1) statement of the case; (2) statement of facts; (3) issues
or assignment of errors; (4) court ruling, in which each issue is, as a
rule, separately considered and resolved; and, finally, (5) dispositive
portion. The ponente may also opt to include an introduction or a
prologue as well as an epilogue, especially in cases in which
controversial or novel issues are involved.98
An introduction may consist of a concise but comprehensive
statement of the principal factual or legal issue/s of the case. In
some cases -- particularly those concerning public interest; or
involving complicated commercial, scientific, technical or otherwise
rare subject matters -- a longer introduction or prologue may serve
to acquaint readers with the specific nature of the controversy and
the issues involved. An epilogue may be a summation of the
important principles applied to the resolution of the issues of
paramount public interest or significance. It may also lay down an
enduring philosophy of law or guiding principle.
Let us now, again for the guidance of the bench and the bar, discuss
the essential parts of a good decision.
1. Statement of the Case
The Statement of the Case consists of a legal definition of the nature
of the action. At the first instance, this part states whether the
action is a civil case for collection, ejectment, quieting of title,
foreclosure of mortgage, and so on; or, if it is a criminal case, this
part describes the specific charge -- quoted usually from the
accusatory portion of the information -- and the plea of the accused.
Also mentioned here are whether the case is being decided on
appeal or on a petition for certiorari, the court of origin, the case
number in the trial court, and the dispositive portion of the assailed
decision.
In a criminal case, the verbatim reproduction of the criminal
information serves as a guide in determining the nature and the
gravity of the offense for which the accused may be found culpable.
As a rule, the accused cannot be convicted of a crime different from
or graver than that charged.
Also, quoting verbatim the text of the information is especially
important when there is a question on the sufficiency of the charge,
or on whether qualifying and modifying circumstances have been
adequately alleged therein.
To ensure that due process is accorded, it is important to give a
short description of the proceedings regarding the plea of the
accused. Absence of an arraignment, or a serious irregularity
therein, may render the judgment void, and further consideration by
the appellate court would be futile. In some instances, especially in
appealed cases, it would also be useful to mention the fact of the
appellants’ detention, in order to dispose of the preliminary query --
whether or not they have abandoned their appeal by absconding or
jumping bail.
Mentioning the court of origin and the case number originally
assigned helps in facilitating the consolidation of the records of the
case in both the trial and the appellate courts, after entry of final
judgment.
Finally, the reproduction of the decretal portion of the assailed
decision informs the reader of how the appealed case was decided
by the court a quo.
Rule 63 Full Text Cases andm76 of 88
2. Statement of Facts
There are different ways of relating the facts of the case. First, under
the objective or reportorial method, the judge summarizes --
without comment -- the testimony of each witness and the contents
of each exhibit. Second, under the synthesis method, the factual
theory of the plaintiff or prosecution and then that of the defendant
or defense is summarized according to the judge’s best
light. Third, in the subjective method, the version of the facts
accepted by the judge is simply narrated without explaining what
the parties’ versions are. Finally, through a combination of objective
and subjective means, the testimony of each witness is reported and
the judge then formulates his or her own version of the facts.
In criminal cases, it is better to present both the version of the
prosecution and that of the defense, in the interest of fairness and
due process. A detailed evaluation of the contentions of the parties
must follow. The resolution of most criminal cases, unlike civil and
other cases, depends to a large extent on the factual issues and the
appreciation of the evidence. The plausibility or the implausibility of
each version can sometimes be initially drawn from a reading of the
facts. Thereafter, the bases of the court in arriving at its findings and
conclusions should be explained.
On appeal, the fact that the assailed decision of the lower court
fully, intelligently and correctly resolved all factual and legal issues
involved may partly explain why the reviewing court finds no reason
to reverse the findings and conclusions of the former. Conversely,
the lower court’s patent misappreciation of the facts or
misapplication of the law would aid in a better understanding of why
its ruling is reversed or modified.
In appealed civil cases, the opposing sets of facts no longer need to
be presented. Issues for resolution usually involve questions of law,
grave abuse of discretion, or want of jurisdiction; hence, the facts of
the case are often undisputed by the parties. With few exceptions,
factual issues are not entertained in non-criminal cases.
Consequently, the narration of facts by the lower court, if exhaustive
and clear, may be reproduced; otherwise, the material factual
antecedents should be restated in the words of the reviewing
magistrate.
In addition, the reasoning of the lower court or body whose decision
is under review should be laid out, in order that the parties may
clearly understand why the lower court ruled in a certain way, and
why the reviewing court either finds no reason to reverse it or
concludes otherwise.
3. Issues or Assignment of Errors
Both factual and legal issues should be stated. On appeal, the
assignment of errors, as mentioned in the appellant’s brief, may be
reproduced in toto and tackled seriatim, so as to avoid motions for
reconsideration of the final decision on the ground that the court
failed to consider all assigned errors that could affect the outcome
of the case. But when the appellant presents repetitive issues or
when the assigned errors do not strike at the main issue, these may
be restated in clearer and more coherent terms.
Though not specifically questioned by the parties, additional issues
may also be included, if deemed important for substantial justice to
be rendered. Note that appealed criminal cases are given de
novo review, in contrast to noncriminal cases in which the reviewing
court is generally limited to issues specifically raised in the appeal.
The few exceptions are errors of jurisdiction; questions not raised
but necessary in arriving at a just decision on the case; or unassigned
errors that are closely related to those properly assigned, or upon
which depends the determination of the question properly raised.
4. The Court’s Ruling
This part contains a full discussion of the specific errors or issues
raised in the complaint, petition or appeal, as the case may be; as
well as of other issues the court deems essential to a just disposition
of the case. Where there are several issues, each one of them should
be separately addressed, as much as practicable. The respective
contentions of the parties should also be mentioned here. When
procedural questions are raised in addition to substantive ones, it is
better to resolve the former preliminarily.
5. The Disposition or Dispositive Portion
In a criminal case, the disposition should include a finding of
innocence or guilt, the specific crime committed, the penalty
imposed, the participation of the accused, the modifying
circumstances if any, and the civil liability and costs. In case an
acquittal is decreed, the court must order the immediate release of
the accused, if detained, (unless they are being held for another
cause) and order the director of the Bureau of Corrections (or
wherever the accused is detained) to report, within a maximum of
ten (10) days from notice, the exact date when the accused were set
free.
