Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

125078 May 30, 2011

BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG, DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO, NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M. EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA, LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA, EARLWIN L. GINGOYO,

ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D. MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA, JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ, CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRNACISCO G. PAGUNTALAN, RENE B. PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN G. SALIGONAN, VICTORINO SALOMON, GENEROSO J. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN, EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER VILLAFAE, DANTE VILLALVA, PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA, EDUARDO G. YUMANG, HENRY 1

R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA and GRACIANO ZAMORA, Petitioners, vs. HON. TEODORO A. DIZON, JR., Presiding Judge, Regional Trial Court, Branch 37, General Santos City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS, INC., Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 125598 THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL CORPORATION, Petitioners, vs. BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG, DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO, NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M.

EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA, LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA, EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D. MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA, JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ, CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRANCISCO G. PAGUNTALAN, RENE B. PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN B. SALIGONAN, VICTORINO SALOMON, GENEROSO M. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN, EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, 2

EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER VILLAFAE, DANTE VILLALVA, PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA, EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA, and GRACIANO ZAMORA, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 126654

MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Petitioners, vs. THE HON. ROMEO D. MARASIGAN, Presiding Judge of Regional Trial Court, Branch 16, Davao City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS, INC., Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x

CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS,

G.R. No. 127856 DEL MONTE FRESH PRODUCE N.A. and DEL MONTE TROPICAL FRUIT CO., Petitioners, vs. THE REGIONAL TRIAL COURT OF DAVAO CITY, BRANCHES 16 AND 13, CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP, AURELIO 3

A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x

G. MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents. DECISION

G.R. No. 128398 LEONARDO-DE CASTRO, J.: CHIQUITA BRANDS, INC., and CHIQUITA BRANDS INTERNATIONAL, INC., Petitioners, vs. HON. ANITA ALFELOR-ALAGABAN, in her capacity as Presiding Judge of the Regional Trial Court, Davao City, Branch 13, CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, which arose out of two civil cases that were filed in different courts but whose factual background and issues are closely intertwined. The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3 dated May 20, 1996 of the Regional Trial Court (RTC) of General Santos City, Branch 37, in Civil Case No. 5617. The said Order decreed the dismissal of the case in view of the perceived lack of jurisdiction of the RTC over the subject matter of the complaint. The petition in G.R. No. 125598 also challenges the Orders dated June 4, 1996 4 and July 9, 1996,5 which held that the RTC of General Santos City no longer had jurisdiction to proceed with Civil Case No. 5617. On the other hand, the petitions in G.R. Nos. 126654, 6 127856,7 and 1283988 seek the reversal of the Order9dated October 1, 1996 of the RTC of Davao City, Branch 16, in Civil Case No. 24,251-96, which also dismissed the case on the ground of lack of jurisdiction. G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the Resolutions dated February 10, 1997,10 April 28, 199711 and March 10, 1999.12 The factual antecedents of the petitions are as follows: Proceedings before the Texas Courts Beginning 1993, a number of personal injury suits were filed in different Texas state courts by citizens of twelve foreign countries, including the Philippines. The thousands of plaintiffs sought damages for injuries they allegedly sustained from their exposure to 4

dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working on farms in 23 foreign countries. The cases were eventually transferred to, and consolidated in, the Federal District Court for the Southern District of Texas, Houston Division. The cases therein that involved plaintiffs from the Philippines were "Jorge Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-94-1359, and "Juan Ramon Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-95-1356. The defendants in the consolidated cases prayed for the dismissal of all the actions under the doctrine of forum non conveniens. In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally granted the defendants motion to dismiss. Pertinently, the court ordered that: Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the entry of this Memorandum and Order provided that defendants and third- and fourth-party defendants have: (1) participated in expedited discovery in the United States xxx; (2) either waived or accepted service of process and waived any other jurisdictional defense within 40 days after the entry of this Memorandum and Order in any action commenced by a plaintiff in these actions in his home country or the country in which his injury occurred. Any plaintiff desiring to bring such an action will do so within 30 days after the entry of this Memorandum and Order; (3) waived within 40 days after the entry of this Memorandum and Order any limitations-based defense that has matured since the commencement of these actions in the courts of Texas; (4) stipulated within 40 days after the entry of this Memorandum and Order that any discovery conducted during the pendency of these actions may be used in any foreign proceeding to the same extent as if it had been conducted in proceedings initiated there; and (5) submitted within 40 days after the entry of this Memorandum and Order an agreement binding them to satisfy any final judgment rendered in favor of plaintiffs by a foreign court. xxxx Notwithstanding the dismissals that may result from this Memorandum and Order, in the event that the highest court of any foreign country finally affirms the dismissal for lack of jurisdiction of an action commenced by a plaintiff in these actions in his home country or the country in which he was injured, that plaintiff may return to this court and, upon proper motion, the court will resume jurisdiction over the action as if the case had never been dismissed for [forum non conveniens].13

Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and 125598 In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General Santos City (the petitioners in G.R. No. 125078, hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint14 in the RTC of General Santos City on August 10, 1995. The case was docketed as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co. (SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands, Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to as defendant companies.) Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the reproductive systems which they allegedly suffered because of their exposure to DBCP. They claimed, among others, that they were exposed to this chemical during the early 1970s up to the early 1980s when they used the same in the banana plantations where they worked at; and/or when they resided within the agricultural area where such chemical was used. Navida, et al., claimed that their illnesses and injuries were due to the fault or negligence of each of the defendant companies in that they produced, sold and/or otherwise put into the stream of commerce DBCP-containing products. According to NAVIDA, et al., they were allowed to be exposed to the said products, which the defendant companies knew, or ought to have known, were highly injurious to the formers health and well-being. Instead of answering the complaint, most of the defendant companies respectively filed their Motions for Bill of Particulars.15 During the pendency of the motions, on March 13, 1996, NAVIDA, et al., filed an Amended Joint Complaint, 16 excluding Dead Sea Bromine Co., Ltd., Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as party defendants. Again, the remaining defendant companies filed their various Motions for Bill of Particulars.17 On May 15, 1996, DOW filed an Answer with Counterclaim.18 On May 20, 1996, without resolving the motions filed by the parties, the RTC of General Santos City issued an Order dismissing the complaint. First, the trial court determined that it did not have jurisdiction to hear the case, to wit: THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT SHOULD BE DISMISSED FOR LACK OF JURISDICTION xxxx The substance of the cause of action as stated in the complaint against the defendant foreign companies cites activity on their part which took place abroad and had occurred outside and beyond the territorial domain of the Philippines. These acts of defendants cited in the complaint included the manufacture of pesticides, their packaging in containers, their 5

distribution through sale or other disposition, resulting in their becoming part of the stream of commerce. Accordingly, the subject matter stated in the complaint and which is uniquely particular to the present case, consisted of activity or course of conduct engaged in by foreign defendants outside Philippine territory, hence, outside and beyond the jurisdiction of Philippine Courts, including the present Regional Trial Court.19 Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their complaint is a tort category that is not recognized in Philippine laws. Said the trial court: THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT FOREIGN COMPANIES IS NOT WITHIN THE SUBJECT MATTER JURISDICTION OF THE REGIONAL TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY WITHIN THE PURVIEW OF THE PHILIPPINE LAW The specific tort asserted against defendant foreign companies in the present complaint is product liability tort. When the averments in the present complaint are examined in terms of the particular categories of tort recognized in the Philippine Civil Code, it becomes stark clear that such averments describe and identify the category of specific tort known as product liability tort. This is necessarily so, because it is the product manufactured by defendant foreign companies, which is asserted to be the proximate cause of the damages sustained by the plaintiff workers, and the liability of the defendant foreign companies, is premised on being the manufacturer of the pesticides. It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and only if the Civil Code of the Philippines, or a suppletory special law prescribes a product liability tort, inclusive of and comprehending the specific tort described in the complaint of the plaintiff workers.20 Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting their case to the Philippine courts, viz: FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS The Court views that the plaintiffs did not freely choose to file the instant action, but rather were coerced to do so, merely to comply with the U.S. District Courts Order dated July 11, 1995, and in order to keep open to the plaintiffs the opportunity to return to the U.S. District Court.21 Fourth, the trial court ascribed little significance to the voluntary appearance of the defendant companies therein, thus: THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS ILLUSORY

Defendants have appointed their agents authorized to accept service of summons/processes in the Philippines pursuant to the agreement in the U.S. court that defendants will voluntarily submit to the jurisdiction of this court. While it is true that this court acquires jurisdiction over persons of the defendants through their voluntary appearance, it appears that such voluntary appearance of the defendants in this case is conditional. Thus in the "Defendants Amended Agreement Regarding Conditions of Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S. District Court, defendants declared that "(t)he authority of each designated representative to accept service of process will become effective upon final dismissal of these actions by the Court". The decision of the U.S. District Court dismissing the case is not yet final and executory since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended Complaint). Consequently, since the authority of the agent of the defendants in the Philippines is conditioned on the final adjudication of the case pending with the U.S. courts, the acquisition of jurisdiction by this court over the persons of the defendants is also conditional. x x x. The appointment of agents by the defendants, being subject to a suspensive condition, thus produces no legal effect and is ineffective at the moment.22 Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case in the Philippine courts violated the rules on forum shopping and litis pendencia. The trial court expounded: THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING This court frowns upon the fact that the parties herein are both vigorously pursuing their appeal of the decision of the U.S. District court dismissing the case filed thereat. To allow the parties to litigate in this court when they are actively pursuing the same cases in another forum, violates the rule on forum shopping so abhorred in this jurisdiction. x x x. xxxx THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction. This court takes note that the U.S. District Court did not decline jurisdiction over the cause of action. The case was dismissed on the ground of forum non conveniens, which is really a matter of venue. By taking cognizance of the case, the U.S. District Court has, in essence, concurrent jurisdiction with this court over the subject matter of this case. It is settled that initial acquisition of jurisdiction divests another of its own jurisdiction. x x x. xxxx THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"

Furthermore, the case filed in the U.S. court involves the same parties, same rights and interests, as in this case. There exists litis pendencia since there are two cases involving the same parties and interests. The court would like to emphasize that in accordance with the rule on litis pendencia x x x; the subsequent case must be dismissed. Applying the foregoing [precept] to the case-at-bar, this court concludes that since the case between the parties in the U.S. is still pending, then this case is barred by the rule on "litis pendencia."23 In fine, the trial court held that: It behooves this Court, then to dismiss this case. For to continue with these proceedings, would be violative of the constitutional provision on the Bill of Rights guaranteeing speedy disposition of cases (Ref. Sec. 16, Article III, Constitution). The court has no other choice. To insist on further proceedings with this case, as it is now presented, might accord this court a charming appearance. But the same insistence would actually thwart the very ends of justice which it seeks to achieve. This evaluation and action is made not on account of but rather with due consideration to the fact that the dismissal of this case does not necessarily deprive the parties especially the plaintiffs of their possible remedies. The court is cognizant that the Federal Court may resume proceedings of that earlier case between the herein parties involving the same acts or omissions as in this case. WHEREFORE, in view of the foregoing considerations, this case is now considered DISMISSED.24 On June 4, 1996, the RTC of General Santos City likewise issued an Order, 25 dismissing DOWs Answer with Counterclaim. CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration 26 of the RTC Order dated May 20, 1996, while DOW filed a motion for reconsideration 27 of the RTC Order dated June 4, 1996. Subsequently, DOW and OCCIDENTAL also filed a Joint Motion for Reconsideration28 of the RTC Order dated May 20, 1996. In an Order29 dated July 9, 1996, the RTC of General Santos City declared that it had already lost its jurisdiction over the case as it took into consideration the Manifestation of the counsel of NAVIDA, et al., which stated that the latter had already filed a petition for review on certiorari before this Court. CHIQUITA and SHELL filed their motions for reconsideration30 of the above order. On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail the RTC Order dated May 20, 1996, which was docketed as G.R. No. 125078. The RTC of General Santos City then issued an Order 31 dated August 14, 1996, which merely noted the incidents still pending in Civil Case No. 5617 and reiterated that it no longer had any jurisdiction over the case.

On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on Certiorari,32 challenging the orders of the RTC of General Santos City dated May 20, 1996, June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No. 125598. In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in ruling that it has no jurisdiction over the subject matter of the case as well as the persons of the defendant companies. In a Resolution33 dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598 with G.R. No. 125078. CHIQUITA filed a Petition for Review on Certiorari,34 which sought the reversal of the RTC Orders dated May 20, 1996, July 9, 1996 and August 14, 1996. The petition was docketed as G.R. No. 126018. In a Resolution 35 dated November 13, 1996, the Court dismissed the aforesaid petition for failure of CHIQUITA to show that the RTC committed grave abuse of discretion. CHIQUITA filed a Motion for Reconsideration,36 but the same was denied through a Resolution37 dated January 27, 1997. Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856, and 128398 Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155 plaintiffs from Davao City. This case was docketed as Civil Case No. 24,251-96. These plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.) amended their Joint-Complaint on May 21, 1996.38 Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana plantation and/or as residents near the said plantation, they were made to use and/or were exposed to nematocides, which contained the chemical DBCP. According to ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health, including, but not limited to, sterility and severe injuries to their reproductive capacities."39ABELLA, et al., claimed that the defendant companies manufactured, produced, sold, distributed, used, and/or made available in commerce, DBCP without warning the users of its hazardous effects on health, and without providing instructions on its proper use and application, which the defendant companies knew or ought to have known, had they exercised ordinary care and prudence. Except for DOW, the other defendant companies filed their respective motions for bill of particulars to which ABELLA, et al., filed their opposition. DOW and DEL MONTE filed their respective Answers dated May 17, 1996 and June 24, 1996. The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated October 1, 1996, which, in its entirety, reads: Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the plaintiffs against the defendants Shell Oil Company, DOW Chemicals Company, 7

Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit and Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands International, Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign corporations with Philippine Representatives, the Court, as correctly pointed out by one of the defendants, is convinced that plaintiffs "would have this Honorable Court dismiss the case to pave the way for their getting an affirmance by the Supreme Court" (#10 of Defendants Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated July 22, 1996). Consider these: 1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the Philippines; they have no agents as well (par. 18); plaintiffs are suing the defendants for tortuous acts committed by these foreign corporations on their respective countries, as plaintiffs, after having elected to sue in the place of defendants residence, are now compelled by a decision of a Texas District Court to file cases under torts in this jurisdiction forcauses of actions which occurred abroad (par. 19); a petition was filed by same plaintiffs against same defendants in the Courts of Texas, USA, plaintiffs seeking for payment of damages based on negligence, strict liability, conspiracy and international tort theories (par. 27); upon defendants Motion to Dismiss on Forum non [conveniens], said petition was provisionally dismissed on condition that these cases be filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine Courts refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.) 11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District Court issued a Memorandum and Order conditionally dismissing several of the consolidated actions including those filed by the Filipino complainants. One of the conditions imposed was for the plaintiffs to file actions in their home countries or the countries in which they were injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that should the highest court of any foreign country affirm the dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home countries [or] the countries where they were injured, the said plaintiffs may return to that court and, upon proper motion, the Court will resume jurisdiction as if the case had never been dismissed for forum non conveniens. The Court however is constrained to dismiss the case at bar not solely on the basis of the above but because it shares the opinion of legal experts given in the interview made by the Inquirer in its Special report "Pesticide Cause Mass Sterility," to wit: 1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines should be an inconvenient forum to file this kind of damage suit against foreign companies since the causes of action alleged in the petition do not exist under Philippine laws. There has been no decided case in Philippine Jurisprudence awarding to those adversely affected by DBCP. This means there is no available evidence which will prove and disprove the relation between sterility and DBCP. 2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in the Philippines the device has been employed strictly. Mass sterility will not qualify as a class suit injury within the contemplation of Philippine statute.

3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine here that permits these causes to be heard. No product liability ever filed or tried here. Case ordered dismissed.40 Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by ABELLA, et al., assails before this Court the above-quoted order of the RTC of Davao City. ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,25196 on the ground of lack of jurisdiction. According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of the case since Articles 2176 and 2187 of the Civil Code are broad enough to cover the acts complained of and to support their claims for damages. ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal luminaries reported in a newspaper, by the RTC of Davao City is bereft of basis. According to them, their cause of action is based on quasi-delict under Article 2176 of the Civil Code. They also maintain that the absence of jurisprudence regarding the award of damages in favor of those adversely affected by the DBCP does not preclude them from presenting evidence to prove their allegations that their exposure to DBCP caused their sterility and/or infertility. SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the Order dated October 1, 1996 of the RTC of Davao City. DEL MONTE also filed its motion for reconsideration, which contained an additional motion for the inhibition of the presiding judge. The presiding judge of Branch 16 then issued an Order41 dated December 2, 1996, voluntarily inhibiting himself from trying the case. Thus, the case was re-raffled to Branch 13 of the RTC of Davao City. In an Order42 dated December 16, 1996, the RTC of Davao City affirmed the Order dated October 1, 1996, and denied the respective motions for reconsideration filed by defendant companies. Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the Orders dated October 1, 1996 and December 16, 1996 of the RTC of Davao City. This case was docketed as G.R. No. 128398. In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case motu proprio as it acquired jurisdiction over the subject matter of the case as well as over the persons of the defendant companies which voluntarily appeared before it. CHIQUITA also claims that the RTC of Davao City cannot dismiss the case simply on the basis of opinions of alleged legal experts appearing in a newspaper article.