In a civil case as well as in a special civil action, the disposition
should state whether the complaint or petition is granted or denied,
the specific relief granted, and the costs. The following test of
completeness may be applied. First, the parties should know their
rights and obligations. Second, they should know how to execute the
decision under alternative contingencies. Third, there should be no
need for further proceedings to dispose of the issues. Fourth, the
case should be terminated by according the proper relief. The
"proper relief" usually depends upon what the parties seek in their
pleadings. It may declare their rights and duties, command the
performance of positive prestations, or order them to abstain from
specific acts. The disposition must also adjudicate costs.
The foregoing parts need not always be discussed in sequence. But
they should all be present and plainly identifiable in the decision.
Depending on the writer’s character, genre and style, the language
should be fresh and free-flowing, not necessarily stereotyped or in a
fixed form; much less highfalutin, hackneyed and pretentious. At all
times, however, the decision must be clear, concise, complete and
correct.
Second Substantive Issue:
Religious Leaders’ Endorsement
of Candidates for Public Office
The basic question posed in the SJS Petition -- WHETHER
ENDORSEMENTS OF CANDIDACIES BY RELIGIOUS LEADERS IS
UNCONSTITUTIONAL -- undoubtedly deserves serious consideration.
As stated earlier, the Court deems this constitutional issue to be of
paramount interest to the Filipino citizenry, for it concerns the
Rule 63 Full Text Cases andm77 of 88
governance of our country and its people. Thus, despite the obvious
procedural transgressions by both SJS and the trial court, this Court
still called for Oral Argument, so as not to leave any doubt that there
might be room to entertain and dispose of the SJS Petition on the
merits.
Counsel for SJS has utterly failed, however, to convince the Court
that there are enough factual and legal bases to resolve the
paramount issue. On the other hand, the Office of the Solicitor
General has sided with petitioner insofar as there are no facts
supporting the SJS Petition and the assailed Decision.
We reiterate that the said Petition failed to state directly the
ultimate facts that it relied upon for its claim. During the Oral
Argument, counsel for SJS candidly admitted that there were no
factual allegations in its Petition for Declaratory Relief. Neither were
there factual findings in the assailed Decision. At best, SJS merely
asked the trial court to answer a hypothetical question. In effect, it
merely sought an advisory opinion, the rendition of which was
beyond the court’s constitutional mandate and jurisdiction. 99
Indeed, the assailed Decision was rendered in clear violation of the
Constitution, because it made no findings of facts and final
disposition. Hence, it is void and deemed legally inexistent.
Consequently, there is nothing for this Court to review, affirm,
reverse or even just modify.
Regrettably, it is not legally possible for the Court to take up, on the
merits, the paramount question involving a constitutional principle.
It is a time-honored rule that "the constitutionality of a statute [or
act] will be passed upon only if, and to the extent that, it is directly
and necessarily involved in a justiciable controversy and is essential
to the protection of the rights of the parties concerned." 100
WHEREFORE, the Petition for Review of Brother Mike Velarde
is GRANTED. The assailed June 12, 2003 Decision and July 29, 2003
Order of the Regional Trial Court of Manila (Branch 49) are
hereby DECLARED NULL AND VOID and thus SET ASIDE. The SJS
Petition for Declaratory Relief is DISMISSED for failure to state a
cause of action.
Let a copy of this Decision be furnished the Office of the Court
Administrator to evaluate and recommend whether the trial judge
may, after observing due process, be held administratively liable for
rendering a decision violative of the Constitution, the Rules of Court
and relevant circulars of this Court. No costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 161140 January 31, 2007
BAYAN TELECOMMUNICATIONS INC. (Formerly International
Communications Corporation), Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES and NATIONAL
TELECOMMUNICATIONS COMMISSION, Respondents.
RESOLUTION
QUISUMBING, J.:
This petition for review assails (a) the Decision1 dated September 25,
2003 of the Court of Appeals in CA-G.R. CV No. 74283, which
affirmed the Order2 dated October 12, 2000 of the Regional Trial
Court (RTC) of Pasig City, Branch 71, dismissing SCA No. 1962 for
declaratory relief; and (b) the Court of Appeals’ Resolution3 dated
December 5, 2003, which denied the motion for reconsideration.
The case stemmed from the petition for declaratory relief filed
before the RTC of Pasig City, by petitioner Bayan
Telecommunications Inc., against respondents Republic of the
Philippines and National Telecommunications Commission (NTC).
Petitioner specifically sought the suspension of the requirement,
under Section 21 of Republic Act No. 7925,4 of a public offering of
30% of the aggregate common stocks of telecommunication entities
with regulated types of services within five years from the effectivity
of the Act or the entity’s first start of commercial operations,
whichever comes later. Petitioner claimed that it was impossible for
it to make a bona fide public offering at that time because its
financial condition, the Philippine economy, and the stock market
were not conducive for a successful public offering. It also claimed
that impossibility of performance was an implied exception to the
abovecited provision of Rep. Act No. 7925.
The Solicitor General moved for the dismissal of the petition for
failure to state a cause of action. The Solicitor General maintained
that the provisions of Section 215 of Rep. Act No. 7925 are clear and
free of any ambiguity, and that petitioner failed to exhaust
administrative remedies as it did not first ask for an exemption from
the application of said provision.
On October 12, 2000, the trial court dismissed the petition for
failure to state a cause of action. It ruled as follows:
WHEREFORE, in view of the foregoing, the Motion to Dismiss is
hereby GRANTED. The case is DISMISSED as the petition states no
cause of action, without costs.
SO ORDERED.6
Petitioner sought reconsideration, but it was denied. Petitioner then
elevated the case to the Court of Appeals.
On September 25, 2003, the appellate court affirmed the trial
court’s ruling. It held that the elements of justiciable controversy
and ripeness for judicial determination were absent as there was no
showing that petitioner asked for an exemption from or deferment
of compliance with the requirement of Section 21, from the NTC,
and was refused. The dispositive portion of the Court of Appeals’
decision reads:
WHEREFORE, premises considered, the present appeal is hereby
DISMISSED and the appealed Order dated October 12, 2000 of the
court a quo in SCA No. 1962 is hereby affirmed and upheld.
With costs against the petitioner-appellant.
SO ORDERED.7
Petitioner now comes before us raising the following issues:
Rule 63 Full Text Cases andm78 of 88
 1. Whether or not there is ambiguity in the provisions of
Section 21 of R.A. 7925 that would require the remedy of a
declaratory relief?
2. Whether or not there is a justiciable controversy ripe for
judicial determination?
3. Whether or not the matters relating to a [bona
fide] public offering by Telecommunication Entities are
within the regulatory power or authority of the National
Telecommunications Commission (NTC)?
4. Whether or not the petitioner, which is not in a position
to make a [bona fide] public offering due to the negative
condition of the economy, the negative interest of the
investing public in the stock market and the condition of
the company, is still bound by the provisions under section
21 of the Telecommunications Law…8
Simply stated, we are asked to resolve: (1) Whether there is an
ambiguity in the cited provision of Section 21, Rep. Act No. 7925
which justifies an action for declaratory relief. And, also whether
there is a justiciable controversy ripe for judicial determination. (2) If
so, is petitioner excused from complying with Section 21 of Rep. Act
No. 7925?
Petitioner contends that there is a justiciable controversy ripe for
judicial determination as it faces a possible sanction from the NTC
for its inability to comply with the mandate of Rep. Act No. 7925. It
claims that the present case falls within the exceptions to the
general rule of exhaustion of administrative remedies, since there is
no administrative review provided by law as the NTC does not have
the power to decide the validity of the law and the questions
involved are essentially judicial.
Petitioner contends that applying blindly the literal import of Section
21 would lead to absurd and destructive results because the huge
amount needed to undertake a public offering could only bring more
losses to the corporation in case it fails to attract the investing public
due to its unattractive financial condition. It maintains that
impossibility or impracticability of compliance excuses it from
complying with said provision.
Respondents counter that Section 21 is clear and unambiguous,
hence, there is no need for judicial interpretation. They maintain
that petitioner’s claim of impossibility or impracticability of
compliance is purely speculative, adding that there are a good
number of publicly listed telecommunication companies. Besides,
respondents argue, Section 21 does not provide for any exception.
Respondents state, however, that there were yet no implementing
rules and guidelines by the NTC or any administrative agency to
carry into effect the requirement imposed by Section 21 of Rep. Act
No. 7925. Hence, according to respondents, petitioner’s
apprehension of an administrative sanction was merely conjectural
and anticipatory. Citing Garcia v. Executive Secretary,9 they argue
that under the circumstances, there is no justiciable controversy ripe
for judicial determination. Respondents also contend that courts do
not have the power to order the suspension of the application of a
law or its provision especially where there is no constitutional
challenge to such legal provision. They assert that the NTC has the
power and authority to implement Rep. Act No. 7925, hence they
aver that the issue of suspension or deferment of the initial public
offering for telecommunication companies is best left to its sound
judgment.
After seriously considering the submission of the parties, we agree
that respondents’ contentions are valid while petitioner’s plea lacks
merit.
Section 1, Rule 63 of the Rules of Court reads:
Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive
order or regulation, ordinance, or any other governmental
regulation may, before breach or violation thereof, bring an action in
the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or
duties, thereunder.
xxxx
For such an action for declaratory relief before a trial court to
prosper, it must be shown that (a) there is a justiciable controversy,
(b) the controversy is between persons whose interests are adverse,
(c) the party seeking the relief has a legal interest in the controversy,
and (d) the issue invoked is ripe for judicial
determination.10 Respondents contest the presence of the first and
last requisites insofar as petitioner’s case is concerned.
A justiciable controversy is a definite and concrete dispute touching
on the legal relations of parties having adverse legal interests, which
may be resolved by a court of law through the application of a
law.11 In the case at bar, petitioner fears the risk of possible
sanctions. However, a mere apprehension of an administrative
sanction does not give rise to a justiciable controversy.12 Rep. Act
No. 7925 does not provide for a penalty for noncompliance with
Section 21, and as correctly pointed out by the Solicitor General,
there are yet no implementing rules or guidelines to carry into effect
the requirement imposed by the said provision. Whatever sanctions
petitioner fears are merely hypothetical.
An issue is ripe for judicial determination when litigation is
inevitable,13 or when administrative remedies have been
exhausted.14 There is no showing of either in the present case.
Instead, petitioner asserts that this case falls within the exceptions
to the rule on exhaustion of administrative remedies, specifically
when there is no administrative review provided by law or when the
questions involved are essentially judicial. To our mind, petitioner
should have first raised its concerns with the NTC, the agency
authorized to implement Rep. Act No. 7925. Only after a categorical
denial of its claim of exemption from or deferment of compliance
with Section 21 can petitioner proceed to court. As it is now, we
agree with the trial and appellate courts that petitioner has no cause
of action.
Observance of the mandate regarding exhaustion of administrative
remedies is a sound practice and policy. The doctrine insures an
orderly procedure which favors a preliminary sifting process and
withholds judicial interference until administrative process would
have been allowed to duly run its course.15 The underlying principle
of the rule rests on the presumption that the administrative agency,
if afforded a complete chance to pass upon the matter, will decide
correctly.16
Rule 63 Full Text Cases andm79 of 88
Considering that the requirements of an action for declaratory relief
have not been met, the trial court properly dismissed the case for
lack of cause of action. The appellate court did not err in affirming
said dismissal. At this point, we shall no longer discuss the second
issue, involving excuse from compliance with Section 21 of Rep. Act
No. 7925, for it will not serve any practical purpose in the resolution
of this petition.
WHEREFORE, the instant petition is DENIED for lack of merit. The
Decision dated September 25, 2003 and Resolution dated December
5, 2003 of the Court of Appeals in CA-G.R. CV No. 74283 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
EN BANC
G.R. No. 170656 August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and
BAYANI FERNANDO as Chairman of the Metropolitan Manila
Development Authority, petitioners,
vs.
VIRON TRANSPORTATION CO., INC., respondent.
x --------------------------------------------- x
G.R. No. 170657 August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the
METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI
FERNANDO as Chairman of the Metropolitan Manila Development
Authority,petitioners,
vs.
MENCORP TRANSPORTATION SYSTEM, INC., respondent.
DECISION
CARPIO MORALES, J.:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has
moved from bad to worse, from tolerable to critical. The
number of people who use the thoroughfares has
multiplied x x x,1
have remained unchecked and have reverberated to this day. Traffic
jams continue to clog the streets of Metro Manila, bringing vehicles
to a standstill at main road arteries during rush hour traffic and
sapping people’s energies and patience in the process.
The present petition for review on certiorari, rooted in the traffic
congestion problem, questions the authority of the Metropolitan
Manila Development Authority (MMDA) to order the closure of
provincial bus terminals along Epifanio de los Santos Avenue (EDSA)
and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T.