Initially, this Court in its Resolution 43 dated July 28, 1997, dismissed the petition filed by CHIQUITA for submitting a defective certificate against forum shopping. CHIQUITA, however, filed a motion for reconsideration, which was granted by this Court in the Resolution44 dated October 8, 1997. On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court assailing the above-mentioned orders of the RTC of Davao City. Its petition was docketed as G.R. No. 127856. DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,25196, as defined under the law and that the said court already obtained jurisdiction over its person by its voluntary appearance and the filing of a motion for bill of particulars and, later, an answer to the complaint. According to DEL MONTE, the RTC of Davao City, therefore, acted beyond its authority when it dismissed the case motu proprio or without any motion to dismiss from any of the parties to the case. In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court consolidated G.R. Nos. 125078, 125598, 126654, 127856, and 128398. The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents filed by NAVIDA, et al. and ABELLA, et al. On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a Consolidated Motion (to Drop Party-Respondents).45 The plaintiff claimants alleged that they had amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in July 1997. This settlement agreement was evidenced by facsimiles of the "Compromise Settlement, Indemnity, and Hold Harmless Agreement," which were attached to the said motion. Pursuant to said agreement, the plaintiff claimants sought to withdraw their petitions as against DOW, OCCIDENTAL, and SHELL. DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the settlement entered into between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL. The Memoranda of the Parties Considering the allegations, issues, and arguments adduced by the parties, this Court, in a Resolution dated June 22, 1998,46 required all the parties to submit their respective memoranda. CHIQUITA filed its Memorandum on August 28, 1998; 47 SHELL asked to be excused from the filing of a memorandum alleging that it had already executed a compromise agreement with the plaintiff claimants. 48 DOLE filed its Memorandum on October 12, 1998 49 while DEL MONTE filed on October 13, 1998.50 NAVIDA, et al., and ABELLA, et al., filed their Consolidated Memorandum on February 3, 1999; 51 and DOW and OCCIDENTAL jointly filed a Memorandum on December 23, 1999.52

The Motion to Withdraw Petition for Review in G.R. No. 125598 On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in G.R. No. 125598, 53explaining that the said petition "is already moot and academic and no longer presents a justiciable controversy" since they have already entered into an amicable settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied with their obligations set forth in the 1997 Compromise Agreements. DOLE filed its Manifestation dated September 6, 2004, 54 interposing no objection to the withdrawal of the petition, and further stating that they maintain their position that DOW and OCCIDENTAL, as well as other settling defendant companies, should be retained as defendants for purposes of prosecuting the cross-claims of DOLE, in the event that the complaint below is reinstated. NAVIDA, et al., also filed their Comment dated September 14, 2004, 55 stating that they agree with the view of DOW and OCCIDENTAL that the petition in G.R. No. 125598 has become moot and academic because Civil Case No. 5617 had already been amicably settled by the parties in 1997. On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for Review Filed by Petitioners in G.R. No. 125598,56 stating that it has no objections to the withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No. 125598. In a Resolution57 dated October 11, 2004, this Court granted, among others, the motion to withdraw petition for review filed by DOW and OCCIDENTAL. THE ISSUES In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the following issues for our consideration: IN REFUTATION I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION. a) The court did not simply dismiss the case because it was filed in bad faith with petitioners intending to have the same dismissed and returned to the Texas court. b) The court dismissed the case because it was convinced that it did not have jurisdiction. IN SUPPORT OF THE PETITION II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE CASE. 9

a. The acts complained of occurred within Philippine territory. b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts complained of. c. Assumption of jurisdiction by the U.S. District Court over petitioner[s] claims did not divest Philippine [c]ourts of jurisdiction over the same. d. The Compromise Agreement and the subsequent Consolidated Motion to Drop Party Respondents Dow, Occidental and Shell does not unjustifiably prejudice remaining respondents Dole, Del Monte and Chiquita.58 DISCUSSION On the issue of jurisdiction Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos City and the RTC of Davao City erred in dismissing Civil Case Nos. 5617 and 24,251-96, respectively, for lack of jurisdiction. Remarkably, none of the parties to this case claims that the courts a quo are bereft of jurisdiction to determine and resolve the above-stated cases. All parties contend that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the action for damages, specifically for approximately P2.7 million for each of the plaintiff claimants. NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of defendant companies occurred within Philippine territory. Specifically, the use of and exposure to DBCP that was manufactured, distributed or otherwise put into the stream of commerce by defendant companies happened in the Philippines. Said fact allegedly constitutes reasonable basis for our courts to assume jurisdiction over the case. Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as Article 2176 thereof, are broad enough to cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the respective rulings of the RTC of General Santos City and the RTC of Davao City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said cases be remanded to the courts a quo for further proceedings. DOLE similarly maintains that the acts attributed to defendant companies constitute a quasidelict, which falls under Article 2176 of the Civil Code. In addition, DOLE states that if there were no actionable wrongs committed under Philippine law, the courts a quo should have dismissed the civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., stated no cause of action against the defendant companies. DOLE also argues that if indeed there is no positive law defining the alleged acts of defendant companies as actionable wrong, Article 9 of the Civil Code dictates that a judge may not refuse to render a decision on the ground of insufficiency of the law. The court may still resolve the case, applying the customs of the place and, in the absence thereof, the general principles of law. DOLE posits that the Philippines is the situs of the tortious acts allegedly

committed by defendant companies as NAVIDA, et al., and ABELLA, et al., point to their alleged exposure to DBCP which occurred in the Philippines, as the cause of the sterility and other reproductive system problems that they allegedly suffered. Finally, DOLE adds that the RTC of Davao City gravely erred in relying upon newspaper reports in dismissing Civil Case No. 24,251-96 given that newspaper articles are hearsay and without any evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were taken judicial notice of, without any notice to the parties. DOLE, however, opines that the dismissal of Civil Case Nos. 5617 and 24,251-96 was proper, given that plaintiff claimants merely prosecuted the cases with the sole intent of securing a dismissal of the actions for the purpose of convincing the U.S. Federal District Court to re-assume jurisdiction over the cases. In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter of the cases filed before them. The Amended Joint-Complaints sought approximately P2.7 million in damages for each plaintiff claimant, which amount falls within the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place of the alleged exposure to DBCP, not the place of manufacture, packaging, distribution, sale, etc., of the said chemical. This is in consonance with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law of the place where the alleged wrong was committed will govern the action. CHIQUITA and the other defendant companies also submitted themselves to the jurisdiction of the RTC by making voluntary appearances and seeking for affirmative reliefs during the course of the proceedings. None of the defendant companies ever objected to the exercise of jurisdiction by the courts a quo over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City, respectively. The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil Case Nos. 5617 and 24,251-96, respectively The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the plaintiffs are entitled to all or some of the claims asserted therein.59 Once vested by law, on a particular court or body, the jurisdiction over the subject matter or nature of the action cannot be dislodged by anybody other than by the legislature through the enactment of a law. At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, was: SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxxx (8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro

10

Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred thousand pesos (P200,000.00).60 Corollary thereto, Supreme Court Administrative Circular No. 09-94, states: 2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court. Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended JointComplaints filed before the courts a quo, the following prayer: PRAYER WHEREFORE, premises considered, it is most respectfully prayed that after hearing, judgment be rendered in favor of the plaintiffs ordering the defendants: a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred Thousand Pesos (P1,500,00.00); b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand Pesos (P400,000.00) each; c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand Pesos (P600,000.00); d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos (P200,000.00); and e) TO PAY THE COSTS of the suit.61 From the foregoing, it is clear that the claim for damages is the main cause of action and that the total amount sought in the complaints is approximately P2.7 million for each of the plaintiff claimants. The RTCs unmistakably have jurisdiction over the cases filed in General Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall within the purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129. Moreover, the allegations in both Amended Joint-Complaints narrate that: THE CAUSES OF ACTION

4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN COMMERCE nematocides containing the chemical dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as the nematode, which plagued banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human reproductive system as well. 5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used this product in the banana plantations WHERE they were employed, and/or (b) they resided within the agricultural area WHERE IT WAS USED. As a result of such exposure, the plaintiffs suffered serious and permanent injuries TO THEIR HEALTH, including, but not limited to, STERILITY and severe injuries to their reproductive capacities. 6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY MANUFACTURED, produced, sold, and/or USED DBCP and/or otherwise, PUT THE SAME into the stream of commerce, WITHOUT INFORMING THE USERS OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which THEY knew, or in the exercise of ordinary care and prudence ought to have known, were highly harmful and injurious to the Plaintiffs health and well-being. 7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE STREAM OF COMMERCE were negligent OR AT FAULT in that they, AMONG OTHERS: a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their subsidiaries or affiliates to so warn plaintiffs; b. Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient clothing and proper protective equipment and appliances, if any, to protect plaintiffs from the harmful effects of exposure to DBCP, or to cause their subsidiaries or affiliates to do so; c. Failed to place adequate warnings, in a language understandable to the worker, on containers of DBCP-containing materials to warn of the dangers to health of coming into contact with DBCP, or to cause their subsidiaries or affiliates to do so; d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce a safety plan and a safe method of handling and applying DBCP, or to cause their subsidiaries or affiliates to do so; e. Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or affiliates to do so; and

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f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies and the public, or to cause their subsidiaries or affiliate to do so. 8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of defendants Standard Fruit Company, Dole Fresh Fruit Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that they failed to exercise reasonable care to prevent each plaintiffs harmful exposure to DBCP-containing products which defendants knew or should have known were hazardous to each plaintiff in that they, AMONG OTHERS: a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCP-containing products; b. Failed to implement proper methods and techniques of application of said products, or to cause such to be implemented; c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so warned; d. Failed to test said products for adverse health effects, or to cause said products to be tested; e. Concealed from Plaintiffs information concerning the observed effects of said products on Plaintiffs; f. Failed to monitor the health of plaintiffs exposed to said products; g. Failed to place adequate labels on containers of said products to warn them of the damages of said products; and h. Failed to use substitute nematocides for said products or to cause such substitutes to [be] used.62 (Emphasis supplied and words in brackets ours.) Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., attribute to defendant companies certain acts and/or omissions which led to their exposure to nematocides containing the chemical DBCP. According to NAVIDA, et al., and ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and illnesses, specifically to their reproductive system. Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants a quasi-delict, which under the Civil Code is defined as an act, or omission which causes damage to another, there being fault or negligence. To be precise, Article 2176 of the Civil Code provides:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al., point to the acts and/or omissions of the defendant companies in manufacturing, producing, selling, using, and/or otherwise putting into the stream of commerce, nematocides which contain DBCP, "without informing the users of its hazardous effects on health and/or without instructions on its proper use and application." 63 Verily, in Citibank, N.A. v. Court of Appeals, 64 this Court has always reminded that jurisdiction of the court over the subject matter of the action is determined by the allegations of the complaint, irrespective of whether or not the plaintiffs are entitled to recover upon all or some of the claims asserted therein. The jurisdiction of the court cannot be made to depend upon the defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would almost entirely depend upon the defendants. What determines the jurisdiction of the court is the nature of the action pleaded as appearing from the allegations in the complaint. The averments therein and the character of the relief sought are the ones to be consulted. Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-delict which is the basis for the claim for damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims of approximatelyP2.7 million for each plaintiff claimant, which obviously falls within the purview of the civil action jurisdiction of the RTCs. Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly suffered resulted from their exposure to DBCP while they were employed in the banana plantations located in the Philippines or while they were residing within the agricultural areas also located in the Philippines. The factual allegations in the Amended Joint-Complaints all point to their cause of action, which undeniably occurred in the Philippines. The RTC of General Santos City and the RTC of Davao City obviously have reasonable basis to assume jurisdiction over the cases. It is, therefore, error on the part of the courts a quo when they dismissed the cases on the ground of lack of jurisdiction on the mistaken assumption that the cause of action narrated by NAVIDA, et al., and ABELLA, et al., took place abroad and had occurred outside and beyond the territorial boundaries of the Philippines, i.e., "the manufacture of the pesticides, their packaging in containers, their distribution through sale or other disposition, resulting in their becoming part of the stream of commerce," 65 and, hence, outside the jurisdiction of the RTCs. Certainly, the cases below are not criminal cases where territoriality, or the situs of the act complained of, would be determinative of jurisdiction and venue for trial of cases. In personal civil actions, such as claims for payment of damages, the Rules of Court allow the action to be commenced and tried in the appropriate court, where any of the plaintiffs or defendants resides, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff.66

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In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all residents of the Philippines, either in General Santos City or in Davao City. Second, the specific areas where they were allegedly exposed to the chemical DBCP are within the territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages. Third, the testimonial and documentary evidence from important witnesses, such as doctors, co-workers, family members and other members of the community, would be easier to gather in the Philippines. Considering the great number of plaintiff claimants involved in this case, it is not far-fetched to assume that voluminous records are involved in the presentation of evidence to support the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact that the alleged cause of action of NAVIDA, et al., and ABELLA, et al., against the defendant companies for damages occurred in the Philippines, demonstrate that, apart from the RTC of General Santos City and the RTC of Davao City having jurisdiction over the subject matter in the instant civil cases, they are, indeed, the convenient fora for trying these cases.67 The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction over the persons of all the defendant companies It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction over the cases filed before them. All parties are one in asserting that the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of the defendant companies in the action below. All parties voluntarily, unconditionally and knowingly appeared and submitted themselves to the jurisdiction of the courts a quo. Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendants voluntary appearance in the action shall be equivalent to service of summons." In this connection, all the defendant companies designated and authorized representatives to receive summons and to represent them in the proceedings before the courts a quo. All the defendant companies submitted themselves to the jurisdiction of the courts a quo by making several voluntary appearances, by praying for various affirmative reliefs, and by actively participating during the course of the proceedings below. In line herewith, this Court, in Meat Packing Corporation of the Philippines v. Sandiganbayan,68 held that jurisdiction over the person of the defendant in civil cases is acquired either by his voluntary appearance in court and his submission to its authority or by service of summons. Furthermore, the active participation of a party in the proceedings is tantamount to an invocation of the courts jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from later on impugning the court or bodys jurisdiction.69 Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of the defendant companies, as well as over the subject matter of the instant case. What is more, this jurisdiction, which has been acquired and has been vested on the courts a quo, continues until the termination of the proceedings. It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction." Jurisdiction refers to the authority to decide a case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over the persons of

the defendants and the subject matter, as in the case of the courts a quo, the decision on all questions arising therefrom is but an exercise of such jurisdiction. Any error that the court may commit in the exercise of its jurisdiction is merely an error of judgment, which does not affect its authority to decide the case, much less divest the court of the jurisdiction over the case.70 Plaintiffs purported bad faith in filing the subject civil cases in Philippine courts Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith merely to procure a dismissal of the same and to allow them to return to the forum of their choice, this Court finds such argument much too speculative to deserve any merit. It must be remembered that this Court does not rule on allegations that are unsupported by evidence on record. This Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. This Court deals with facts, not fancies; on realities, not appearances. When this Court acts on appearances instead of realities, justice and law will be short-lived.71 This is especially true with respect to allegations of bad faith, in line with the basic rule that good faith is always presumed and bad faith must be proved.72 In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the subject matter of the amended complaints filed by NAVIDA, et al., and ABELLA, et al., and that the courts a quo have also acquired jurisdiction over the persons of all the defendant companies, it therefore, behooves this Court to order the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City, respectively. On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of their amicable settlement with NAVIDA, et al., and ABELLA, et al. NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and SHELL be dropped as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96. The non-settling defendants allegedly manifested that they intended to file their cross-claims against their co-defendants who entered into compromise agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling defendants did not aver any cross-claim in their answers to the complaint and that they subsequently sought to amend their answers to plead their cross-claims only after the settlement between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and ABELLA, et al., therefore, assert that the cross-claims are already barred. In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et al., and ABELLA, et al., since the latters Amended Complaints cited several instances of tortious conduct that were allegedly committed jointly and severally by the defendant companies. This solidary obligation on the part of all the defendants allegedly gives any codefendant the statutory right to proceed against the other co-defendants for the payment of their respective shares. Should the subject motion of NAVIDA, et al., and ABELLA, et al., be granted, and the Court subsequently orders the remand of the action to the trial court for continuance, CHIQUITA and DOLE would allegedly be deprived of their right to prosecute their cross-claims against their other co-defendants. Moreover, a third party complaint or a 13

separate trial, according to CHIQUITA, would only unduly delay and complicate the proceedings. CHIQUITA and DOLE similarly insist that the motion of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96, be denied. Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda, DEL MONTE filed a Manifestation and Motion 73 before the Court, stating that similar settlement agreements were allegedly executed by the plaintiff claimants with DEL MONTE and CHIQUITA sometime in 1999. Purportedly included in the agreements were Civil Case Nos. 5617 and 24,251-96. Attached to the said manifestation were copies of the Compromise Settlement, Indemnity, and Hold Harmless Agreement between DEL MONTE and the settling plaintiffs, as well as the Release in Full executed by the latter. 74 DEL MONTE specified therein that there were "only four (4) plaintiffs in Civil Case No. 5617 who are claiming against the Del Monte parties"75 and that the latter have executed amicable settlements which completely satisfied any claims against DEL MONTE. In accordance with the alleged compromise agreements with the four plaintiffs in Civil Case No. 5617, DEL MONTE sought the dismissal of the Amended Joint-Complaint in the said civil case. Furthermore, in view of the above settlement agreements with ABELLA, et al., in Civil Case No. 24,251-96, DEL MONTE stated that it no longer wished to pursue its petition in G.R. No. 127856 and accordingly prayed that it be allowed to withdraw the same. Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the RTC of General Santos City and the RTC of Davao City, respectively, the Court deems that the Consolidated Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and ABELLA, et al., should likewise be referred to the said trial courts for appropriate disposition. Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." Like any other contract, an extrajudicial compromise agreement is not excepted from rules and principles of a contract. It is a consensual contract, perfected by mere consent, the latter being manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. 76 Judicial approval is not required for its perfection.77 A compromise has upon the parties the effect and authority of res judicata 78 and this holds true even if the agreement has not been judicially approved. 79 In addition, as a binding contract, a compromise agreement determines the rights and obligations of only the parties to it.80 In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao City should first receive in evidence and examine all of the alleged compromise settlements involved in the cases at bar to determine the propriety of dropping any party as a defendant therefrom. The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed by NAVIDA, et al., and ABELLA, et al., only pertained to DOW, OCCIDENTAL and SHELL in view of the latter companies alleged compromise agreements with the plaintiff claimants. However, in subsequent developments, DEL MONTE and CHIQUITA supposedly reached their own amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it entered into a settlement agreement with only four of the plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were allegedly the only ones who were asserting claims

against DEL MONTE. However, the said allegation of DEL MONTE was simply stipulated in their Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could not be verified with certainty based on the records elevated to this Court. Significantly, the 336 plaintiff claimants in Civil Case No. 5617 jointly filed a complaint without individually specifying their claims against DEL MONTE or any of the other defendant companies. Furthermore, not one plaintiff claimant filed a motion for the removal of either DEL MONTE or CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96. There is, thus, a primary need to establish who the specific parties to the alleged compromise agreements are, as well as their corresponding rights and obligations therein. For this purpose, the courts a quo may require the presentation of additional evidence from the parties. Thereafter, on the basis of the records of the cases at bar and the additional evidence submitted by the parties, if any, the trial courts can then determine who among the defendants may be dropped from the said cases. It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the same quasi-delict is solidary. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors.81 In solidary obligations, the paying debtors right of reimbursement is provided for under Article 1217 of the Civil Code, to wit: Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.
1avvphil

The above right of reimbursement of a paying debtor, and the corresponding liability of the co-debtors to reimburse, will only arise, however, if a solidary debtor who is made to answer for an obligation actually delivers payment to the creditor. As succinctly held in Lapanday Agricultural Development Corporation v. Court of Appeals, 82 "[p]ayment, which means not only the delivery of money but also the performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary debtors to seek reimbursement for the share which corresponds to each of the [other] debtors."83 In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must necessarily be conducted first in order to establish whether or not defendant companies are liable for the claims for damages filed by the plaintiff claimants, which would necessarily give rise to an obligation to pay on the part of the defendants.