Pampilo, Jr. of the Regional Trial Court (RTC) of Manila, Branch 26 in
Civil Case Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005, 2 which resolved a
motion for reconsideration filed by herein respondents, declared
Executive Order (E.O.) No. 179, hereafter referred to as the E.O.,
"unconstitutional as it constitutes an unreasonable exercise of police
power." The second assailed Order of November 23, 20053 denied
petitioners’ motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10,
2003, "Providing for the Establishment of Greater Manila Mass
Transport System," the pertinent portions of which read:
WHEREAS, Metro Manila continues to be the
center of employment opportunities, trade and
commerce of the Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila
has affected the adjacent provinces of Bulacan,
Cavite, Laguna, and Rizal, owing to the continued
movement of residents and industries to more
affordable and economically viable locations in
these provinces;
WHEREAS, the Metropolitan Manila
Development Authority (MMDA) is tasked to
undertake measures to ease traffic congestion in
Metro Manila and ensure the convenient and
efficient travel of commuters within its
jurisdiction;
WHEREAS, a primary cause of traffic congestion
in Metro Manila has been the numerous buses
plying the streets that impedes [sic] the flow of
vehicles and commuters due to the inefficient
connectivity of the different transport modes;
WHEREAS, the MMDA has recommended a plan
to decongest traffic by eliminating the bus
terminals now located along major Metro Manila
thoroughfares and providing more convenient
access to the mass transport system to the
commuting public through the provision of mass
transport terminal facilities that would integrate
the existing transport modes, namely the buses,
the rail-based systems of the LRT, MRT and PNR
and to facilitate and ensure efficient travel
through the improved connectivity of the
different transport modes;
WHEREAS, the national government must
provide the necessary funding requirements to
immediately implement and render operational
these projects; and extent to MMDA such other
assistance as may be warranted to ensure their
expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-
ARROYO, President of the Philippines, by virtue
of the powers vested in me by law, do hereby
order:
Rule 63 Full Text Cases andm80 of 88
Section 1. THE PROJECT. – The project shall be
identified as GREATER MANILA TRANSPORT
SYSTEM Project.
Section 2. PROJECT OBJECTIVES. – In accordance
with the plan proposed by MMDA, the project
aims to develop four (4) interim intermodal mass
transport terminals to integrate the different
transport modes, as well as those that shall
hereafter be developed, to serve the commuting
public in the northwest, north, east, south, and
southwest of Metro Manila. Initially, the project
shall concentrate on immediately establishing
the mass transport terminals for the north and
south Metro Manila commuters as hereinafter
described.
Section 3. PROJECT IMPLEMENTING AGENCY. –
The Metropolitan Manila Development
Authority (MMDA), is hereby designated as the
implementing Agency for the project. For this
purpose, MMDA is directed to undertake such
infrastructure development work as may be
necessary and, thereafter, manage the project
until it may be turned-over to more appropriate
agencies, if found suitable and convenient.
Specifically, MMDA shall have the following
functions and responsibilities:
a) Cause the preparation of
the Master Plan for the
projects, including the
designs and costing;
b) Coordinate the use of the
land and/or properties
needed for the project with
the respective agencies
and/or entities owning them;
c) Supervise and manage the
construction of the necessary
structures and facilities;
d) Execute such contracts or
agreements as may be
necessary, with the
appropriate government
agencies, entities, and/or
private persons, in
accordance with existing
laws and pertinent
regulations, to facilitate the
implementation of the
project;
e) Accept, manage and
disburse such funds as may
be necessary for the
construction and/or
implementation of the
projects, in accordance with
prevailing accounting and
audit polices and practice in
government.
f) Enlist the assistance of any
national government agency,
office or department,
including local government
units, government-owned or
controlled corporations, as
may be necessary;
g) Assign or hire the
necessary personnel for the
above purposes; and
h) Perform such other
related functions as may be
necessary to enable it to
accomplish the objectives
and purposes of this
Executive Order.4 (Emphasis
in the original; underscoring
supplied)
As the above-quoted portions of the E.O. noted, the primary cause
of traffic congestion in Metro Manila has been the numerous buses
plying the streets and the inefficient connectivity of the different
transport modes;5 and the MMDA had "recommended a plan to
decongest traffic by eliminating the bus terminals now located along
major Metro Manila thoroughfares and providing more and
convenient access to the mass transport system to the commuting
public through the provision of mass transport terminal
facilities"6 which plan is referred to under the E.O. as the Greater
Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for
the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the
governing board and policymaking body of the MMDA, issued
Resolution No. 03-07 series of 20037 expressing full support of the
Project. Recognizing the imperative to integrate the different
transport modes via the establishment of common bus parking
terminal areas, the MMC cited the need to remove the bus
terminals located along major thoroughfares of Metro Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic
corporation engaged in the business of public transportation with a
provincial bus operation,9 filed a petition for declaratory
relief10 before the RTC11 of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron
alleged that the MMDA, through Chairman Fernando, was "poised
to issue a Circular, Memorandum or Order closing, or tantamount to
closing, all provincial bus terminals along EDSA and in the whole of
the Metropolis under the pretext of traffic regulation."12 This
impending move, it stressed, would mean the closure of its bus
terminal in Sampaloc, Manila and two others in Quezon City.
Alleging that the MMDA’s authority does not include the power to
direct provincial bus operators to abandon their existing bus
terminals to thus deprive them of the use of their property, Viron
asked the court to construe the scope, extent and limitation of the
Rule 63 Full Text Cases andm81 of 88
power of the MMDA to regulate traffic under R.A. No. 7924, "An Act
Creating the Metropolitan Manila Development Authority, Defining
its Powers and Functions, Providing Funds Therefor and For Other
Purposes."
Viron also asked for a ruling on whether the planned closure of
provincial bus terminals would contravene the Public Service Act and
related laws which mandate public utilities to provide and maintain
their own terminals as a requisite for the privilege of operating as
common carriers.13
Mencorp Transportation System, Inc. (Mencorp), another provincial
bus operator, later filed a similar petition for declaratory
relief14 against Executive Secretary Alberto G. Romulo and MMDA
Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and
illegal for transgressing the possessory rights of owners and
operators of public land transportation units over their respective
terminals.
Averring that MMDA Chairman Fernando had begun to implement a
plan to close and eliminate all provincial bus terminals along EDSA
and in the whole of the metropolis and to transfer their operations
to common bus terminals,15 Mencorp prayed for the issuance of a
temporary restraining order (TRO) and/or writ of preliminary
injunction to restrain the impending closure of its bus terminals
which it was leasing at the corner of EDSA and New York Street in
Cubao and at the intersection of Blumentritt, Laon Laan and Halcon
Streets in Quezon City. The petition was docketed as Civil Case No.
03-106224 and was raffled to Branch 47 of the RTC of Manila.
Mencorp’s petition was consolidated on June 19, 2003 with Viron’s
petition which was raffled to Branch 26 of the RTC, Manila.
Mencorp’s prayer for a TRO and/or writ of injunction was denied as
was its application for the issuance of a preliminary injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were
narrowed down to whether 1) the MMDA’s power to regulate traffic
in Metro Manila included the power to direct provincial bus
operators to abandon and close their duly established and existing
bus terminals in order to conduct business in a common terminal;
(2) the E.O. is consistent with the Public Service Act and the
Constitution; and (3) provincial bus operators would be deprived of
their real properties without due process of law should they be
required to use the common bus terminals.
Upon the agreement of the parties, they filed their respective
position papers in lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the
constitutionality and legality of the E.O. pursuant to R.A. No. 7924,
which empowered the MMDA to administer Metro Manila’s basic
services including those of transport and traffic management.
The trial court held that the E.O. was a valid exercise of the police
power of the State as it satisfied the two tests of lawful subject
matter and lawful means, hence, Viron’s and Mencorp’s property
rights must yield to police power.
On the separate motions for reconsideration of Viron and Mencorp,
the trial court, by Order of September 8, 2005, reversed its Decision,
this time holding that the E.O. was "an unreasonable exercise of
police power"; that the authority of the MMDA under Section (5)(e)
of R.A. No. 7924 does not include the power to order the closure of
Viron’s and Mencorp’s existing bus terminals; and that the E.O. is
inconsistent with the provisions of the Public Service Act.
Petitioners’ motion for reconsideration was denied by Resolution of
November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule
that: (1) the requisites of declaratory relief are not present, there
being no justiciable controversy in Civil Case Nos. 03-105850 and 03-
106224; and (2) the President has the authority to undertake or
cause the implementation of the Project.19
Petitioners contend that there is no justiciable controversy in the
cases for declaratory relief as nothing in the body of the E.O.
mentions or orders the closure and elimination of bus terminals
along the major thoroughfares of Metro Manila. Viron and Mencorp,
they argue, failed to produce any letter or communication from the
Executive Department apprising them of an immediate plan to close
down their bus terminals.
And petitioners maintain that the E.O. is only an administrative
directive to government agencies to coordinate with the MMDA and
to make available for use government property along EDSA and
South Expressway corridors. They add that the only relation created
by the E.O. is that between the Chief Executive and the
implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged
deficiency of the consolidated petitions to meet the requirement of
justiciability was not among the issues defined for resolution in the
Pre-Trial Order of January 12, 2004. It is equally true, however, that
the question was repeatedly raised by petitioners in their Answer to
Viron’s petition,20 their Comment of April 29, 2003 opposing
Mencorp’s prayer for the issuance of a TRO,21 and their Position
Paper of August 23, 2004.22
In bringing their petitions before the trial court, both respondents
pleaded the existence of the essential requisites for their respective
petitions for declaratory relief,23 and refuted petitioners’ contention
that a justiciable controversy was lacking.24 There can be no
denying, therefore, that the issue was raised and discussed by the
parties before the trial court.
The following are the essential requisites for a declaratory relief
petition: (a) there must be a justiciable controversy; (b) the
controversy must be between persons whose interests are adverse;
(c) the party seeking declaratory relief must have a legal interest in
the controversy; and (d) the issue invoked must be ripe for judicial
determination.25
The requirement of the presence of a justiciable controversy is
satisfied when an actual controversy or the ripening seeds thereof
exist between the parties, all of whom are sui juris and before the
court, and the declaration sought will help in ending the
controversy.26 A question becomes justiciable when it is translated
into a claim of right which is actually contested.27
Rule 63 Full Text Cases andm82 of 88
In the present cases, respondents’ resort to court was prompted by
the issuance of the E.O. The 4th Whereas clause of the E.O. sets out
in clear strokes the MMDA’s plan to "decongest traffic
by eliminating the bus terminals now located along major Metro
Manila thoroughfares and providing more convenient access to the
mass transport system to the commuting public through the
provision of mass transport terminal facilities x x x." (Emphasis
supplied)
Section 2 of the E.O. thereafter lays down the immediate
establishment of common bus terminals for north- and south-bound
commuters. For this purpose, Section 8 directs the Department of
Budget and Management to allocate funds of not more than one
hundred million pesos (P100,000,000) to cover the cost of the
construction of the north and south terminals. And the E.O. was
made effective immediately.
The MMDA’s resolve to immediately implement the Project, its
denials to the contrary notwithstanding, is also evident from telltale
circumstances, foremost of which was the passage by the MMC of
Resolution No. 03-07, Series of 2003 expressing its full support of
the immediate implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the
plan to "remove the bus terminals located along major
thoroughfares of Metro Manila and an urgent need to integrate the
different transport modes." The 7th Whereas clause proceeds to
mention the establishment of the North and South terminals.
As alleged in Viron’s petition, a diagram of the GMA-MTS North
Bus/Rail Terminal had been drawn up, and construction of the
terminal is already in progress. The MMDA, in its Answer28 and
Position Paper,29 in fact affirmed that the government had begun to
implement the Project.
It thus appears that the issue has already transcended the
boundaries of what is merely conjectural or anticipatory.lawphil
Under the circumstances, for respondents to wait for the actual
issuance by the MMDA of an order for the closure of respondents’
bus terminals would be foolhardy for, by then, the proper action to
bring would no longer be for declaratory relief which, under Section
1, Rule 6330 of the Rules of Court, must be brought before there is a
breach or violation of rights.
As for petitioners’ contention that the E.O. is a mere administrative
issuance which creates no relation with third persons, it does not
persuade. Suffice it to stress that to ensure the success of the
Project for which the concerned government agencies are directed
to coordinate their activities and resources, the existing bus
terminals owned, operated or leased by third persons like
respondents would have to be eliminated; and respondents would
be forced to operate from the common bus terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on
respondents. The closure of their bus terminals would mean, among
other things, the loss of income from the operation and/or rentals of
stalls thereat. Precisely, respondents claim a deprivation of their
constitutional right to property without due process of law.