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At the point in time where the proceedings below were prematurely halted, no cross-claims have been interposed by any defendant against another defendant. If and when such a cross-claim is made by a non-settling defendant against a settling defendant, it is within the discretion of the trial court to determine the propriety of allowing such a cross-claim and if the settling defendant must remain a party to the case purely in relation to the cross claim. In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, 84 the Court had the occasion to state that "where there are, along with the parties to the compromise, other persons involved in the litigation who have not taken part in concluding the compromise agreement but are adversely affected or feel prejudiced thereby, should not be precluded from invoking in the same proceedings an adequate relief therefor." 85 Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, 86 the Court upheld the ruling of the trial court that, in a joint and solidary obligation, the paying debtor may file a third-party complaint and/or a cross-claim to enforce his right to seek contribution from his co-debtors. Hence, the right of the remaining defendant(s) to seek reimbursement in the above situation, if proper, is not affected by the compromise agreements allegedly entered into by NAVIDA, et al., and ABELLA, et al., with some of the defendant companies. WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos. 125078, 126654, and 128398. We REVERSE and SET ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General Santos City, Branch 37, in Civil Case No. 5617, and the Order dated October 1, 1996 of the Regional Trial Court of Davao City, Branch 16, and its subsequent Order dated December 16, 1996 denying reconsideration in Civil Case No. 24,251-96, and REMAND the records of this case to the respective Regional Trial Courts of origin for further and appropriate proceedings in line with the ruling herein that said courts have jurisdiction over the subject matter of the amended complaints in Civil Case Nos. 5617 and 24,251-96. The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R. No. 127856. In view of the previous grant of the motion to withdraw the petition in G.R. No. 125598, both G.R. Nos. 127856 and 125598 are considered CLOSED AND TERMINATED. No pronouncement as to costs.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 170251 June 1, 2011

dismissed the petition and affirmed the resolution of the COSLAP. The CA ruled that the COSLAP has exclusive jurisdiction over the present case and, even assuming that the COSLAP has no jurisdiction over the land dispute of the parties herein, petitioner is already estopped from raising the issue of jurisdiction because Alfredo failed to raise the issue of lack of jurisdiction before the COSLAP and he actively participated in the proceedings before the said body. Petitioner filed a motion for reconsideration, which was denied by the CA in a Resolution dated October 17, 2005. Hence, petitioner elevated the case to this Court via Petition for Review on Certiorari under Rule 45 of the Rules of Court, with the following issues: I WHETHER OR NOT COSLAP HAD JURISDICTION TO DECIDE THE QUESTION OF OWNERSHIP. II WHETHER OR NOT THE ISSUANCE OF A TORRENS TITLE IN THE NAME OF THE PETITIONER'S HUSBAND IN 2002 RENDERED THE INSTANT CONTROVERSY ON THE ISSUE OF OWNERSHIP OVER THE SUBJECT PROPERTY MOOT AND ACADEMIC.6 Petitioner averred that the COSLAP has no adjudicatory powers to settle and decide the question of ownership over the subject land. Further, the present case cannot be classified as explosive in nature as the parties never resorted to violence in resolving the controversy. Petitioner submits that it is the Regional Trial Court which has jurisdiction over controversies relative to ownership of the subject property. Respondents, on the other hand, alleged that the COSLAP has jurisdiction over the present case. Further, respondents argued that petitioner is estopped from questioning the jurisdiction of the COSLAP by reason of laches due to Alfredo's active participation in the actual proceedings before the COSLAP. Respondents said that Alfredo's filing of the Motion for Reconsideration and/or Reopening of the proceedings before the COSLAP is indicative of his conformity with the questioned resolution of the COSLAP. The main issue for our resolution is whether the COSLAP has jurisdiction to decide the question of ownership between the parties. The petition is meritorious. The COSLAP was created by virtue of Executive Order (E.O.) No. 561, issued on September 21, 1979 by then President Ferdinand E. Marcos. It is an administrative body established as a means of providing a mechanism for the expeditious settlement of land problems among small settlers, landowners and members of the cultural minorities to avoid social unrest.

CELIA S. VDA. DE HERRERA, Petitioner, vs. EMELITA BERNARDO, EVELYN BERNARDO as Guardian of Erlyn, Crislyn and Crisanto Bernardo,*Respondents. DECISION PERALTA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 73674. The antecedents are as follows: Respondents heirs of Crisanto S. Bernardo, represented by Emelita Bernardo, filed a complaint before the Commission on the Settlement of Land Problems (COSLAP) against Alfredo Herrera (Alfredo) for interference, disturbance, unlawful claim, harassment and trespassing over a portion of a parcel of land situated at BarangayDalig, Cardona, Rizal, with an area of 7,993 square meters. The complaint was docketed as COSLAP Case No. 99-221. Respondents claimed that said parcel of land was originally owned by their predecessor-ininterest, Crisanto Bernardo, and was later on acquired by Crisanto S. Bernardo. The parcel of land was later on covered by Tax Declaration No. CD-006-0828 under the name of the respondents. Petitioner, on the other hand, alleged that the portion of the subject property consisting of about 700 square meters was bought by Diosdado Herrera, Alfredo's father, from a certain Domingo Villaran. Upon the death of Diosdado Herrera, Alfredo inherited the 700-squaremeter lot. The COSLAP, in a Resolution 3 dated December 6, 1999, ruled that respondents have a rightful claim over the subject property. Consequently, a motion for reconsideration and/or reopening of the proceedings was filed by Alfredo. The COSLAP, in an Order 4 dated August 21, 2002, denied the motion and reiterated its Order dated December 6, 1999. Aggrieved, petitioner Celia S. Vda. de Herrera, as the surviving spouse of Alfredo, filed a petition for certiorari with the CA.5 The CA, Twelfth Division, in its Decision dated April 28, 2005,

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Section 3 of E.O. No. 561 specifically enumerates the instances when the COSLAP can exercise its adjudicatory functions: Section 3. Powers and Functions. - The Commission shall have the following powers and functions: xxxx 2. Refer and follow up for immediate action by the agency having appropriate jurisdiction any land problem or dispute referred to the Commission: Provided, That the Commission may, in the following cases, assume jurisdiction and resolve land problems or disputes which are critical and explosive in nature considering, for instance, the large number of the parties involved, the presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action: (a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires; (b) Between occupants/squatters and government reservation grantees; (c) Between occupants/squatters and public land claimants or applicants; (d) Petitions for classification, release and/or subdivision of lands of the public domain; and (e) Other similar land problems of grave urgency and magnitude.7 Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction that can only wield powers which are specifically granted to it by its enabling statute. 8 Under Section 3 of E.O. No. 561, the COSLAP has two options in acting on a land dispute or problem lodged before it, to wit: (a) refer the matter to the agency having appropriate jurisdiction for settlement/resolution; or (b) assume jurisdiction if the matter is one of those enumerated in paragraph 2 (a) to (e) of the law, if such case is critical and explosive in nature, taking into account the large number of parties involved, the presence or emergence of social unrest, or other similar critical situations requiring immediate action. In resolving whether to assume jurisdiction over a case or to refer the same to the particular agency concerned, the COSLAP has to consider the nature or classification of the land involved, the parties to the case, the nature of the questions raised, and the need for immediate and urgent action thereon to prevent injuries to persons and damage or destruction to property. The law does not vest jurisdiction on the COSLAP over any land dispute or problem.9 In the instant case, the COSLAP has no jurisdiction over the subject matter of respondents' complaint. The present case does not fall under any of the cases enumerated under Section 3, paragraph 2 (a) to (e) of E.O. No. 561. The dispute between the parties is not critical and explosive in nature, nor does it involve a large number of parties, nor is there a presence or emergence of social tension or unrest. It can also hardly be characterized as involving a critical situation that requires immediate action.

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs. 10 Respondents' cause of action before the COSLAP pertains to their claim of ownership over the subject property, which is an action involving title to or possession of real property, or any interest therein,11 the jurisdiction of which is vested with the Regional Trial Courts or the Municipal Trial Courts depending on the assessed value of the subject property. 12 The case of Banaga v. Commission on the Settlement of Land Problems, 13 applied by the CA and invoked by the respondents, is inapplicable to the present case. Banaga involved parties with conflicting free patent applications over a parcel of public land and pending with the Bureau of Lands. Because of the Bureau of Land's inaction within a considerable period of time on the claims and protests of the parties and to conduct an investigation, the COSLAP assumed jurisdiction and resolved the conflicting claims of the parties. The Court held that since the dispute involved a parcel of public land on a free patent issue, the COSLAP had jurisdiction over that case. In the present case, there is no showing that the parties have conflicting free patent applications over the subject parcel of land that would justify the exercise of the COSLAP's jurisdiction. Since the COSLAP has no jurisdiction over the action, all the proceedings therein, including the decision rendered, are null and void.14 A judgment issued by a quasi-judicial body without jurisdiction is void. It cannot be the source of any right or create any obligation. 15 All acts performed pursuant to it and all claims emanating from it have no legal effect. 16 Having no legal effect, the situation is the same as it would be as if there was no judgment at all. It leaves the parties in the position they were before the proceedings. 17 Respondents allegation that petitioner is estopped from questioning the jurisdiction of the COSLAP by reason of laches does not hold water. Petitioner is not estopped from raising the jurisdictional issue, because it may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel. 18 The fact that a person attempts to invoke unauthorized jurisdiction of a court does not estop him from thereafter challenging its jurisdiction over the subject matter, since such jurisdiction must arise by law and not by mere consent of the parties.19 In Regalado v. Go,20 the Court held that laches should be clearly present for the Sibonghanoy21 doctrine to apply, thus: Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier, it is negligence or omission to assert a right within a reasonable length of time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it." The ruling in People v. Regalario that was based on the landmark doctrine enunciated in Tijam v. Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in 17

cases in which the factual milieu is analogous to that in the cited case. In such controversies, laches should have been clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to assert it. In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss filed by the Surety almost 15 years after the questioned ruling had been rendered. At several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety invoked the jurisdiction of the said courts to obtain affirmative relief and submitted its case for final adjudication on the merits. It was only when the adverse decision was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction.22
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The factual settings attendant in Sibonghanoy are not present in the case at bar that would justify the application of estoppel by laches against the petitioner. Here, petitioner assailed the jurisdiction of the COSLAP when she appealed the case to the CA and at that time, no considerable period had yet elapsed for laches to attach. Therefore, petitioner is not estopped from assailing the jurisdiction of the COSLAP. Additionally, no laches will even attach because the judgment is null and void for want of jurisdiction.23 Anent the issuance of OCT No. M-10991 in favor of petitioners husband Alfredo Herrerra in 2002, respondents alleged that there was fraud, misrepresentation and bad faith in the issuance thereof. Thus, respondents are now questioning the legality of OCT No. M-10991, an issue which this Court cannot pass upon in this present petition. It is a rule that the validity of a Torrens title cannot be assailed collaterally. 24 Section 48 of Presidential Decree No. 1529 provides that: Certificate not Subject to Collateral Attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled, except in a direct proceeding in accordance with law. The issue of the validity of the Title was brought only during the proceedings before this Court as said title was issued in the name of petitioner's husband only during the pendency of the appeal before the CA. The issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted for that purpose 25 and the present appeal before us, is simply not the direct proceeding contemplated by law. WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 28, 2005 and October 17, 2005, respectively, in CA-G.R. SP No. 73674 are REVERSED and SET ASIDE. The Decision and Order of the Commission on the Settlement of Land Problems, dated December 6, 1999 and August 21, 2002, respectively, in COSLAP Case No. 99-221, are declared NULL and VOID for having been issued without jurisdiction. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

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G.R. No. 179558

June 11, 2011

sought the determination of the true and correct amount of their loan obligation with petitioner.11 On May 16, 2006, the RTC issued an Order,12 the pertinent portions of which read: After an examination of the contents of the petition setting forth with sufficient particularity and material facts pursuant to Section 2 of Rule 4 of the Interim Rules of Procedures (sic) of Corporate Rehabilitation and the supporting documents attached thereto and finding the same to be sufficient in form and substance, the Court hereby: 1. ORDERS STAYING enforcement of all claims whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtors (herein petitioners)[, their] guarantors and [sureties] not solidarily liable with the debtors. In particular[,] ASIATRUST BANK BE STAYED from proceeding with the foreclosure and auction sale of the mortgaged properties; 2. APPOINTS PATRICK V. CAOILE as interim rehabilitation receiver with a bond of two million (P2,000,000.00) pesos; xxxx 7. FIXES the initial hearing on the petition on June 29, 2006 at 11:00 oclock (sic) in the morning.13 On June 2, 2006, Robert Cuchado, an officer of petitioner, went to Baguio City to secure a copy of the petition for rehabilitation but failed to do so because, at that time, the personnel of the rehabilitation court were attending the Judicial Service Training. Petitioner then tried to secure a copy of the petition through the sheriff of the RTC of La Trinidad, Benguet. The rehabilitation court, however, required petitioner to file a motion to that effect, together with a written document authorizing the sheriff to secure a copy thereof. On June 9, 2006, the rehabilitation court issued an Order granting the motion filed by petitioner and gave it a certified true copy of the petition.14 On the day of the initial hearing, petitioner, through its counsel Atty. Mario C. Lorenzo (Atty. Lorenzo), went to court with a Motion for Leave of Court to Admit Opposition to Rehabilitation Petition15 with the attached Opposition to Petition for Rehabilitation. 16 In an Order17 dated July 17, 2006, the RTC denied the motion and explained: Under par. 9 of the Stay Order[,] all creditors, etc., were given ten (10) days before the initial hearing to file their comment or opposition to the petition and putting them on notice that failure to do so will bar them from participating in the proceedings. It is only on June 29, 2006, the date of the initial hearing that Asiatrust filed its Motion with Leave to Admit Opposition. The motion partakes of the nature of a motion for extension of time to file pleading which is a prohibited pleading under Rule 3(e) of the Interim Rules of Procedure on Corporate Rehabilitation.18

ASIATRUST DEVELOPMENT BANK, Petitioner, vs. FIRST AIKKA DEVELOPMENT, INC. and UNIVAC DEVELOPMENT, INC., Respondents. DECISION NACHURA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) Decision1 dated June 28, 2007 and Resolution2 dated August 29, 2007 in CA-G.R. SP No. 97408. The Facts Respondents First Aikka Development, Inc. (FADI) and Univac Development, Inc. (UDI) are domestic corporations engaged in the construction and/or development of roads, bridges, infrastructure projects, subdivisions, housing, land, memorial parks, and other industrial and commercial projects for the government or any private entity or individual. 3 In the course of their business, FADI and UDI availed of separate loan accommodations or credit lines with petitioner Asiatrust Development Bank. 4 The aggregate amount of the loan obtained by respondents wasP114,000,000.00. Respondents religiously and faithfully complied with their loan obligations, but during the Asian Financial Crisis, which directly and adversely affected mainly the construction and real estate industry, respondents could not pay their obligations in cash.5 This prompted respondents to negotiate with petitioner for different modes of payment that the former might avail of. Petitioner thus agreed that respondents assign the receivables of their various contracts to sell involving the lots in the residential subdivision projects they were developing, instead of paying in cash.6 Notwithstanding the above agreement, petitioner insisted on collecting the loan per the loan documents. Petitioner claimed that respondents were already in default and demanded the payment of P145,830,220.95. Respondents denied that they were in default because of the assignment of their receivables to petitioner. Respondents contested petitioners claim and demanded for an accounting to determine the correct and true amount of their obligations.7 On May 10, 2006, respondents filed a consolidated Petition for Corporate Rehabilitation with Prayer for Suspension of Payments8 with the Regional Trial Court (RTC) of Baguio City, Branch 59. The case was docketed as Civil Case No. 6267-R. Respondents alleged that they were unable to pay their loan based on the claim of petitioner. Though they have sufficient assets to pay their loan, respondents averred that they were not liquid. They also stated that they were threatened by petitioner with various cases aimed at disrupting the operations of respondents which might eventually lead to the cessation of their business.9 Respondents prayed that an order be issued staying the enforcement of any and all claims of their creditors, investors, and suppliers, whether for money or otherwise, against petitioner, their guarantors, and sureties. 10 By way of rehabilitation, respondents also

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On July 31, 2006, when the case was called for hearing, Enrico J. Ong (Ong) appeared as representative of petitioner because the latters counsel could not go to court due to the cancellation of his flight as a result of bad weather. The rehabilitation court recognized the appearance of Ong only to inform the court that the counsel for petitioner could not attend the hearing. There being no other oppositors or creditors in court despite due notices, the rehabilitation court terminated the initial hearing and directed the rehabilitation receiver to evaluate respondents rehabilitation plan and then report the results thereof to the court.19 On October 13, 2006, the rehabilitation receiver called for a conference and presented the draft of the rehabilitation report to petitioner, represented by Atty. Lorenzo and Ong, and to respondents. Petitioner filed a manifestation and motion in court calling its attention to the alleged refusal of the receiver to hear its side. Petitioner thus asked for judicial assistance to enable it to actively participate in the rehabilitation proceedings and protect its interest. The receiver finalized and later on filed his evaluation report in court. He recommended the approval of the rehabilitation plan.20 On December 5, 2006, the RTC issued an Order,21 the pertinent portions of which read: On the same ground under Rule 3 of the Interim Rules, the Motion of Oppositor Asiatrust to participate in the Rehabilitation Proceedings is DENIED. This pleading partakes of a [P]etition for Relief which is also a prohibited pleading under par. d of Rule 3 of the same rule. Moreover, the motion has also the purpose to reconsider the courts ruling in denying the admission of their opposition to the [P]etition for Rehabilitation. It must be stressed that under par. 9 of the Stay Order, "All creditors, etc., were given ten (10) days before the initial hearing to file their comment or opposition to the petition and putting them on notice that failure to do so will bar them from participating in the proceedings." As to the Rehabilitation Report and the Integrated Revised Rehabilitation Plan and Schedule of the petitioners, the court, after a careful and thorough examination and review of the report, it is its considered judgment that the rehabilitation of the debtor is feasible and hereby APPROVES the Rehabilitation Report and the REVISED REHABILITATION PLAN. xxxx

Aggrieved, petitioner elevated the case to the CA via a Petition for Review 23 under Rule 43 of the Rules of Court. On June 28, 2007, the appellate court affirmed the above RTC Orders. The appellate court emphasized that petitioners failure to participate in the rehabilitation proceedings was due to its own fault. First, petitioner failed to file on time its opposition to the petition for rehabilitation and still failed to present good reason for it to be belatedly admitted. Second, on the date of the second hearing, its counsel failed to go to court allegedly due to the cancellation of his flight, which, to the mind of the court, was inexcusable. Lastly, instead of filing a comment to the rehabilitation proceedings, petitioner filed a motion to participate in the rehabilitation proceedings, which is a prohibited pleading. The CA thus concluded that petitioner was given every opportunity to be heard in the rehabilitation proceedings, but it failed to avail of these remedies. On the propriety of the joint petition for rehabilitation, the CA opined that the Interim Rules of Procedure on Corporate Rehabilitation (the Rules) contains no prohibition. Finally, the CA stressed that rehabilitation proceedings are nonadversarial and summary in nature which, therefore, necessitate the proper observance of the period and procedures provided for by law and the Rules.24 The Issues Undaunted, petitioner comes before this Court, raising the following errors:

A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT FAILED TO RULE THAT PETITIONER WAS UNJUSTLY DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW WHEN IT WAS NOT ALLOWED TO PROVE THE TRUE AND CORRECT AMOUNT OF THE LOAN OBLIGATIONS OWING TO IT BY THE RESPONDENTS BASED ON A MERE TECHNICALITY, IN BLATANT DISREGARD OF THE APPLICABLE LAWS AND DECISIONS OF THIS HONORABLE COURT. B.

WHEREFORE, premises all duly considered, the Motion of Asiatrust to participate in the Rehabilitation Proceedings is hereby DENIED, the Rehabilitation Report and the Integrated Revised Rehabilitation Plan of Receiver Patrick Caoile is APPROVED and the Notice of the Appearance of the Cabato Law Office as collaborating counsel for Oppositor Asiatrust is NOTED. The court appointed Receiver shall submit his report every three (3) months and a yearly report on the status of the progress of the rehabilitation and the implementation and monitoring of the same. SO ORDERED.22

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT AFFIRMED THE APPROVAL OF THE REHABILITATION PLAN DESPITE THE REHABILITATION COURTS FAILURE TO CONDUCT A CLARIFICATORY HEARING TO RESOLVE THE UNSETTLED ISSUE ON THE AMOUNT OF INDEBTEDNESS OF PRIVATE RESPONDENTS AND THE REHABILITATION RECEIVERS FAILURE TO MAKE A CREDIBLE AND INDEPENDENT INVESTIGATION ON THE AMOUNT OF INDEBTEDNESS OF RESPONDENT CORPORATIONS, THEREBY DEVIATING FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS.

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C. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERRORS OF LAW WHEN IT INEXPLICABLY AFFIRMED THE REHABILITATION COURTS APPROVAL OF THE CONSOLIDATED PETITION FOR REHABILITATION, DESPITE THE SUBSTANTIAL EVIDENCE SHOWING THAT THE PETITION WAS FILED IN THE WRONG VENUE INSOFAR AS RESPONDENT UNIVAC DEVELOPMENT IS CONCERNED AND WAS FATALLY DEFECTIVE ON ITS FACE. D. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT REFUSED TO RULE ON THE SUBSTANTIAL AND FORMAL DEFECTS OF THE REHABILITATION PLAN ON THE PRETEXT THAT THE REHABILITATION COURTS APPROVAL OF THE RESPONDENTS REHABILITATION IS BINDING ON IT, DESPITE THE ABSENCE OF SUBSTANTIAL EVIDENCE THAT WOULD SUPPORT THE DECISION OF THE REHABILITATION COURT. E. WHETHER OR NOT THE HONORABLE COURTS EXERCISE OF ITS DISCRETIONARY REVIEW POWERS IS WARRANTED UNDER THE CIRCUMSTANCES.25 Petitioners Arguments Petitioner avers that it was denied due process when the rehabilitation court refused to admit its opposition to the petition for rehabilitation and to comment on the rehabilitation plan.26 It explains that the late submission of the opposition was brought about by the baseless and unfounded requirements imposed by the court. 27 Considering that there are valid and substantial grounds for the dismissal of the petition for rehabilitation, petitioner insists that its comment and opposition should have been admitted by the rehabilitation court. Petitioner points out that while the court denied its motion for leave to admit its opposition, it (the court) allowed the Securities and Exchange Commission to submit its comment long after the prescribed period.28 Petitioner adds that the rehabilitation courts unwarranted refusal to recognize the appearance of its duly authorized representative constitutes a denial of its right to due process.29 Petitioner also insists that mere delay in the submission of the comment on the petition for rehabilitation does not warrant the denial of petitioners right to participate in the rehabilitation proceedings. It likewise assails the rehabilitation courts jurisdiction over UDI, whose principal place of business is in Pasig City, which is beyond the jurisdiction of the RTC of Baguio City. It, thus, challenges the consolidated petition for rehabilitation.30 Moreover, petitioner avers that respondents failed to show that they had adequate capital to sustain their operations during the interim period of corporate rehabilitation.31 Lastly, petitioner denies that it is estopped from assailing the rehabilitation

plan as it already received payment from respondents based on the rehabilitation plan. It clarifies that it accepted the check payments subject to the outcome of this case.32 Respondents Arguments Respondents, on the other hand, aver that the petition is legally infirm as there are no special important reasons for the Court to exercise its sound judicial discretion to review the assailed CA Decision.33 They also argue that petitioners failure to participate in the rehabilitation proceedings could be attributed to its counsels own slackness and disregard for the rules.34 On the issue of the rehabilitation courts jurisdiction, respondents counter that petitioner could no longer assail it as petitioner actively participated and continues to participate in the rehabilitation proceedings, including the receipt of payments in accordance with the approved rehabilitation plan.35 They explain that in the Orders dated May 16, 2006, the rehabilitation court held that the petition is sufficient in form and substance; July 17, 2006, the rehabilitation court denied petitioners motion for leave to admit its comment on the petition for rehabilitation; and July 31, 2006, the court declared that there is merit in the petition which was given due course. Petitioners failure to assail the above orders rendered them final and immutable. Respondents thus opine that petitioner could no longer assail them in this petition for review.36 Respondents likewise insist that petitioner could no longer participate in the rehabilitation proceedings because of its failure to file its comment on the petition. In other words, respondents said, the filing of the comment on the petition is a condition precedent to the filing of the comment on the rehabilitation plan. 37 On the amount of the loan obligation, respondents claim that there was a valid basis and there was a determination of the true and correct amount thereof.38 The Courts Ruling Though the rehabilitation proceedings had gone as far as the approval and the subsequent implementation of the rehabilitation plan, we must confront the issue of the rehabilitation courts jurisdiction to hear and decide the case insofar as respondent UDI is concerned. A perusal of petitioners pleadings clearly shows that it had repeatedly raised the jurisdictional question. The courts below, however, ignored this issue as they did not recognize petitioners right to participate in the rehabilitation proceedings. While it is true that petitioner had been asking the rehabilitation and appellate courts that it be allowed to participate, contrary to respondents contention, the same did not amount to estoppel that would bar it from questioning the rehabilitation courts jurisdiction. It is wellsettled that the courts jurisdiction may be assailed at any stage of the proceedings, even for the first time on appeal. The reason is that jurisdiction is conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render judgment on the action.39 In its Opposition to the petition for rehabilitation, petitioner already questioned the courts jurisdiction over UDI. On appeal to the CA, it again raised the same issue, but it failed to obtain a favorable decision. We cannot, therefore, say that petitioner slept on its rights. It is not estopped from raising the jurisdictional issue even at this stage. In any event, even if petitioner had not raised the issue of jurisdiction, the reviewing court would still not be precluded from ruling on the matter of jurisdiction.

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Neither can estoppel be imputed to petitioner for its receipt of payments made by respondents in accordance with the rehabilitation plan. It has been established that in its letters to respondents, petitioner explained that it received payments subject to the results of its appeal. Besides, it is a basic rule that estoppel does not confer jurisdiction on a tribunal that has none over the cause of action or subject matter of the case.40 Records show that the Petition for Corporate Rehabilitation with Prayer for Suspension of Payments41 was filed by two corporations, namely, FADI and UDI. Respondent FADI is a real estate corporation duly organized and existing under and by virtue of Philippine laws, with principal place of business in Baguio City. 42 Respondent UDI, on the other hand, is a real estate corporation with principal place of business in Pasig City. 43 Respondents explain in their petition that they filed the consolidated petition because they availed of separate but intertwined loan obligations or credit lines, and that they have interlocking directors, owners, and officers. As such, a full and complete settlement of the loan obligations will involve the two corporations and, consequently, the rehabilitation of one will entail the rehabilitation of the other.44 We find that the consolidation of the petitions involving these two separate entities is not proper. Although FADI and UDI have interlocking directors, owners, and officers and intertwined loans, the two corporations are separate, each with a personality distinct from the other. To be sure, in determining the feasibility of rehabilitation, the court evaluates the assets and liabilities of each of these corporations separately and not jointly with other corporations. Moreover, Section 2, Rule 3 of the Rules, the rule applicable at the time of the filing of the petition, provides: Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall be filed in the Regional Trial Court having jurisdiction over the territory where the debtors principal office is located. Considering that UDIs principal office is located in Pasig City, the petition should have been filed with the RTC in Pasig City and not in Baguio City. The latter court cannot, therefore, take cognizance of the rehabilitation petition insofar as UDI is concerned for lack of jurisdiction. This error, however, will not result in the dismissal of the entire petition since the RTC of Baguio City had jurisdiction over the petition of FADI in accordance with the above-quoted provision of the Rules. On the issue of whether the rehabilitation court, as affirmed by the CA, correctly denied petitioners prayer to participate in the rehabilitation proceedings because of the belated filing of its Comment/Opposition to respondents petition for rehabilitation, we answer in the negative.

The Court promulgated the Rules in order to provide a remedy for summary and nonadversarial rehabilitation proceedings of distressed but viable corporations.45 These Rules are to be construed liberally to obtain for the parties a just, expeditious, and inexpensive disposition of the case.46 To be sure, strict compliance with the rules of procedure is essential to the administration of justice. Nonetheless, technical rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application should be relaxed when they hinder rather than promote substantial justice. 47 Otherwise stated, strict application of technical rules of procedure should be shunned when they hinder rather than promote substantial justice.48 In this case, instead of filing its opposition to the petition for rehabilitation at least ten days before the date of the initial hearing as required by the Rules, petitioner filed a Motion for Leave of Court to Admit Opposition to Rehabilitation Petition 49 with the attached Opposition to Petition for Rehabilitation 50 on the date of the initial hearing. Because the pleading was not filed on time, the RTC denied the motion. While the court has the discretion whether or not to admit the opposition belatedly filed by petitioner, it is our considered opinion that the RTC gravely abused its discretion when it refused to grant the motion, even as the factual circumstances of the case require that the Rules be liberally construed in the interest of justice. Admittedly, petitioner is respondents major creditor. The parties even explained that the new payment scheme adopted in the approved rehabilitation plan maintained the same scheme as that stipulated in the contracts between respondents and their creditors except that of petitioner. In other words, respondents could pay the other creditors in the same manner as that stipulated in their contracts but could not abide by the terms of their contracts with petitioner. Moreover, petitioner and respondents differ in their assessment and computation of the latters obligations to the former. Petitioner claims that respondents owe it P145,830,220.95, while the latter only admit a total obligation ofP24,202,015. This disparity in the parties claims makes it more important for the rehabilitation court to have given petitioner the opportunity to be heard. Besides, in their petition before the RTC, respondents sought the determination of the true and correct amount of their loan with petitioner. 51 We consider this as a compelling reason for the liberal interpretation of the Rules, and the rehabilitation court should have admitted petitioners comment on the petition for rehabilitation and allowed petitioner to participate in the proceedings. Time and again, we have held that cases should, as much as possible, be resolved on the merits, not on mere technicalities. In cases where we dispense with the technicalities, we do not mean to undermine the force and effectivity of the periods set by law. In those rare cases where we did not stringently apply the procedural rules, there always existed a clear need to prevent the commission of a grave injustice, as in the present case. 52 Our judicial system and the courts have always tried to maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant be given the full opportunity for the just and proper disposition of his cause.53 Corporate rehabilitation connotes the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continued operation is economically feasible and its creditors can recover by way of the present value of payments projected in the 22

rehabilitation plan, more if the corporation continues as a going concern than if it is immediately liquidated.54
1awvvphi1

The Regional Trial Court of Baguio City, Branch 59, is likewise ORDERED to DISMISS the petition for rehabilitation of Univac Development, Inc. for lack of jurisdiction. SO ORDERED.

Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative purposes. On the one hand, they attempt to provide for the efficient and equitable distribution of an insolvent debtors remaining assets to its creditors; and on the other, to provide debtors with a "fresh start" by relieving them of the weight of their outstanding debts and permitting them to reorganize their affairs.55 The purpose of rehabilitation proceedings is to enable the company to gain a new Lease on life and thereby allow creditors to be paid their claims from its earnings.56 The determination of the true and correct amount due petitioner is important in assessing whether FADI may be successfully rehabilitated. It is thus necessary that petitioner be given the opportunity to be heard by the rehabilitation court. The court should admit petitioners comment on or opposition to FADIs petition for rehabilitation and allow petitioner to participate in the rehabilitation proceedings to determine if indeed FADI could maintain its corporate existence. A remand of the case to the rehabilitation court is, therefore, imperative. To be sure, the successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the economy in general.57 As much as we would like to honor the rehabilitation plan approved by the rehabilitation court, particularly because it has already been partially implemented, we cannot sustain the decision of the court, as affirmed by the CA, if we are to ensure that rehabilitation is indeed feasible. It is especially important in this case to hear petitioner, as the major creditor of the distressed corporation, since it is a banking institution. Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the publics excess money and lend out the same. Banks, therefore, redistribute wealth in the economy by channeling idle savings to profitable investments.58 Banks operate (and earn income) by extending credit facilities financed primarily by deposits from the public. They plough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the publics money, their viability depends largely on their ability to return those deposits on demand. For this reason, banking is undeniably imbued with public interest. Consequently, much importance is given to sound lending practices and good corporate governance.59 WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated June 28, 2007 and Resolution dated August 29, 2007 in CA-G.R. SP No. 97408 are SET ASIDE. Consequently, the Order of the RTC dated July 17, 2006 and those issued subsequent thereto are hereby NULLIFIED. We REMAND the records of the case pertaining to the petition for rehabilitation of First Aikka Development, Inc. to the Regional Trial Court of Baguio City, Branch 59, for further proceedings. The court is ORDERED to admit petitioner Asiatrust Development Banks Comment/Opposition to the petition for rehabilitation and to allow petitioner to participate in said proceedings.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 192649 March 9, 2011