Respondents have thus amply demonstrated a "personal and
substantial interest in the case such that [they have] sustained, or
will sustain, direct injury as a result of [the E.O.’s]
enforcement."31 Consequently, the established rule that the
constitutionality of a law or administrative issuance can be
challenged by one who will sustain a direct injury as a result of its
enforcement has been satisfied by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order
the elimination of their bus terminals under the E.O. which, they
argue, is unconstitutional because it violates both the Constitution
and the Public Service Act; and that neither is the MMDA clothed
with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the
President’s authority to undertake or to cause the implementation
of the Project. They assert that the authority of the President is
derived from E.O. No. 125, "Reorganizing the Ministry of
Transportation and Communications Defining its Powers and
Functions and for Other Purposes," her residual power and/or E.O.
No. 292, otherwise known as the Administrative Code of 1987. They
add that the E.O. is also a valid exercise of the police power.
E.O. No. 125,32 which former President Corazon Aquino issued in the
exercise of legislative powers, reorganized the then Ministry (now
Department) of Transportation and Communications. Sections 4, 5,
6 and 22 of E.O. 125, as amended by E.O. 125-A,33 read:
SECTION 4. Mandate. — The Ministry shall be
the primary policy, planning, programming, coordinating,
implementing, regulating and administrative entity of the
Executive Branch of the government in the promotion,
development and regulation of dependable and
coordinated networks of transportationand
communication systems as well as in the fast, safe,
efficient and reliable postal, transportation and
communications services.
To accomplish such mandate, the Ministry shall have the
following objectives:
(a) Promote the development of
dependable and coordinated networks
of transportation and communications
systems;
(b) Guide government and private
investment in the development of the
country’s intermodal transportation
and communications systems in a
most practical, expeditious, and
orderly fashion for maximum safety,
service, and cost effectiveness;
(Emphasis and underscoring supplied)
xxxx
SECTION 5. Powers and Functions. — To accomplish its
mandate, the Ministry shall have the following powers and
functions:
(a) Formulate and recommend national
policies and guidelines for the
Rule 63 Full Text Cases andm83 of 88
 preparation and implementation of
integrated and comprehensive
transportation and communications
systems at the national, regional and
local levels;
(b) Establish and administer
comprehensive and integrated
programs for transportation and
communications, and for this purpose,
may call on any agency, corporation, or
organization, whether public or
private, whose development programs
include transportation and
communications as an integral part
thereof, to participate and assist in the
preparation and implementation of
such program;
(c) Assess, review and provide
direction to transportation and
communications research and
development programs of the
government in coordination with other
institutions concerned;
(d) Administer all laws, rules and
regulations in the field of
transportation and communications;
(Emphasis and underscoring supplied)
xxxx
SECTION 6. Authority and Responsibility. — The authority
and responsibility for the exercise of the mandate of the
Ministry and for the discharge of its powers and functions
shall be vested in the Minister of Transportation and
Communications, hereinafter referred to as the Minister,
who shall have supervision and control over the Ministry
and shall be appointed by the President. (Emphasis and
underscoring supplied)
SECTION 22. Implementing Authority of Minister. — The
Minister shall issue such orders, rules, regulations and
other issuances as may be necessary to ensure the
effective implementation of the provisions of this
Executive Order. (Emphasis and underscoring supplied)
It is readily apparent from the abovequoted provisions of E.O. No.
125, as amended, that the President, then possessed of and
exercising legislative powers, mandated the DOTC to be the
primary policy, planning, programming, coordinating, implementing,
regulating and administrative entity to promote, develop and
regulate networks of transportation and communications. The grant
of authority to the DOTC includes the power
to establishand administer comprehensive and integrated programs
for transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is
vested with the authority and responsibility to exercise the mandate
given to the department. Accordingly, the DOTC Secretary is
authorized to issue such orders, rules, regulations and other
issuances as may be necessary to ensure the effective
implementation of the law.
Since, under the law, the DOTC is authorized to establish and
administer programs and projects for transportation, it follows that
the President may exercise the same power and authority to order
the implementation of the Project, which admittedly is one for
transportation.
Such authority springs from the President’s power of control over all
executive departments as well as the obligation for the faithful
execution of the laws under Article VII, Section 17 of the
Constitution which provides:
SECTION 17. The President shall have control of all the
executive departments, bureaus and offices. He shall
ensure that the laws be faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the
Administrative Code of 1987. Notably, Section 38, Chapter 37, Book
IV of the same Code defines the President’s power of supervision
and control over the executive departments, viz:
SECTION 38. Definition of Administrative Relationships. —
Unless otherwise expressly stated in the Code or in other
laws defining the special relationships of particular
agencies, administrative relationships shall be categorized
and defined as follows:
(1) Supervision and Control. — Supervision and control
shall include authority to act directly whenever a specific
function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify
acts and decisions of subordinate officials or units;
determine priorities in the execution of plans and
programs. Unless a different meaning is explicitly provided
in the specific law governing the relationship of particular
agencies the word "control" shall encompass supervision
and control as defined in this paragraph. x x x (Emphasis
and underscoring supplied)
Thus, whenever a specific function is entrusted by law or regulation
to a subordinate, the President may act directly or merely direct the
performance of a duty.34
Respecting the President’s authority to order the implementation of
the Project in the exercise of the police power of the State, suffice it
to stress that the powers vested in the DOTC Secretary to establish
and administer comprehensive and integrated programs for
transportation and communications and to issue orders, rules and
regulations to implement such mandate (which, as previously
discussed, may also be exercised by the President) have been so
delegated for the good and welfare of the people. Hence, these
powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make,
ordain, and establish wholesome and reasonable laws, statutes and
ordinances, not repugnant to the Constitution, for the good and
welfare of the people.35 This power to prescribe regulations to
promote the health, morals, education, good order or safety, and
general welfare of the people flows from the recognition that salus
Rule 63 Full Text Cases andm84 of 88
populi est suprema lex ─ the welfare of the people is the supreme
law.
While police power rests primarily with the legislature, such power
may be delegated, as it is in fact increasingly being delegated.36 By
virtue of a valid delegation, the power may be exercised by the
President and administrative boards37 as well as by the lawmaking
bodies of municipal corporations or local governments under an
express delegation by the Local Government Code of 1991.38
The authority of the President to order the implementation of the
Project notwithstanding, the designation of the MMDA as the
implementing agency for the Project may not be sustained. It is ultra
vires, there being no legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as
amended, it is the DOTC, and not the MMDA, which is authorized to
establish and implement a project such as the one subject of the
cases at bar. Thus, the President, although authorized to establish or
cause the implementation of the Project, must exercise the
authority through the instrumentality of the DOTC which, by law,
is the primary implementing and administrative entity in the
promotion, development and regulation of networks of
transportation, and the one so authorized to establish and
implement a project such as the Project in question.