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HOME GUARANTY CORPORATION, Petitioner, vs. R-II BUILDERS INC., and NATIONAL HOUSING AUTHORITY, Respondents. DECISION PEREZ, J.: Primarily assailed in this petition for review filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, is the Decision dated 21 January 2010 rendered by the Former Fifteenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 111153, 1 the dispositive portion of which states as follows: WHEREFORE, the petition for certiorari and prohibition is hereby DENIED. The assailed Orders, dated March 3, 2009 and September 29, 2009, of the Regional Trial Court of Manila, Branch 22 are hereby AFFIRMED. Consequently, the injunction earlier issued on December 4, 2009, restraining the proceedings in Civil Case No. 05-113407, is hereby DISSOLVED. 2 The Facts On 19 March 1993, a Joint Venture Agreement (JVA) was entered into between respondents National Housing Authority (NHA) and R-II Builders, Inc. (R-II Builders) for the implementation of the Smokey Mountain Development and Reclamation Project (SMDRP). Amended and restated on 21 February 1994 3 and 11 August 1994,4 the JVA was aimed at implementing a two-phase conversion of the Smokey Mountain Dumpsite "into a habitable housing project inclusive of the reclamation of the area across Radial Road 10 (R-10)". 5 By the terms of the JVA, R-II Builders, as developer, was entitled to own 79 hectares of reclaimed land and the 2.3 hectare commercial area at the Smokey Mountain. As landowner/implementing agency, NHA, on the other hand, was entitled to own the 2,992 temporary housing units agreed to be built in the premises, the cleared and fenced incinerator site consisting of 5 hectares, 3,520 units of permanent housing to be awarded to qualified on site residents, the industrial area consisting of 3.2 hectares and the open spaces, roads and facilities within the Smokey Mountain Area.6 On 26 September 1994, NHA and R-II Builders, alongside petitioner Housing Guaranty Corporation (HGC) as guarantor and the Philippine National Bank (PNB) as trustee, entered into an Asset Pool Formation Trust Agreement which provided the mechanics for the implementation of the project.7 To back the project, an Asset Pool was created composed of the following assets: (a) the 21.2 hectare Smokey Mountain Site in Tondo, Manila; (b) the 79-hectare Manila Bay foreshore property in the name of the NHA; (c) the Smokey Mountain Project Participation Certificates (SMPPCs) to be issued, or their money proceeds; (d) disposable assets due to R-II Builders and/or its proceeds as defined in the JVA; (e) the resulting values inputted by R-II Builders for pre-implementation activities and some start-up

works amounting to P300,000,000.00; (f) the 2,992 temporary housing facilities/units to be constructed by R-II Builders; and, (g) all pertinent documents and records of the project.8 On the same date, the parties likewise executed a Contract of Guaranty whereby HGC, upon the call made by PNB and conditions therein specified, undertook to redeem the regular SMPPCs upon maturity and to pay the simple interest thereon to the extent of 8.5% per annum.9 The foregoing agreements led to the securitization of the project through the issuance of 5,216 SMPPCs upon the Asset Pool, with a par value of 1 Million each, classified and to be redeemed by the trustee or, in case of call on its guaranty, by HGC, in the following order of priority: a) Regular SMPPCs worth P2.519 Billion, issued for value to the general public at specified interests and maturity dates. These were to be redeemed by the PNB which was obliged to exhaust all liquid assets of the Asset Pool before calling on the HGC guarantee; b) Special SMPPCs worth P1.403 Billion, issued exclusively to the NHA for conveyance of the Smokey Mountain Site and Manila Bay foreshore property to the Asset Pool, redeemable upon turnover of the developed project; and c) Subordinated SMPPCs worth P1.294 Billion, issued exclusively to R-II Builders for its rights and interests in the JVA, redeemable with the turnover of all residual values, assets and properties remaining in the Asset Pool after both the Regular and Special SMPPCs are redeemed and all the obligations of the Asset Pool are settled.10 Subsequent to R-II Builders' infusion of P300 Million into the project, the issuance of the SMPPCs and the termination of PNBs services on 29 January 2001, NHA, R-II Builders and HGC agreed on the institution of Planters Development Bank (PDB) as trustee on 29 January 2001.11 By 24 October 2002, however, all the Regular SMPPCs issued had reached maturity and, unredeemed, already amounted to an aggregate face value ofP2.513 Billion. The lack of liquid assets with which to effect redemption of the regular SMPPCs prompted PDB to make a call on HGCs guaranty and to execute in the latters favor a Deed of Assignment and Conveyance (DAC) of the entire Asset Pool, consisting of: (a) 105 parcels of land comprising the Smokey Mountain Site and the Reclamation Area, with a total area of 539,471.47 square meters, and all the buildings and improvements thereon; (b) shares of stock of Harbour Centre Port Terminal, Inc. (HCPTI); and, (c) other documents. 12 On 1 September 2005, R-II Builders filed the complaint against HGC and NHA which was docketed as Civil Case No. 05-113407 before Branch 24 of the Manila Regional Trial Court, a Special Commercial Court (SCC). Contending that HGCs failure to redeem the outstanding regular SMPPCs despite obtaining possession of the Asset Pool ballooned the stipulated interests and materially prejudiced its stake on the residual values of the Asset Pool, R-II Builders alleged, among other matters, that the DAC should be rescinded since PDB exceeded its authority in executing the same prior to HGCs redemption and payment of the guaranteed SMPPCs; that while the estimated value of Asset Pool amounted to P5,919,716,618.62 as of 30 June 2005, its total liabilities was estimated at P2,796,019,890.41; and, that with the cessation of PDBs functions as a trustee and HGCs intention to use the Asset Pool to settle its obligations to the Social Security System 24

(SSS), it was best qualified to be appointed as new trustee in the event of the resolution of the DAC. Assessed docket fees corresponding to an action incapable of pecuniary estimation, the complaint sought the grant of the following reliefs: (a) a temporary restraining order/preliminary and permanent injunction, enjoining disposition/s of the properties in the Asset Pool; (b) the resolution or, in the alternative, the nullification of the DAC; (c) R-II Builders' appointment as trustee pursuant to Rule 98 of the Rules of Court; (d) HGCs rendition of an accounting of the assets and the conveyance thereof in favor of R-II Builders; and, (e) P500,000.00 in attorneys fees.13 On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary injunction sought by R-II Builders which, upon the challenge thereto interposed by HGC, was later affirmed by the CA in the 17 December 2007 decision rendered in CA-G.R. SP No. 98953.14 Having filed its answer to the complaint, in the meantime, HGC went on to move for the conduct of a preliminary hearing on its affirmative defenses which included such grounds as lack of jurisdiction, improper venue and the then pendency before this Court of G.R. No. 164537, entitled Francisco Chavez vs. National Housing Authority, et al., a case which challenged, among other matters, the validity of the JVA and its subsequent amendments.15 On 2 August 2007, R-II Builders, in turn, filed a motion to admit 16 its Amended and Supplemental Complaint which deleted the prayer for resolution of the DAC initially prayed for in its original complaint. In lieu thereof, said pleading introduced causes of action for conveyance of title to and/or possession of the entire Asset Pool, for NHA to pay the Asset Pool the sum of P1,803,729,757.88 representing the cost of the changes and additional works on the project and for an increased indemnity for attorneys fees in the sum of P2,000,000.00.17 Consistent with its joint order dated 2 January 2008 which held that R-II Builders complaint was an ordinary civil action and not an intra-corporate controversy, 18 Branch 24 of the Manila RTC issued a clarificatory order dated 1 February 2008 to the effect, among other matters, that it did not have the authority to hear the case. 19 As a consequence, the case was reraffled to respondent Branch 22 of the Manila RTC (respondent RTC) which subsequently issued the 19 May 2008 order which, having determined that the case is a real action, admitted the aforesaid Amended and Supplemental Complaint, subject to R-II Builders payment of the "correct and appropriate" docket fees. 20 On 15 August 2008, however, R-II Builders filed a motion to admit it Second Amended Complaint, on the ground that its previous Amended and Supplemental Complaint had not yet been admitted in view of the non-payment of the correct docket fees therefor. 21 Said Second Amended Complaint notably resurrected R-II Builders cause of action for resolution of the DAC, deleted its causes of action for accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced the claim for attorneys fees toP500,000.00, sought its appointment as Receiver pursuant to Rule 59 of the Rules of Court and, after an inventory in said capacity, prayed for approval of the liquidation and distribution of the Asset Pool in accordance with the parties agreements.22 On 2 September 2008, HGC filed its opposition to the admission of R-II Builders Second Amended Complaint on the ground that respondent RTC had no jurisdiction to act on the case until payment of the correct docket fees and that said pleading was intended for delay and introduced a new theory inconsistent with the original complaint and the Amended and Supplemental Complaint. Claiming that R-II Builders had defied respondent courts 19 May 2008 order by refusing to pay the correct docket fees, HGC additionally moved for the dismissal of the case pursuant to Section 3, Rule 17 of the 1997 Rules of Civil

Procedure.23 On 24 November 2008, R-II Builders also filed an Urgent Ex-Parte Motion for Annotation of Lis Pendens on the titles of the properties in the Asset Pool, on the ground that HGC had sold and/or was intending to dispose of portions thereof, in violation of the writ of preliminary injunction issued in the premises. 24 Finding that jurisdiction over the case was already acquired upon payment of the docket fees for the original complaint and that the Second Amended Complaint was neither intended for delay nor inconsistent with R-II Builders previous pleadings, respondent RTC issued its first assailed order dated 3 March 2009 which: (a) denied HGCs motion to dismiss; (b) granted R-II Builders motion to admit its Second Amended Complaint; and, (c) noted R-II Builders Urgent Ex-Parte Motion for Annotation of Lis Pendens, to which the attention of the Manila Register of Deeds was additionally called.25 Undaunted, HGC filed its 22 March 2009 motion for reconsideration of the foregoing order, arguing that: (a) the case is real action and the docket fees paid by R-II Builders were grossly insufficient because the estimated value of properties in the Asset Pool exceeds P5,000,000,000.00; (b) a complaint cannot be amended to confer jurisdiction when the court had none; (c) the RTC should have simply denied the Urgent Ex-Parte Motion for Annotation of Lis Pendens instead of rendering an advisory opinion thereon. In addition, HGC faulted R-II Builders with forum shopping, in view of its 10 September 2008 filing of the complaint docketed as Civil Case No. 08-63416 before Branch 91 of the Quezon City RTC, involving a claim for receivables from the NHA. 26 In turn, R-II Builders opposed the foregoing motion27 and, on the theory that the Asset Pool was still in danger of dissipation, filed an urgent motion to resolve its application for the appointment of a receiver and submitted its nominees for said position.28 On 29 September 2009, respondent RTC issued its second assailed order which (a) denied HGCs motion for reconsideration; (b) granted R-II Builders application for appointment of receiver and, for said purpose: [i] appointed Atty. Danilo Concepcion as Receiver and, [ii] directed R-II Builders to post a bond in the sum ofP10,000,000.00.29 Imputing grave abuse of discretion against the RTC for not dismissing the case and for granting R-II Builders application for receivership, HGC filed the Rule 65 petition for certiorari and prohibition docketed as CA-G.R. SP No. 111153 before the CA 30 which, thru its Former Special Fifteenth Division, rendered the herein assailed 21 January 2010 decision, 31 upon the following findings and conclusions: a) Irrespective of whether it is real or one incapable of pecuniary estimation, the action commenced by R-II Builders indubitably falls squarely within the jurisdiction of respondent RTC; b) From the allegations of R-II Builders original complaint and amended complaint the character of the relief primarily sought, i.e., the declaration of nullity of the DAC, the action before respondent RTC is one where the subject matter is incapable of pecuniary estimation; c) R-II Builders need not pay any deficiency in the docket fees considering its withdrawal of its Amended and Supplemental Complaint;

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d) A receiver may be appointed without formal hearing, particularly when it is within the interest of both parties and does not result in the delay of any government infrastructure projects or economic development efforts; e) Respondent RTCs act of calling the attention of the Manila Registrar of Deeds to R-II Builders Urgent Ex-Parte Motion for Annotation of Lis Pendens is wellwithin its residual power to act on matters before it; and f) The withdrawal of R-II Builders Amended and Supplemental Complaint discounted the forum shopping imputed against it by HGC.32 HGCs motion for reconsideration of the foregoing decision 33 was denied for lack of merit in the CAs resolution dated 21 June 2010, hence, this petition. The Issues HGC urges the affirmative of the following issues in urging the grant of its petition, to wit: "Did the Honorable Court of Appeals Seriously Err When It Failed to Rule That: I. The Regional Trial Court a quo had no jurisdiction to proceed with the case considering that: (1) the original court was without authority to hear the case and; (2) despite an unequivocal order from the trial court a quo, Private Respondent (R-II Builders) failed and refused to pay the correct and proper docket fees, whether it be for a real or personal action, based on the values of the properties or claims subject of the complaints. II. Since the Honorable Court of Appeals had characterized the case as a personal action, the action before the Regional Trial Court a quo should have been dismissed for improper venue. III. The order appointing a receiver was made with grave abuse of discretion as amounting to lack of jurisdiction for having been issued under the following circumstances: (1) It was made without a hearing and without any evidence of its necessity; (2) It was unduly harsh and totally unnecessary in view of other available remedies, especially considering that Petitioner HGC is conclusively presumed to be solvent;

(3) It effectively prevented the performance of HGCs functions in recovering upon its guaranty exposure and was in contravention of Presidential Decree Nos. 385 and 1818, Republic Act No. 8927 and Supreme Court Circular Nos. 2-91, 13-93, 68-94 and Administrative Circular No. 11-00."34 Acting on HGCs motion for resolution of its application for a temporary restraining order and/or preliminary injunction,35 the Court issued the resolution dated 23 August 2010, enjoining the enforcement of respondent RTCs assailed orders.36 The Courts Ruling We find the petition impressed with merit. Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.37 In addition to being conferred by the Constitution and the law,38 the rule is settled that a courts jurisdiction over the subject matter is determined by the relevant allegations in the complaint,39 the law in effect when the action is filed,40 and the character of the relief sought irrespective of whether the plaintiff is entitled to all or some of the claims asserted.41 Consistent with Section 1, Rule 141 of the Revised Rules of Court which provides that the prescribed fees shall be paid in full "upon the filing of the pleading or other application which initiates an action or proceeding", the well-entrenched rule is to the effect that a court acquires jurisdiction over a case only upon the payment of the prescribed filing and docket fees.42 The record shows that R-II Builders original complaint dated 23 August 2005 was initially docketed as Civil Case No. 05-113407 before Branch 24 of the Manila, a designated Special Commercial Court.43 With HGCs filing of a motion for a preliminary hearing on the affirmative defenses asserted in its answer44 and R-II Builders filing of its Amended and Supplemental Complaint dated 31 July 2007,45 said court issued an order dated 2 January 2008 ordering the re-raffle of the case upon the finding that the same is not an intra-corporate dispute. 46 In a clarificatory order dated 1 February 2008, 47 the same court significantly took cognizance of its lack of jurisdiction over the case in the following wise: At the outset, it must be stated that this Court is a designated Special Commercial Court tasked to try and hear, among others, intra-corporate controversies to the exclusion of ordinary civil cases. When the case was initially assigned to this Court, it was classified as an intra-corporate case. However, in the ensuing proceedings relative to the affirmative defences raised by defendants, even the plaintiff conceded that the case is not an intra-corporate controversy or even if it is, this Court is without authority to hear the same as the parties are all housed in Quezon City. Thus, the more prudent course to take was for this Court to declare that it does not have the authority to hear the complaint it being an ordinary civil action. As to whether it is personal or civil, this Court would rather leave the resolution of the same to Branch 22 of this Court. (Italics supplied).

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We find that, having squarely raised the matter in its Rule 65 petition for certiorari and prohibition docketed as CA-G.R. SP No. 111153,48 HGC correctly faults the CA for not finding that Branch 24 of the Manila RTC had no authority to order the transfer of the case to respondent RTC.49 Being outside the jurisdiction of Special Commercial Courts, the rule is settled that cases which are civil in nature, like the one commenced by R-II Builders, should be threshed out in a regular court.50 With its acknowledged lack of jurisdiction over the case, Branch 24 of the Manila RTC should have ordered the dismissal of the complaint, since a court without subject matter jurisdiction cannot transfer the case to another court. 51 Instead, it should have simply ordered the dismissal of the complaint, considering that the affirmative defenses for which HGC sought hearing included its lack of jurisdiction over the case. Calleja v. Panday,52 while on facts the other way around, i.e., a branch of the RTC exercising jurisdiction over a subject matter within the Special Commercial Courts authority, dealt squarely with the issue: Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide a case has authority to remand the same to another co-equal Court in order to cure the defects on venue and jurisdiction. Calleja ruled on the issue, thus: Such being the case, RTC Br. 58 did not have the requisite authority or power to order the transfer of the case to another branch of the Regional Trial Court. The only action that RTCBr. 58 could take on the matter was to dismiss the petition for lack of jurisdiction. Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order of 2 January 2008 that the case is not an intracorporate controversy, amplified in its Order of 1 February 2008 that it "does not have the authority to hear the complaint it being an ordinary civil action" is incompatible with the directive for the re-raffle of the case and to "leave the resolution of the same to Branch 22 of this Court." Such a directive is an exercise of authority over the case, which authority it had in the same breath declared it did not have. What compounds the jurisdictional error is the fact that at the time of its surrender of jurisdiction, Br. 24 had already acted on the case and had in fact, on 26 October 2005, issued the writ of preliminary injunction sought by herein respondent R-II Builders. At that point, there was absolutely no reason which could justify a re-raffle of the case considering that the order that was supposed to have caused the re-raffle was not an inhibition of the judge but a declaration of absence of jurisdiction. So faulty was the order of re-raffle that it left the impression that its previously issued preliminary injunction remained effective since the case from which it issued was not dismissed but merely transferred to another court. A re-raffle which causes a transfer of the case involves courts with the same subject matter jurisdiction; it cannot involve courts which have different jurisdictions exclusive of the other. More apt in this case, a re-raffle of a case cannot cure a jurisdictional defect. Prescinding from the foregoing considerations, and to show that the proceedings below was error upon error, we find that the CA also gravely erred in not ruling that respondent RTCs (Branch 22, the regular court) jurisdiction over the case was curtailed by R-II Builders failure to pay the correct docket fees. In other words, the jurisdictionally flawed transfer of the case from Branch 24, the SCC to Branch 22, the regular court, is topped by another jurisdictional defect which is the non-payment of the correct docket fees. In its order dated 19 May 2008

which admitted R-II Builders Amended and Supplemental Complaint, respondent RTC distinctly ruled that the case was a real action and ordered the re-computation and payment of the correct docket fees.53 In patent circumvention of said order, however, R-II Builders filed its 14 August 2008 motion to admit its Second Amended Complaint which effectively deleted its causes of action for accounting and conveyance of title to and/or possession of the entire Asset Pool and, in addition to reducing the claim for attorneys fees and seeking its appointment as a receiver, reinstated its cause of action for resolution of the DAC.54 Acting on said motion as well as the opposition and motion to dismiss interposed by HGC,55 respondent RTC ruled as follows in its assailed 3 March 2009 order,56 to wit: 1. The docket fees of the original complaint has been paid, thus, the Court already acquired jurisdiction over the instant case. The admission of the Amended and Supplemental Complaint, is subject to the payment of docket fees pursuant to the Order of this Court dated May 18, 2008. The non-payment of the docket fees stated in the Order dated May 18, 2008 will result only in the non-admission of the Amended and Supplemental Complaint, which means that the Original Complaint remains. However, since the Amended and Supplemental Complaint is being withdrawn and in lieu thereof a new Amended Complaint is sought to be admitted, there is no more need to pay the docket fees as provided for in the said Order. 2. It is settled that once jurisdiction is acquired and vested in a Court, said Court maintains its jurisdiction until judgment is had (Aruego, Jr., et al. vs. CA). Such acquired jurisdiction is not lost by the amendment of a pleading that raises additional/new cause(s) of action. The jurisdiction of a Court is not even lost even if the additional docket fees are required by reason of the amendment. Indeed, the Supreme Court held in PNOC vs. Court of Appeals (G.R. No. 107518, October 8, 1998) that: "Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower courts jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, the unpaid docket fees should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint. Thus, even on the assumption that additional docket fees are required as a consequence of any amended complaint, its non-payment will not result in the courts loss of jurisdiction over the case.57 Distinctly, the principal reference remained to be the "original complaint," in which R-II Builders itself submitted that the case "is a real action as it affects title and possession of real property or interest therein." It was precisely this submission which was the basis of the conclusion of the SCC court, Br. 24 that the case is not an intra-corporate controversy and therefore is outside its authority. We see from the assailed Order that the regular court accepted the case on the reason that "the docket fees of the original complaint has been paid," so that, furthermore, the Amended 27

and Supplemental Complaint may be admitted "subject to the payment of docket fees." When the required fees were not paid, the court considered it as resulting in the nonadmission of the Amended and Supplemental Complaint such that "the original complaint remains." That remaining original complaint can then be amended by "a new Amended Complaint" which is no longer subject to the conditions attached to the unadmitted Amended and Supplemental Complaint. The Order of 3 March 2009, with its logic and reason, is wholly unacceptable. In upholding the foregoing order as well as its affirmance in respondent RTCs 29 September 2009 order,58 the CA ruled that the case being one primarily instituted for the resolution/nullification of the DAC involved an action incapable of pecuniary estimation. While it is true, however, that R-II Builder's continuing stake in the Asset Pool is "with respect only to its residual value after payment of all the regular SMPPCs holders and the Asset Pool creditors",59 the CA failed to take into account the fact that R-II Builders original complaint and Amended and Supplemental Complaint both interposed causes of action for conveyance and/or recovery of possession of the entire Asset Pool. Indeed, in connection with its second cause of action for appointment as trustee in its original complaint, 60 R-II Builders distinctly sought the conveyance of the entire Asset Pool 61 which it consistently estimated to be valued at P5,919,716,618.62 as of 30 June 2005.62 In its opposition to HGCs motion to dismiss, R-II Builders even admitted that the case is a real action as it affects title to or possession of real property or an interest therein. 63 With R-II Builders' incorporation of a cause of action for conveyance of title to and/or possession of the entire Asset Pool in its Amended and Supplemental Complaint, 64 on the other hand, no less than respondent RTC, in its 19 May 2008 order, directed the assessment and payment of docket fees corresponding to a real action. Admittedly, this Court has repeatedly laid down the test in ascertaining whether the subject matter of an action is incapable of pecuniary estimation by determining the nature of the principal action or remedy sought. While a claim is, on the one hand, considered capable of pecuniary estimation if the action is primarily for recovery of a sum of money, the action is considered incapable of pecuniary estimation where the basic issue is something other than the right to recover a sum of money, the money claim being only incidental to or merely a consequence of, the principal relief sought. 65 To our mind, the application of foregoing test does not, however, preclude the further classification of actions into personal actions and real action, for which appropriate docket fees are prescribed. In contrast to personal actions where the plaintiff seeks the recovery of personal property, the enforcement of a contract, or the recovery of damages, real actions are those which affect title to or possession of real property, or interest therein.66 While personal actions should be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff,67 the venue for real actions is the court of the place where the real property is located.68 Although an action for resolution and/or the nullification of a contract, like an action for specific performance, fall squarely into the category of actions where the subject matter is considered incapable of pecuniary estimation,69we find that the causes of action for resolution and/or nullification of the DAC was erroneously isolated by the CA from the other causes of action alleged in R-II Builders' original complaint and Amended and Supplemental Complaint which prayed for the conveyance and/or transfer of possession of the Asset Pool.

In Gochan v. Gochan,70 this Court held that an action for specific performance would still be considered a real action where it seeks the conveyance or transfer of real property, or ultimately, the execution of deeds of conveyance of real property. More to the point is the case of Ruby Shelter Builders and Realty Development Corporation v. Hon. Pablo C. Formaran III71 where, despite the annulment of contracts sought in the complaint, this Court upheld the directive to pay additional docket fees corresponding to a real action in the following wise, to wit: x x x [I]n Siapno v. Manalo, the Court disregarded the title/denomination of therein plaintiff Manalo's amended petition as one for Mandamus with Revocation of Title and Damages; and adjudged the same to be a real action, the filing fees for which should have been computed based on the assessed value of the subject property or, if there was none, the estimated value thereof. The Court expounded in Siapno that: In his amended petition, respondent Manalo prayed that NTA's sale of the property in dispute to Standford East Realty Corporation and the title issued to the latter on the basis thereof, be declared null and void. In a very real sense, albeit the amended petition is styled as one for "Mandamus with Revocation of Title and Damages", it is, at bottom, a suit to recover from Standford the realty in question and to vest in respondent the ownership and possession thereof. In short, the amended petition is in reality an action in res or a real action. Our pronouncement in Fortune Motors (Phils.), Inc. vs. Court of Appeals is instructive. There, we said: A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948) An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950). While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action.72 Granted that R-II Builders is not claiming ownership of the Asset Pool because its continuing stake is, in the first place, limited only to the residual value thereof, the conveyance and/or transfer of possession of the same properties sought in the original complaint and Amended and Supplemental Complaint both presuppose a real action for which appropriate docket fees computed on the basis of the assessed or estimated value of said properties should have been assessed and paid. In support of its original complaints second cause of action for appointment as trustee and conveyance of the properties in the Asset Pool, R-II Builders distinctly alleged as follows:

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5.12. As the Court-appointed Trustee, R-II Builders shall have and exercise the same powers, rights and duties as if [it] had been originally appointed, having the principal duty of redeeming and buying back the Regular SMPPCs and thereafter liquidating the Asset Pool, which are also the end goals of the Agreement. 5.12.1. R-II Builders, as the Trustee, shall have the power and right to invest, transfer, convey or assign any of the assets of the Asset Pool, whether funds, receivables, real or personal property, in exchange for shares of stocks, bonds, securities, real or personal properties of any kind, class or nature, provided that any such investment, transfer, conveyance or assignment shall not impair the value of the Asset Pool. 5.12.2. R-II Builders, as the Trustee, shall have the power and right to sell, change, assign or otherwise dispose of any stocks, bonds, securities, real or personal properties or other assets constituting the Asset Pool. 5.12. 3. R-II Builders, as the Trustee, shall have the power and right to enter into lease agreements as lessor or any other related contract for the benefit of the Asset Pool; and 5.12.4. It is understood that the aforecited powers and rights of R-II Builders as the court-appointed Trustee, are non-exclusive; and is deemed to include all the rights and powers necessary and incidental to achieve the goals and objectives of the Agreement.73 From the foregoing allegations in its original complaint, it cannot be gainsaid that R-II Builders was unquestionably seeking possession and control of the properties in the Asset Pool which predominantly consisted of real properties. Having admitted that "the case is a real action as it affects title to or possession of real property or (an) interest therein", 74 R-II Builders emphasized the real nature of its action by seeking the grant of the following main reliefs in the Amended and Supplemental Complaint it subsequently filed, to wit: 5. After trial on the merits, render judgment: (i) Declaring the annulment of the Deed of Assignment and conveyance executed by PDB in favor of HGC; or in the alternative, declaring the nullity of the said instrument; (ii) Appointing R-II Builders as the Trustee of the Asset Pool Properties, with powers and responsibilities including but not limited to those stated in 5.12.1, 5.12.2, 5.12.3 and 5.12.4 herein and those spelled out in the Re-Stated Smokey Mountain Asset Pool Formation Trust Agreement; (iii) Ordering HGC to render an accounting of all properties of the Asset Pool transferred thereto under the Deed of Assignment and Conveyance and thereafter convey title to and/or possession of the entire Asset Pool to R-II Builders as the Trustee thereof which assets consist of, but is not limited to the following:

(a) 105 parcels of land comprising the Smokey Mountain Site, and, the Reclamation Area, consisting of the 539,471.47 square meters, and all the buildings and improvements thereon, with their corresponding certificates of title; (b) shares of stock of Harbour Center Port Terminal, Inc. which are presently registered in the books of the said company in the name of PDB for the account of the Smokey Mountain Asset Pool; and (c) other documents as listed in Annex E of the Contract of Guaranty. (iv) Ordering NHA to pay the Asset Pool the amount of Php1,803,729,757.88 including the direct and indirect cost thereon as may be found by this Honorable Court to be due thereon; (v) Making the injunction permanent; (vi) Ordering HGC and the NHA to pay Attorneys fees in the amount of P2,000,000 and the costs of suit.75 For failure of R-II Builders to pay the correct docket fees for its original complaint or, for that matter, its Amended and Supplemental Complaint as directed in respondent RTC's 19 May 2008 order, it stands to reason that jurisdiction over the case had yet to properly attach. Applying the rule that "a case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court" in the landmark case of Manchester Development Corporation v. Court of Appeals, 76 this Court ruled that jurisdiction over any case is acquired only upon the payment of the prescribed docket fee which is both mandatory and jurisdictional. To temper said ruling, the Court subsequently issued the following guidelines in Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,77 viz.: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall 29

constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. True to the foregoing guidelines, respondent RTC admitted R-II Builders Amended and Supplemental Complaint and directed the assessment and payment of the appropriate docket fees in the order dated 19 May 2008. Rather than complying with said directive, however, R-II Builders manifested its intent to evade payment of the correct docket fees by withdrawing its Amended and Supplemental Complaint and, in lieu thereof, filed its Second Amended Complaint which deleted its cause of action for accounting and conveyance of title to and/or possession of the entire Asset Pool, reduced its claim for attorneys fees, sought its appointment as Receiver and prayed for the liquidation and distribution of the Asset Pool.78 In upholding the admission of said Second Amended Complaint in respondent RTCs assailed 3 March 2009 Order, however, the CA clearly lost sight of the fact that a real action was ensconced in R-II Builders original complaint and that the proper docket fees had yet to be paid in the premises. Despite the latters withdrawal of its Amended and Supplemental Complaint, it cannot, therefore, be gainsaid that respondent RTC had yet to acquire jurisdiction over the case for non-payment of the correct docket fees. In the 15 February 2011 Resolution issued in the case of David Lu v. Paterno Lu Ym, Sr.,79 this Court, sitting En Banc, had occasion to rule that an action for declaration of nullity of share issue, receivership and corporate dissolution is one where the value of the subject matter is incapable of pecuniary estimation. Subsequent to the trial court's rendition of a decision on the merits declared to be immediately executory and the CA's denial of their application for a writ of preliminary injunction and/or temporary restraining order to enjoin enforcement of said decision, the defendants questioned the sufficiency of the docket fees paid a quo which supposedly failed take into consideration the value of the shares as well as the real properties involved for which the plaintiff additionally caused notices of lis pendens to be annotated. Finding that defendants were already estopped in questioning the jurisdiction of the trial court on the ground of non-payment of the correct docket fees, the Court discounted intent to defraud the government on the part of the plaintiff who can, at any rate, be required to pay the deficiency which may be considered a lien on the judgment that may be rendered, without automatic loss of the jurisdiction already acquired, in the first instance, by the trial court.
1avvphi1

however, R-II Builders conveniently overlooked the fact that the very same argument could very well apply to its original complaint for which given its admitted nature as a real action - the correct docket fees have also yet to be paid. The importance of filing fees cannot be over-emphasized for they are intended to take care of court expenses in the handling of cases in terms of costs of supplies, use of equipment, salaries and fringe benefits of personnel, and others, computed as to man-hours used in the handling of each case. The payment of said fees, therefore, cannot be made dependent on the result of the action taken without entailing tremendous losses to the government and to the judiciary in particular.80 For non-payment of the correct docket fees which, for real actions, should be computed on the basis of the assessed value of the property, or if there is none, the estimated value thereof as alleged by the claimant, 81 respondent RTC should have denied admission of R-II Builders Second Amended Complaint and ordered the dismissal of the case. Although a catena of decisions rendered by this Court eschewed the application of the doctrine laid down in the Manchester case, 82 said decisions had been consistently premised on the willingness of the party to pay the correct docket fees and/or absence of intention to evade payment of the correct docket fees. This cannot be said of R-II Builders which not only failed to pay the correct docket fees for its original complaint and Amended and Supplemental Complaint but also clearly evaded payment of the same by filing its Second Amended Complaint. By itself, the propriety of admitting R-II Builders Second Amended Complaint is also cast in dubious light when viewed through the prism of the general prohibition against amendments intended to confer jurisdiction where none has been acquired yet. Although the policy in this jurisdiction is to the effect that amendments to pleadings are favored and liberally allowed in the interest of justice, amendment is not allowed where the court has no jurisdiction over the original complaint and the purpose of the amendment is to confer jurisdiction upon the court.83 Hence, with jurisdiction over the case yet to properly attach, HGC correctly fault the CA for upholding respondent RTCs admission of R-II Builders Second Amended Complaint despite non-payment of the docket fees for its original complaint and Amended and Supplemental Complaint as well as the clear intent to evade payment thereof. With the determination of the jurisdictional necessity of the dismissal of the complaint of R-II Builders docketed as Civil Case No. 05-113407, first before Br. 24 and later before Br. 22 both of the RTC of Manila, we no longer find any reason to go into a discussion of the remaining issues HGC proffers for resolution. In view, particularly, of its non-acquisition of jurisdiction over the case, respondent RTC clearly had no authority to grant the receivership sought by R-II Builders. It needs pointing out though that the prayer for receivership clearly indicates that the R-II Builders sought the transfer of possession of property consisting of the assets of the JVA from HGC to the formers named Receiver. As already noted, said transfer of possession was sought by respondent R-II Builders since the very start, overtly at the first two attempts, covertly in the last, the successive amendments betraying the deft maneuverings to evade payment of the correct docket fees. WHEREFORE, premises considered, the assailed Decision dated 21 January 2010 is REVERSED and SET ASIDE. In lieu thereof, another is entered NULLIFYING the regular courts, RTC Branch 22s Orders dated 3 March 2009 and 29 September 2009 as well as the SCCs, RTC Branch 24s Order dated 26 October 2005 which was rendered void by the SCCs subsequent declaration of absence of authority over the case. The complaint of R-II

The factual and legal milieus of the case at bench could not, however, be more different. While R-II Builders styled its original complaint and Amended and Supplemental Complaint as one primarily for the resolution and/or declaration of the DAC, it simultaneously and unmistakably prayed for the conveyance, possession and control of the Asset Pool. Alongside the fact that HGC has consistently questioned the sufficiency of the docket fees paid by R-II Builders, estoppel cannot be said to have set in since, the lapse of more than five years from the commencement of the complaint notwithstanding, it appears that the case has yet to be tried on the merits. Having admitted that its original complaint partook the nature of a real action and having been directed to pay the correct docket fees for its Amended and Supplemental Complaint, R-II Builders is, furthermore, clearly chargeable with knowledge of the insufficiency of the docket fees it paid. Unmistakably manifesting its intent to evade payment of the correct docket fees, moreover, R-II Builders withdrew its Amended and Supplemental Complaint after its admission and, in lieu thereof, filed its Second Amended Complaint on the ground that said earlier pleading cannot be considered admitted in view of its non-payment of the docket and other fees it was directed to pay. In so doing,

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Builders docketed as Civil Case No. 05-113407 first before Br. 24 and thereafter before Br. 22 both of the RTC of Manila is hereby DISMISSED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 165777 July 25, 2011

CEFERINA DE UNGRIA [DECEASED], substituted by her HEIRS, represented by LOLITA UNGRIA SAN JUAN-JAVIER, and RHODORA R. PELOMIDA as their Attorneyin-fact, Petitioner, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE REGIONAL TRIAL COURT OF GENERAL SANTOS CITY, BRANCH 35, ROSARIO DIDELES VDA. DE CASTOR, NEPTHALIE CASTOR ITUCAS, FEROLYN CASTOR FACURIB, RACHEL DE 31

CASTOR, LEA CASTOR DOLLOLOSA, and ROSALIE CASTOR BENEDICTO,Respondents. DECISION PERALTA, J.: Assailed in this petition for review on certiorari are the Decision 1 dated May 26, 2004 and the Resolution2 dated September 17, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 60764. On August 26, 1999, respondents Rosario Dideles Vda. de Castor (Rosario), Nepthalie Castor Itucas, Ferolyn Castor Facurib (Ferolyn), Rachel De Castor, Lea Castor Dollolosa and Rosalie Castor Benedicto, filed with the Regional Trial Court (RTC) of General Santos City a Complaint3 for ownership, possession and damages, and alternative causes of action either to declare two documents as patent nullities, and/or for recovery of Rosario's conjugal share with damages or redemption of the subject land against petitioner Ceferina de Ungria, defendants Avelino Gumban, Dolores Cagaitan, Zacasio Poutan, PO1 Jonas Montales, Ignacio Olarte and alias Dory. Respondent Rosario is the surviving wife of the late Fernando Castor, while the rest of the respondents are their legitimate children. The documents they sought to annul are (1) the Deed of Transfer of Rights and Interest including Improvements thereon dated October 3, 1960 allegedly executed by Fernando in favor of Eugenio de Ungria, petitioner's father; and (2) the Affidavit of Relinquishment dated November 23, 1960 executed by Eugenio in favor of petitioner. Petitioner Ceferina filed a Motion to Dismiss (Ex-Abundante Ad Cautelam) on the following grounds: (1) the claim or demand has been extinguished by virtue of the valid sale of Lot No. 1615 to Eugenio; (2) the action is barred by extraordinary acquisitive prescription; (3) the action is barred by laches; and (4) plaintiff failed to state a cause of action, or filed the case prematurely for failure to resort to prior barangay conciliation proceedings.
4

The said land was sold to the defendant on October 3, 1960 (Annex C) and an Affidavit of Relinquishment dated November 23, 1960 which was made a part thereof as Annex "D." Considering the marriage of September 15, 1992, the said land became conjugal as of the date of the marriage and, therefore, thereof belongs to the wife, Rosario Dideles Vda. de Castor. Thus, considering the above, the motion to dismiss is DENIED.7 Petitioner Ceferina filed a Motion for Reconsideration, 8 which the RTC denied in an Order9 dated February 4, 2000. Petitioner filed an Omnibus Motion10 asking the RTC to resolve the issues of (1) whether or not the complaint should be dismissed or expunged from the records pursuant to Supreme Court (SC) Circular No. 7; (2) reconsidering the findings contained in the Order dated February 4, 2000; and (3) holding in abeyance the submission of the answer to the complaint. Pending resolution of the motion, respondents filed a Motion to Allow 11 them to continue prosecuting this case as indigent litigants. On March 8, 2000, the RTC resolved the Omnibus Motion in an Order 12 that read in this wise: On the omnibus motion regarding filing fees, the plaintiffs asserted in its motion that they are charging defendant actual and compensatory damages such as are proved during the hearing of this case. So also are attorneys fees and moral damages, all to be proved during the hearing of this case. Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged. At any rate, if after hearing the Clerk of Court determine that the filing fees is still insufficient, considering the total amount of the claim, the Clerk of Court should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the same x x x. As to the second issue, the same has already been decided in its order dated February 4, 2000. WHEREFORE, premises considered, the omnibus motion is DENIED. The defendant shall file their answer within fifteen (15) days from receipt of this order.13 From this Order, petitioner filed a motion for reconsideration and clarification on whether plaintiffs should be allowed to continue prosecuting the case as indigent litigants.