By designating the MMDA as the implementing agency of the
Project, the President clearly overstepped the limits of the authority
conferred by law, rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the
absence of a specific grant of authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area39 as a
"special development and administrative region" and placed the
administration of "metro-wide" basic services affecting the region
under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to
perform "planning, monitoring and coordinative functions, and in
the process exercise regulatory and supervisory authority over the
delivery of metro-wide services," including transport and traffic
management.40 Section 5 of the same law enumerates the powers
and functions of the MMDA as follows:
(a) Formulate, coordinate and regulate the
implementation of medium and long-term plans
and programs for the delivery of metro-wide
services, land use and physical development
within Metropolitan Manila, consistent with
national development objectives and priorities;
(b) Prepare, coordinate and regulate the
implementation of medium-term investment
programs for metro-wide services which shall
indicate sources and uses of funds for priority
programs and projects, and which shall include
the packaging of projects and presentation to
funding institutions;
(c) Undertake and manage on its own metro-
wide programs and projects for the delivery of
specific services under its jurisdiction, subject to
the approval of the Council. For this purpose,
MMDA can create appropriate project
management offices;
(d) Coordinate and monitor the implementation
of such plans, programs and projects in Metro
Manila; identify bottlenecks and adopt solutions
to problems of implementation;
(e) The MMDA shall set the policies concerning
traffic in Metro Manila, and shall coordinate
and regulate the implementation of all
programs and projects concerning traffic
management, specifically pertaining to
enforcement, engineering and education. Upon
request, it shall be extended assistance and
cooperation, including but not limited to,
assignment of personnel, by all other
government agencies and offices concerned;
(f) Install and administer a single ticketing
system, fix, impose and collect fines and
penalties for all kinds of violations of traffic
rules and regulations, whether moving or non-
moving in nature, and confiscate and suspend or
revoke drivers’ licenses in the enforcement of
such traffic laws and regulations, the provisions
of RA 4136 and PD 1605 to the contrary
notwithstanding. For this purpose, the Authority
shall impose all traffic laws and regulations in
Metro Manila, through its traffic operation
center, and may deputize members of the PNP,
traffic enforcers of local government units, duly
licensed security guards, or members of non-
governmental organizations to whom may be
delegated certain authority, subject to such
conditions and requirements as the Authority
may impose; and
(g) Perform other related functions required to
achieve the objectives of the MMDA, including
the undertaking of delivery of basic services to
the local government units, when deemed
necessary subject to prior coordination with and
consent of the local government unit
concerned." (Emphasis and underscoring
supplied)
The scope of the function of MMDA as an administrative,
coordinating and policy-setting body has been settled
in Metropolitan Manila Development Authority (MMDA) v. Bel-Air
Village Association, Inc.41 In that case, the Court stressed:
Clearly, the scope of the MMDA’s function is limited to the
delivery of the seven (7) basic services. One of these
is transport and traffic management which includes the
formulation and monitoring of policies, standards and
projects to rationalize the existing transport operations,
infrastructure requirements, the use of thoroughfares and
promotion of the safe movement of persons and goods. It
also covers the mass transport system and the institution
of a system of road regulation, the administration of all
Rule 63 Full Text Cases andm85 of 88
 traffic enforcement operations, traffic engineering services
and traffic education programs, including the institution of
a single ticketing system in Metro Manila for traffic
violations. Under this service, the MMDA is expressly
authorized to "to set the policies concerning traffic" and
"coordinate and regulate the implementation of all traffic
management programs." In addition, the MMDA may
install and administer a single ticketing system," fix,
impose and collect fines and penalties for all traffic
violations.
It will be noted that the powers of the MMDA are limited
to the following acts: formulation, coordination,
regulation, implementation, preparation, management,
monitoring, setting of policies, installation of a system and
administration. There is no syllable in R.A. No. 7924 that
grants the MMDA police power, let alone legislative
power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative
bodies of the local government units, there is no
provision in R.A. No. 7924 that empowers the MMDA or
its Council to ‘enact ordinances, approve resolutions and
appropriate funds for the general welfare’ of the
inhabitants of Metro Manila. The MMDA is, as termed in
the charter itself, a ‘development authority.’ It is an
agency created for the purpose of laying down
policies and coordinating with the various national
government agencies, people’s organizations, non-
governmental organizations and the private sector for
the efficient and expeditious delivery of basic services in
the vast metropolitan area. All its functions are
administrative in nature and these are actually summed
up in the charter itself, viz:
‘SECTION 2. Creation of the Metropolitan Manila
Development Authority. — . . .
The MMDA shall perform planning, monitoring
and coordinative functions, and in the
process exercise regulatory and supervisory
authority over the delivery of metro-wide
services within Metro Manila, without
diminution of the autonomy of the local
government units concerning purely local
matters.’42 (Emphasis and underscoring
supplied)
In light of the administrative nature of its powers and functions, the
MMDA is devoid of authority to implement the Project as envisioned
by the E.O; hence, it could not have been validly designated by the
President to undertake the Project. It follows that the MMDA cannot
validly order the elimination of respondents’ terminals.
Even the MMDA’s claimed authority under the police power must
necessarily fail in consonance with the above-quoted ruling
in MMDA v. Bel-Air Village Association, Inc. and this Court’s
subsequent ruling in Metropolitan Manila Development Authority v.
Garin43 that the MMDA is not vested with police power.
Even assuming arguendo that police power was delegated to the
MMDA, its exercise of such power does not satisfy the two tests of a
valid police power measure, viz: (1) the interest of the public
generally, as distinguished from that of a particular class, requires its
exercise; and (2) the means employed are reasonably necessary for
the accomplishment of the purpose and not unduly oppressive upon
individuals.44 Stated differently, the police power legislation must be
firmly grounded on public interest and welfare and a reasonable
relation must exist between the purposes and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic
congestion is a public, not merely a private, concern. The Court
therein held that public welfare underlies the contested statute
authorizing the Director of Public Works to promulgate rules and
regulations to regulate and control traffic on national roads.
Likewise, in Luque v. Villegas,46 this Court emphasized that public
welfare lies at the bottom of any regulatory measure designed "to
relieve congestion of traffic, which is, to say the least, a menace to
public safety."47 As such, measures calculated to promote the safety
and convenience of the people using the thoroughfares by the
regulation of vehicular traffic present a proper subject for the
exercise of police power.