Petitioner also filed an Addendum to the Motion to Dismiss 5 raising the following additional grounds: (1) plaintiffs have no legal capacity to sue; and (2) the court has no jurisdiction over the case for failure of plaintiffs to pay the filing fee in full. Respondents filed their Opposition thereto. On November 19, 1999, the RTC issued an Order6 denying the motion to dismiss, to wit: After the motion to dismiss and its addendum have been received, it is now ripe for resolution. One of the grounds alleged in the complaint is for the recovery of conjugal share on Lot No. 1615, of Pls-209 D with damages. It is alleged that the late Fernando Castor and Rosario Dideles Vda. de Castor were married on September 15, 1952, and the application to the land was dated January 17, 1952 and the patent was issued by the President on November 19, 1954.

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On March 30, 2000, the RTC issued a Clarificatory Order14 reading as follows: As has been said, the plaintiff asserted in its motion that they are charging defendants actual and compensatory damages as has been proved during the hearing of this case. So also are attorney's fees and moral damages all to be proved during the hearing of this case. Since there was no hearing yet, they are not in a possession (sic) to determine how much is to be charged. At any rate, after hearing, the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that may be entered. As to the motion seeking from the Honorable Court allowance to allow plaintiff to continue prosecuting this case as indigent litigants, suffice it to say that the same is already provided for in this order. WHEREFORE, the defendants shall file their answer within fifteen (15) days from receipt of this Order.15 In an Order dated May 31, 2000, the RTC again denied petitioner's motion for reconsideration. Petitioner filed with the CA a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction. Petitioner sought the nullification of the Order dated November 19, 1999 and the subsequent orders issued by the RTC thereto for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Respondents filed their Comment thereto. In a Decision dated May 26, 2004, the CA dismissed the petition. The CA found that SC Circular No. 7 would not apply where the amount of damages or value of the property was immaterial; that the Circular could be applied only in cases where the amount claimed or the value of the personal property was determinative of the court's jurisdiction citing the case of Tacay v. RTC of Tagum, Davao del Norte. 16 The CA found that respondents had paid the corresponding docket fees upon the filing of the complaint, thus, the RTC had acquired jurisdiction over the case despite the failure to state the amount of damages claimed in the body of the complaint or in the prayer thereof. The CA found that the RTC did not commit grave abuse of discretion amounting to lack of jurisdiction when it denied petitioner's motion to dismiss. It noted that the RTC's Clarificatory Order dated March 30, 2000, which stated that "if after hearing the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that may be entered" was in accordance with the rule laid down in Sun Insurance Office, Ltd. v. Asuncion. 17 The CA proceeded to state that a judicious examination of the complaint pointed to a determination of the respective rights and interests of the parties over the property based on the issues presented therein which could only be determined in a full-blown trial on the merits of the case.

Petitioner filed a Motion for Reconsideration, which the CA denied in a Resolution dated September 17, 2004. The CA ruled, among others, that the defenses of acquisitive prescription and laches were likewise unavailing. It found that the subject property is covered by a Torrens title (OCT No. V-19556); thus, it is axiomatic that adverse, notorious and continuous possession under a claim of ownership for the period fixed by law is ineffective against a Torrens title; that unless there are intervening rights of third persons which may be affected or prejudiced by a decision directing the return of the lot to petitioner, the equitable defense of laches will not apply as against the registered owner. Hence, this petition for review on certiorari where petitioner raises the following assignment of errors: THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S MOTION TO DISMISS DESPITE RESPONDENTS' NONPAYMENT OF THE CORRECT DOCKET FEES. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ACTION OF PRIVATE RESPONDENTS IS BARRED BY LACHES AND EXTRAORDINARY ACQUISITIVE PRESCRIPTION.18 We find the petition without merit. Preliminarily, although not raised as an issue in this petition, we find it necessary to discuss the issue of jurisdiction over the subject matter of this case. Respondents' complaint was filed in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary Reorganization Act of 1980, was already amended by Republic Act (RA) No. 7691, An Act Expanding the Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts, amending for the purpose BP Blg. 129.19 Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC shall exercise exclusive original jurisdiction on the following actions: Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980," is hereby amended to read as follows: Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: (1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; (2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00), except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction

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over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; x x x Section 3 of RA No. 7691 expanded the exclusive original jurisdiction of the first level courts, thus: Section 3. Section 33 of the same law (BP Blg. 129) is hereby amended to read as follows: Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise: xxxx (3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots. Respondents filed their Complaint with the RTC; hence, we would first determine whether the RTC has jurisdiction over the subject matter of this case based on the above-quoted provisions. The Complaint filed by respondents in the RTC was for ownership, possession and damages, and alternative causes of action either to declare two documents as patent nullities and/or for recovery of conjugal share on the subject land with damages or redemption of the subject land. In their Complaint, respondents claimed that Rosario and Fernando are the registered owners of the subject land with an assessed value of P12,780.00; that the couple left the cultivation and enjoyment of the usufruct of the subject land to Fernando's mother and her second family to augment their means of livelihood; that respondent Rosario and Fernando thought that when the latter's mother died in 1980, the subject land was in the enjoyment of the second family of his mother, but later learned that the subject land was leased by petitioner Ceferina; that sometime in August 1999, respondents learned of the existence of the Deed of Transfer of Rights and Interest including Improvements thereon dated October 3, 1960, where Fernando had allegedly transferred his rights and interests on the subject land in favor of Eugenio, petitioner Ceferina's father, as well as an Affidavit of Relinquishment dated November 23, 1960 executed by Eugenio in favor of petitioner Ceferina; that Fernando's signature in the Deed of Transfer was not his but a forgery; and the Affidavit of Relinquishment was also void as it was a direct result of a simulated Deed of Transfer. Respondents prayed that they be declared as absolute and lawful owners of the subject land and to order petitioner and the other defendants to vacate the premises and restore respondents to its possession and enjoyment therefore. On their second cause of action, they prayed that the Deed of Transfer of Rights and Interest Including Improvements

Thereon be declared as a forgery, purely simulated and without any consideration; hence, inexistent, void ab initio and/or a patent nullity, as well as the Affidavit of Relinquishment which was the direct result of the Deed of Transfer. Respondents also prayed in the alternative that if the Deed be finally upheld as valid, to order petitioner to reconvey to respondent Rosario the undivided one-half portion of the subject land as conjugal owner thereof and to account and reimburse her of its usufruct; and/or to allow them to redeem the subject land. It would appear that the first cause of action involves the issue of recovery of possession and interest of the parties over the subject land which is a real action. Respondents alleged that the assessed value of the subject land was P12,780.00 based on Tax Declaration No. 15272. Thus, since it is a real action with an assessed value of less than P20,000.00, the case would fall under the jurisdiction of the MTC as provided under the above-quoted Section 33 (3) of BP 129, as amended. Notably, however, respondents in the same Complaint filed alternative causes of action assailing the validity of the Deed of Transfer of Rights and Interest executed by Fernando in favor of petitioner's father. Respondents also sought for the reconveyance to respondent Rosario of the undivided one-half portion of the subject land as conjugal owner thereof in case the Deed of Transfer of Rights and Interest will be upheld as valid; and/or for redemption of the subject land. Clearly, this is a case of joinder of causes of action which comprehends more than the issue of possession of, or any interest in the real property under contention, but includes an action to annul contracts and reconveyance which are incapable of pecuniary estimation and, thus, properly within the jurisdiction of the RTC. 20 In Singson v. Isabela Sawmill,21 we held that: In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).22 Thus, respondents correctly filed their Complaint with the RTC. It is a settled rule in this jurisdiction that when an action is filed in court, the complaint must be accompanied by the payment of the requisite docket and filing fees. 23 It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action.24 Section 7(b)(1) of Rule 141 of the Rules of Court provides:

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SEC. 7. Clerks of Regional Trial Courts. - (a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint-in-intervention, and for all clerical services in the same, if the total-sum claimed, exclusive of interest, or the stated value of the property in litigation, is: xxxx (b) For filing: 1. Actions where the value of the subject matter cannot be estimated ........ P400.00 2. x x x

x x x Ordering the defendants, jointly and severally, in proportion to the length and area of their respective occupancy, to pay reasonable rentals to the plaintiffs in the proportion and amount assessed in paragraph 13 of the First Cause of Action. xxxx (a) Ordering the defendants, jointly and severally, to pay plaintiffs actual and compensatory damages such as are proved during the hearing of this case; (b) Ordering the defendants, jointly and severally, to pay plaintiffs attorneys' fees and moral damages, all to be proved during the hearing of this case.28 Thus, the RTC should have dismissed the case, since respondents did not specify the amount of damages in their prayer. We are not persuaded.

In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by the claimant and shall be the basis in computing the fees.25 Since we find that the case involved the annulment of contract which is not susceptible of pecuniary estimation, thus, falling within the jurisdiction of the RTC, the docket fees should not be based on the assessed value of the subject land as claimed by petitioner in their memorandum, but should be based on Section 7(b)(1) of Rule 141. A perusal of the entries in the Legal Fees Form attached to the records would reflect that the amount of P400.00 was paid to the Clerk of Court, together with the other fees, as assessed by the Clerk of Court. Thus, upon respondents' proof of payment of the assessed fees, the RTC has properly acquired jurisdiction over the complaint. Jurisdiction once acquired is never lost, it continues until the case is terminated. 26 Notably, petitioners claim that the RTC did not acquire jurisdiction in this case is premised on her contention that respondents violated SC Circular No. 7 issued on March 24, 1998 requiring that all complaints must specify the amount of damages sought not only in the body of the pleadings but also in the prayer to be accepted and admitted for filing. Petitioner argues that respondents alleged in paragraph 13 of their Complaint that: (T)he reasonable rental for the use of the [subject] land is P2,000.00 per hectare, every crop time, once every four months, or P6,000.00 a year per hectare; that defendants in proportion and length of time of their respective occupancy is and/or are jointly and severally liable to plaintiffs of the produce thereby in the following proportions, viz: (a) for defendant Ceferina de Ungria for a period of time claimed by her as such; (b) for defendants Dolores Cagautan, a certain alias "Dory," and PO1 Jonas Montales, of an undetermined area, the latter having entered the area sometime in 1998 and defendant alias "Dory," only just few months ago; that defendant Ignacio Olarte and Zacasio Puutan of occupying about one-half hectare each.27 and in their prayer asked:

SC Circular No. 7 was brought about by our ruling in Manchester Development Corporation v. Court of Appeals,29where we held that a pleading which does not specify in the prayer the amount of damages being asked for shall not be accepted or admitted, or shall otherwise be expunged from the record; and that the Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. However, in Sun Insurance Office, Ltd. v. Asuncion,30 we laid down the following guidelines in the payment of docket fees, to wit: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly-authorized deputy to enforce said lien and assess and collect the additional fee.

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Subsequently, in Heirs of Bertuldo Hinog v. Melicor,31 we said: Furthermore, the fact that private respondents prayed for payment of damages "in amounts justified by the evidence" does not call for the dismissal of the complaint for violation of SC Circular No. 7, dated March 24, 1988 which required that all complaints must specify the amount of damages sought not only in the body of the pleadings but also in the prayer in order to be accepted and admitted for filing. Sun Insurance effectively modified SC Circular No. 7 by providing that filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court. x x x judgment awards which were left for determination by the court or as may be proven during trial would still be subject to additional filing fees which shall constitute a lien on the judgment. It would then be the responsibility of the Clerk of Court of the trial court or his duly-authorized deputy to enforce said lien and assess and collect the additional fees. 32 A reading of the allegations in the complaint would show that the amount of the rental due can only be determined after a final judgment, since there is a need to show supporting evidence when the petitioner and the other defendants started to possess the subject land. Thus, we find no reversible error committed by the CA when it ruled that there was no grave abuse of discretion committed by the RTC in issuing its Order dated March 30, 2000, where the RTC stated that "since there was no hearing yet, respondents are not in a position to determine how much is to be charged and that after hearing, the Clerk of Court determines that the filing fee is still insufficient, the same shall be considered as lien on the judgment that may be entered." Petitioner claims that the action is barred by extraordinary acquisitive prescription and laches. Petitioner contends that she took possession of the land in the concept of an owner, open, exclusive, notorious and continuous since 1952 through her predecessor-in-interest, Eugenio, and by herself up to the present; that the late Fernando and private respondents had never taken possession of the land at any single moment; and that, granting without admitting that the transfer of rights between Fernando and Eugenio was null and void for any reason whatsoever, petitioner's possession of the land had already ripened into ownership after the lapse of 30 years from August 1952 by virtue of the extraordinary acquisitive prescription. We are not persuaded. It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be acquired by prescription or adverse possession.33 Prescription is unavailing not only against the registered owner but also against his hereditary successors.34 In this case, the parcel of land subject of this case is a titled property, i.e., titled in the name of the late Fernando Castor, married to Rosario Dideles. Petitioner claims that respondent had impliedly admitted the fact of sale by Fernando to Eugenio in August 1952, but only according to respondents, the sale was null and void because it violated the provisions of the Public Land Act. Petitioner argues that the application of Fernando, dated January 17, 1952, was not the homestead application

referred to in Sections 118 and 124 of the Public Land Act; and that Fernando's application was only as settler, or for the allocation of the subject land to him vice the original settler Cadiente. Such argument does not persuade. The trial in this case has not yet started as in fact no answer has yet been filed. We find that these issues are factual which must be resolved at the trial of this case on the merits wherein both parties will be given ample opportunity to prove their respective claims and defenses. Anent petitioner's defense of laches, the same is evidentiary in nature and cannot be established by mere allegations in the pleadings. Without solid evidentiary basis, laches cannot be a valid ground to dismiss respondents' complaint. 35 Notably, the allegations of respondents in their petition filed before the RTC which alleged among others: 7. That sometime between the years 1965 to 1970, defendant Ceferina de Ungria, accompanied by Miss Angela Jagna-an, appeared in the residence of plaintiff Rosario Dideles Vda. de Castor in Bo.1, Banga, South Cotabato, and requested her to sign a folded document with her name only appearing thereon, telling her that it has something to do with the land above-described, of which she refused telling her that she better return it to the person who requested her to do so (referring to her mother-in-law), more so that her husband was out at that time; 8. That when the matter was brought home to Fernando Castor, the latter just commented that [his] mother desires the land above-described to be sold to defendant Ceferina de Ungria which however he was opposed to do so even as they occasionally come into heated arguments everytime this insistence on the same subject propped up; 9. That even after the death of the mother of the late Fernando Castor in Bo. Bula, City of General Santos, sometime in 1980, the latter and his surviving wife thought all the while that the land above-described was in the enjoyment of his late mother's family with his 2nd husband; that it was only after sometime when plaintiff Rosario Dideles Vda. de Castor heard that the land above-described had even been leased by defendant Ceferina de Ungria with the Stanfilco and Checkered farm; 10. That sometime in 1997, defendant Ceferina de Ungria sent overtures to plaintiffs through Ester Orejana, who is the half sister-in-law of plaintiff Rosario Dideles Vda. de Castor that she desires to settle with them relating to the land above-described; that the overtures developed into defendant Ceferina de Ungria meeting for the purpose plaintiff Ferolyn Castor Facurib where the negotiation continued with Lolita Javier as attorney-in-fact after defendant Ceferina de Ungria left to reside in Manila and which resulted later to the attorney-in-fact offering the plaintiffs P100,000.00 to quitclaim on their rights over the said land, which offer, however, was refused by plaintiffs as so [insignificant] as compared to the actual value of the same land; that in that negotiation, defendant Ceferina de Ungria was 36

challenged to show any pertinent document to support her claim on the land in question and where she meekly answered by saying at the time that she does not have any of such document; x x x x36 would not conclusively establish laches. Thus, it is necessary for petitioners to proceed to trial and present controverting evidence to prove the elements of laches.
1avvphil