Notably, the parties herein concede that traffic congestion is a
public concern that needs to be addressed immediately. Indeed, the
E.O. was issued due to the felt need to address the worsening traffic
congestion in Metro Manila which, the MMDA so determined, is
caused by the increasing volume of buses plying the major
thoroughfares and the inefficient connectivity of existing transport
systems. It is thus beyond cavil that the motivating force behind the
issuance of the E.O. is the interest of the public in general.
Are the means employed appropriate and reasonably necessary for
the accomplishment of the purpose. Are they not duly oppressive?
With the avowed objective of decongesting traffic in Metro Manila,
the E.O. seeks to "eliminate[e] the bus terminals now located along
major Metro Manila thoroughfares and provid[e] more convenient
access to the mass transport system to the commuting public
through the provision of mass transport terminal facilities x x
x."48 Common carriers with terminals along the major thoroughfares
of Metro Manila would thus be compelled to close down their
existing bus terminals and use the MMDA-designated common
parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city
ordinances were passed by the Sangguniang Panlungsod of Lucena,
directing public utility vehicles to unload and load passengers at the
Lucena Grand Central Terminal, which was given the exclusive
franchise to operate a single common terminal. Declaring that no
other terminals shall be situated, constructed, maintained or
established inside or within the city of Lucena,
the sanggunian declared as inoperable all temporary terminals
therein.
The ordinances were challenged before this Court for being
unconstitutional on the ground that, inter alia, the measures
constituted an invalid exercise of police power, an undue taking of
private property, and a violation of the constitutional prohibition
against monopolies.
Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this
Court held that the assailed ordinances were characterized by
overbreadth, as they went beyond what was reasonably necessary
to solve the traffic problem in the city. And it found that the
compulsory use of the Lucena Grand Terminal was unduly
Rule 63 Full Text Cases andm86 of 88
oppressive because it would subject its users to fees, rentals and
charges.
The true role of Constitutional Law is to effect an
equilibrium between authority and liberty so that rights
are exercised within the framework of the law and the
laws are enacted with due deference to rights.
A due deference to the rights of the individual thus
requires a more careful formulation of solutions to societal
problems.
From the memorandum filed before this Court by
petitioner, it is gathered that the Sangguniang Panlungsod
had identified the cause of traffic congestion to be the
indiscriminate loading and unloading of passengers by
buses on the streets of the city proper, hence, the
conclusion that the terminals contributed to the
proliferation of buses obstructing traffic on the city
streets.
Bus terminals per se do not, however, impede or help
impede the flow of traffic. How the outright proscription
against the existence of all terminals, apart from that
franchised to petitioner, can be considered as reasonably
necessary to solve the traffic problem, this Court has not
been enlightened. If terminals lack adequate space such
that bus drivers are compelled to load and unload
passengers on the streets instead of inside the terminals,
then reasonable specifications for the size of terminals
could be instituted, with permits to operate the same
denied those which are unable to meet the specifications.
In the subject ordinances, however, the scope of the
proscription against the maintenance of terminals is so
broad that even entities which might be able to provide
facilities better than the franchised terminal are barred
from operating at all. (Emphasis and underscoring
supplied)
As in Lucena, this Court fails to see how the prohibition against the
existence of respondents’ terminals can be considered a reasonable
necessity to ease traffic congestion in the metropolis. On the
contrary, the elimination of respondents’ bus terminals brings forth
the distinct possibility and the equally harrowing reality of traffic
congestion in the common parking areas, a case of transference
from one site to another.
Less intrusive measures such as curbing the proliferation of
"colorum" buses, vans and taxis entering Metro Manila and using
the streets for parking and passenger pick-up points, as respondents
suggest, might even be more effective in easing the traffic situation.
So would the strict enforcement of traffic rules and the removal of
obstructions from major thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to
be stated that respondents’ certificates of public convenience confer
no property right, and are mere licenses or privileges.52 As such,
these must yield to legislation safeguarding the interest of the
people.
Even then, for reasons which bear reiteration, the MMDA cannot
order the closure of respondents’ terminals not only because no
authority to implement the Project has been granted nor legislative
or police power been delegated to it, but also because the
elimination of the terminals does not satisfy the standards of a valid
police power measure.
Finally, an order for the closure of respondents’ terminals is not in
line with the provisions of the Public Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now
Section 5 of Executive Order No. 202, creating the Land
Transportation Franchising and Regulatory Board or LFTRB) vested
the Public Service Commission (PSC, now the LTFRB) with "x x x
jurisdiction, supervision and control over all public services and their
franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to
"impose such conditions as to construction, equipment,
maintenance, service, or operation as the public interests and
convenience may reasonably require"53 in approving any franchise
or privilege.
Further, Section 16 (g) and (h) of the Public Service Act54 provided
that the Commission shall have the power, upon proper notice and
hearing in accordance with the rules and provisions of this Act,
subject to the limitations and exceptions mentioned and saving
provisions to the contrary:
(g) To compel any public service to furnish safe, adequate,
and proper service as regards the manner of furnishing
the same as well as the maintenance of the necessary
material and equipment.
(h) To require any public service to establish, construct,
maintain, and operate any reasonable extension of its
existing facilities, where in the judgment of said
Commission, such extension is reasonable and practicable
and will furnish sufficient business to justify the
construction and maintenance of the same and when the
financial condition of the said public service reasonably
warrants the original expenditure required in making and
operating such extension.(Emphasis and underscoring
supplied)
The establishment, as well as the maintenance of vehicle parking
areas or passenger terminals, is generally considered a necessary
service to be provided by provincial bus operators like respondents,
hence, the investments they have poured into the acquisition or
lease of suitable terminal sites. Eliminating the terminals would thus
run counter to the provisions of the Public Service Act.
This Court commiserates with the MMDA for the roadblocks thrown
in the way of its efforts at solving the pestering problem of traffic
congestion in Metro Manila. These efforts are commendable, to say
the least, in the face of the abominable traffic situation of our roads
day in and day out. This Court can only interpret, not change, the
law, however. It needs only to be reiterated that it is the DOTC ─ as
the primary policy, planning, programming, coordinating,
implementing, regulating and administrative entity to promote,
develop and regulate networks of transportation and
communications ─ which has the power to establish and administer
a transportation project like the Project subject of the case at bar.
Rule 63 Full Text Cases andm87 of 88
No matter how noble the intentions of the MMDA may be then, any
plan, strategy or project which it is not authorized to implement
cannot pass muster.

WHEREFORE, the Petition is, in light of the foregoing

disquisition, DENIED. E.O. No. 179 is declared NULL and VOID for
being ultra vires.

SO ORDERED.

Rule 63 Full Text Cases andm88 of 88