WHEREFORE, the petition for review is DENIED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 167545 August 17, 2011

ATIKO TRANS, INC. and CHENG LIE NAVIGATION CO., LTD., Petitioners, vs. PRUDENTIAL GUARANTEE AND ASSURANCE, INC., Respondent. DECISION DEL CASTILLO, J.: Where service of summons upon the defendant principal is coursed thru its co-defendant agent, and the latter happens to be a domestic corporation, the rules on service of summons upon a domestic private juridical entity1must be strictly complied with. Otherwise, the court cannot be said to have acquired jurisdiction over the person of both defendants. And insofar

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as the principal is concerned, such jurisdictional flaw cannot be cured by the agents subsequent voluntary appearance. This Petition for Review on Certiorari assails the December 10, 2004 Decision 2 of the Court of Appeals (CA) in CA-G.R. SP No. 82547 which affirmed the April 8, 2003 Decision 3 of the Regional Trial Court (RTC), Branch 150, Makati City. Said Decision of the RTC affirmed the August 6, 2002 Decision 4 of the Metropolitan Trial Court (MeTC), Branch 63, Makati City, which disposed as follows: WHEREFORE, judgment is rendered declaring defendants Cheng Lie Navigation Co., Ltd. and Atiko Trans, Inc. solidarily liable to pay plaintiff Prudential Guarantee & Assurance, Inc. the following amounts: 1. P205,220.97 as actual damages with interest of 1% per month from 14 December 1999 until full payment; 2. P10,000.00 as Attorneys fees; and 3. Costs of suit. SO ORDERED.5 Likewise assailed is the CAs Resolution6 dated March 16, 2005 which denied the Motion for Reconsideration of the said December 10, 2004 Decision. Factual Antecedents On December 11, 1998, 40 coils of electrolytic tinplates were loaded on board M/S Katjana in Kaohsiung, Taiwan for shipment to Manila. The shipment was covered by Bill of Lading No. KNMNI-151267 issued by petitioner Cheng Lie Navigation Co., Ltd. (Cheng Lie) with Oriental Tin Can & Metal Sheet Manufacturing Co., Inc. (Oriental) as the notify party. The cargoes were insured against all risks per Marine Insurance Policy No. 20RN-18749/99 issued by respondent Prudential Guarantee and Assurance, Inc. (Prudential). On December 14, 1998, M/S Katjana arrived in the port of Manila. Upon discharge of the cargoes, it was found that one of the tinplates was damaged, crumpled and dented on the edges. The sea van in which it was kept during the voyage was also damaged, presumably while still on board the vessel and during the course of the voyage. Oriental then filed its claim against the policy. Satisfied that Orientals claim was compensable, Prudential paid Oriental P205,220.97 representing the amount of losses it suffered due to the damaged cargo. Proceedings before the Metropolitan Trial Court

On December 14, 1999, Prudential filed with the MeTC of Makati City a Complaint 8 for sum of money against Cheng Lie and Atiko Trans, Inc. (Atiko). In addition to the above undisputed facts, Prudential alleged that: 1. Plaintiff (Prudential) is a domestic insurance corporation duly organized and existing under the laws of the Philippines with office address at Coyiuto House, 119 Carlos Palanca[,] Jr. St., Legaspi Village, Makati City; 2. Defendant Cheng Lie Navigation Co. Ltd., is [a] foreign shipping company doing business in the Philippines [thru] its duly authorized shipagent defendant Atiko Trans Inc. which is a domestic corporation duly established and created under the laws of the Philippines with office address at 7th Floor, Victoria Bldg., United Nation[s] Ave., Ermita, Manila, where both defendants may be served with summons and other court processes; 3. At all times material to the cause of action of this complaint, plaintiff was and still is engaged in, among others, marine insurance business; Whereas Defendant Cheng Lie Navigation Co. Ltd. was and still is engaged in, among others, shipping, transportation and freight/cargo forwarding business, and as such, owned, operated and/or chartered the ocean going vessel M/S "Katjana" as common carrier to and from any Philippine [port] in international trade [thru] its duly authorized shipagent defendant Atiko Trans Inc. (Both defendants are hereinafter referred to as the "CARRIER"); xxxx 9. Plaintiff, as cargo-insurer and upon finding that the consignees insurance claim was in order and compensable, paid the latters claim in the amount of P205,220.97 under and by virtue of the aforesaid insurance policy, thereby subrogating herein plaintiff to all the rights and causes of action appertaining to the consignee against the defendants;9 On March 20, 2000, Prudential filed a Motion to Declare Defendant in Default, 10 alleging among others that on March 1, 2000 a copy of the summons was served upon petitioners thru cashier Cristina Figueroa and that despite receipt thereof petitioners failed to file any responsive pleading. Acting on the motion, the MeTC issued an Order 11 declaring Cheng Lie and Atiko in default and allowing Prudential to present its evidence ex-parte. On August 6, 2002, the MeTC rendered its judgment by default. Atiko then filed a Notice of Appeal12 dated November 4, 2002. Proceedings before the Regional Trial Court and the Court of Appeals In its Memorandum of Appeal,13 Atiko argued that Prudential failed to prove the material allegations of the complaint. Atiko asserted that Prudential failed to prove by preponderance of evidence that it is a domestic corporation with legal personality to file an action; that Cheng Lie is a private foreign juridical entity operating its shipping business in the 38

Philippines thru Atiko as its shipagent; that Cheng Lie is a common carrier, which owns and operates M/S Katjana; that Prudential was subrogated to the rights of Oriental; and, that Atiko can be held solidarily liable with Cheng Lie. Although assisted by the same counsel, Cheng Lie filed its own Memorandum of Appeal14 maintaining that the MeTC never acquired jurisdiction over its person. On April 8, 2003, the RTC rendered its Decision dismissing the appeal and affirming the Decision of the MeTC. Atiko and Cheng Lie challenged the RTC Decision before the CA via a Petition for Review15 under Rule 42 of the Rules of Court but the appellate court affirmed the RTCs Decision. Hence, this petition. Issues In their Memorandum,16 petitioners raised the following issues: 1. WHETHER X X X THE DECISION OF MAKATI [MeTC] WHICH WAS AFFIRMED BY MAKATI RTC AND THE COURT OF APPEALS IS NULL AND VOID FOR FAILURE TO ACQUIRE JURISDICTION OVER THE PERSONS OF THE PETITIONERS-DEFENDANTS CONSIDERING THAT THE SUMMONS WERE NOT PROPERLY SERVED ON THEM AS REQUIRED BY RULE 14 OF THE RULES OF COURT. 2. WHETHER X X X THE RESPONDENT-PLAINTIFF IS REQUIRED TO PROVE THE MATERIAL ALLEGATIONS IN THE COMPLAINT EVEN IN DEFAULT JUDGMENT OR WHETHER OR NOT IN DEFAULT JUDGMENT, ALL ALLEGATIONS IN THE COMPLAINT ARE DEEMED CONTROVERTED, HENCE, MUST BE PROVED BY COMPETENT EVIDENCE. 2.1. WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE ITS LEGAL PERSONALITY TO SUE EVEN IN DEFAULT JUDGMENT. 2.2. WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE THAT PETITIONER-DEFENDANT ATIKO IS THE SHIPAGENT OF PETITIONERDEFENDANT CHENG LIE EVEN IN DEFAULT JUDGMENT. 2.3. WHETHER X X X THE TESTIMONIES OF THE WITNESSES AND THE DOCUMENTARY EXHIBITS CAN BE CONSIDERED FOR PURPOSES OTHER THAN THE PURPOSE FOR WHICH THEY WERE OFFERED. 2.4. WHETHER X X X A MOTION TO DECLARE DEFENDANT IN DEFAULT ADDRESSED AND SENT TO ONLY ONE OF THE DEFENDANTS WOULD BIND THE OTHER DEFENDANT TO WHOM THE MOTION WAS NOT ADDRESSED AND NOT SENT.17

Our Ruling The petition is partly meritorious. We shall first tackle the factual matters involved in this case, then proceed with the jurisdictional issues raised. Petitioners raised factual matters which are not the proper subject of this appeal. Petitioners contend that the lower courts grievously erred in granting the complaint because, even if they were declared in default, the respondent still has the burden of proving the material allegations in the complaint by preponderance of evidence. Petitioners further argue that respondent miserably failed to discharge this burden because it failed to present sufficient proof that it is a domestic corporation. Hence, respondent could not possibly maintain the present action because only natural or juridical persons or entities authorized by law can be parties to a civil action. Petitioners also claim that respondent failed to present competent proof that Cheng Lie is a foreign shipping company doing business in the Philippines thru its duly authorized shipagent Atiko. Lastly, petitioners assert that respondent failed to prove that Cheng Lie is a common carrier which owned, operated and/or chartered M/S Katjana thru its duly authorized shipagent Atiko. Petitioners emphasize that there is no proof, testimonial or otherwise, which would support the material allegations of the complaint. They also insist that respondents witnesses do not have personal knowledge of the facts on which they were examined. Respondent, for its part, assails the propriety of the remedy taken by the petitioners. It posits that petitioners advanced factual matters which are not the proper subject of a petition for review on certiorari. Besides, the lower courts consistently held that the allegations in respondents complaint are supported by sufficient evidence. We agree with respondent. A cursory reading of the issues raised readily reveals that they involve factual matters which are not within the province of this Court to look into. Well-settled is the rule that in petitions for review on certiorari under Rule 45, only questions of law can be raised. While there are recognized exceptions to this rule, 18 none is present in this case. "[A]s a matter of x x x procedure, [this] Court defers and accords finality to the factual findings of trial courts, [especially] when such findings were [affirmed by the RTC and the CA. These] factual determination[s], as a matter of long and sound appellate practice, deserve great weight and shall not be disturbed on appeal x x x. [I]t is not the function of the Court to analyze and weigh all over again the evidence or premises supportive of the factual holding of the lower courts."19 MeTC properly acquired jurisdiction over the person of Atiko. Petitioners also argue that the MeTC did not acquire jurisdiction over the person of Atiko as the summons was received by its cashier, Cristina Figueroa. They maintain that under Section 11, Rule 14 of the Rules of Court, when the defendant is a domestic corporation like Atiko, summons may be served only upon its president, general manager, corporate secretary, treasurer or in-house counsel.

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We are not persuaded. True, when the defendant is a domestic corporation, service of summons may be made only upon the persons enumerated in Section 11, Rule 14 of the Rules of Court.20 However, jurisdiction over the person of the defendant can be acquired not only by proper service of summons but also by defendants voluntary appearance without expressly objecting to the courts jurisdiction, as embodied in Section 20, Rule 14 of the Rules of Court, viz: SEC. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance. In the case at bench, when Atiko filed its Notice of Appeal, 21 Memorandum of Appeal,22 Motion for Reconsideration23 of the April 8, 2003 Decision of the RTC, and Petition for Review,24 it never questioned the jurisdiction of the MeTC over its person. The filing of these pleadings seeking affirmative relief amounted to voluntary appearance and, hence, rendered the alleged lack of jurisdiction moot. In Palma v. Galvez, 25 this Court reiterated the oft-repeated rule that "the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of the court." Moreover, petitioners contention is a mere afterthought. It was only in their Memorandum26 filed with this Court where they claimed, for the first time, that Atiko was not properly served with summons. In La Naval Drug Corporation v. Court of Appeals, 27 it was held that the issue of jurisdiction over the person of the defendant must be seasonably raised. Failing to do so, a party who invoked the jurisdiction of a court to secure an affirmative relief cannot be allowed to disavow such jurisdiction after unsuccessfully trying to obtain such relief.28 It may not be amiss to state too that in our February 13, 2006 Resolution, 29 we reminded the parties that they are not allowed to interject new issues in their memorandum. MeTC did not acquire jurisdiction over the person of Cheng Lie. Petitioners likewise challenge the validity of the service of summons upon Cheng Lie, thru Atiko. They claim that when the defendant is a foreign private juridical entity which has transacted business in the Philippines, service of summons may be made, among others, upon its resident agent. In this case, however, there is no proof that Atiko is the local agent of Cheng Lie. On this score, we find for the petitioners. Before it was amended by A.M. No. 11-3-6SC,30 Section 12 of Rule 14 of the Rules of Court reads: SEC. 12. Service upon foreign private juridical entity. When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there

be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. Elucidating on the above provision of the Rules of Court, this Court declared in Pioneer International, Ltd. v. Guadiz, Jr.31 that when the defendant is a foreign juridical entity, service of summons may be made upon: 1. Its resident agent designated in accordance with law for that purpose; 2. The government official designated by law to receive summons if the corporation does not have a resident agent; or, 3. Any of the corporations officers or agents within the Philippines. In the case at bench, no summons was served upon Cheng Lie in any manner prescribed above. It should be recalled that Atiko was not properly served with summons as the person who received it on behalf of Atiko, cashier Cristina Figueroa, is not one of the corporate officers enumerated in Section 11 of Rule 14 of the Rules of Court. The MeTC acquired jurisdiction over the person of Atiko not thru valid service of summons but by the latters voluntary appearance. Thus, there being no proper service of summons upon Atiko to speak of, it follows that the MeTC never acquired jurisdiction over the person of Cheng Lie. To rule otherwise would create an absurd situation where service of summons is valid upon the purported principal but not on the latters co-defendant cum putative agent despite the fact that service was coursed thru said agent. Indeed, in order for the court to acquire jurisdiction over the person of a defendant foreign private juridical entity under Section 12, Rule 14 of the Rules of Court, there must be prior valid service of summons upon the agent of such defendant.
1avvphi1

Also, the records of this case is bereft of any showing that cashier Cristina Figueroa is a government official designated by law to receive summons on behalf of Cheng Lie or that she is an officer or agent of Cheng Lie within the Philippines. Hence, her receipt of summons bears no significance insofar as Cheng Lie is concerned. At this point, we emphasize that the requirements of the rule on summons must be strictly followed, 32 lest we ride roughshod on defendants right to due process.33 With regard to Cheng Lies filing of numerous pleadings, the same cannot be considered as voluntary appearance. Unlike Atiko, Cheng Lie never sought affirmative relief other than the dismissal of the complaint on the ground of lack of jurisdiction over its person. From the very beginning, it has consistently questioned the validity of the service of summons and the jurisdiction of the MeTC over its person. It does not escape our attention though that Cheng Lies pleadings do not indicate that the same were filed by way of special appearance. But these, to our mind, are mere inaccuracies in the title of the pleadings. What is important are the allegations contained therein which consistently resisted the jurisdiction of the trial court. Thus, Cheng Lie cannot be considered to have submitted itself to the jurisdiction of the courts.34

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In fine, since the MeTC never acquired jurisdiction over the person of Cheng Lie, its decision insofar as Cheng Lie is concerned is void.35 Cheng Lie was improperly declared in default. Applying the above disquisition, the MeTC likewise erred in declaring Cheng Lie in default. Settled is the rule that a defendant cannot be declared in default unless such declaration is preceded by a valid service of summons.36 WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed December 10, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 82547 is AFFIRMED with the MODIFICATION that the judgment insofar as Cheng Lie Navigation Co., Ltd. is concerned is declared VOID for failure to acquire jurisdiction over its person as there was improper service of summons. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 169157 November 14, 2011

SPOUSES BENJAMIN and NORMA GARCIA, Petitioner, vs. ESTER GARCIA, AMADO GARCIA, ADELA GARCIA, ROSA GARCIA and DAVID GARCIA, Respondents. DECISION PERALTA, J.: For review is the Court of Appeals (CA) Decision 1 dated May 12, 2005 and Resolution2 dated August 3, 2005 in CA-G.R. SP No. 41556. The assailed decision dismissed the Amended Petition for Certiorari with Preliminary Injunction and/or Temporary Restraining Order (TRO)3 filed by petitioners, Spouses Benjamin and Norma Garcia, questioning the Regional Trial Court (RTC)4 Orders5 dated April 24, 19966 and July 9, 19967 denying their Urgent Motion to Quash Order of Execution 8 and Motion for Reconsideration,9 respectively, in Civil Case No. Q-36147; while the assailed resolution denied petitioners motion for reconsideration.

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The facts of the case follow: Emilio Garcia (Emilio) and Eleuteria Pineda Garcia (Eleuteria) had nine (9) children, namely: Jerameal, Jose, Rita Garcia-Shipley (Rita), respondents Ester, Amado, Adela, Rosa, David and petitioner Benjamin, all surnamed Garcia. Eleuteria died in 1927. Emilio, thereafter, married Monica Cruz (Monica), with whom he had eight (8) children, namely: Irma, Imelda, Rogelio, Emilio, Maurita, Felixberto, Violeta and Rosalinda.10 On October 26, 1962, Emilio died intestate, survived by his wife Monica Cruz and his children of the first and second marriage. He left, among others, a 1,564-square-meter (sq m) lot (hereafter referred to as "subject property") located in San Francisco Del Monte, Quezon City covered by Transfer Certificate of Title (TCT) No. 18550 registered in the name of Emilio married to Eleuteria.11 On June 28, 1965, Emilios children of the first marriage executed a General Power of Attorney (GPA) in favor of Rita. On July 29, 1971, Benjamin and Rita executed a Deed of Extrajudicial Settlement of Estate, declaring themselves as the sole and only heirs of Emilio and Eleuteria, and adjudicating unto themselves the subject property, 1,000 sq m of which to Rita and the remaining 564 sq m to Benjamin. 12 Pursuant to said Deed, TCT No. 18550 was cancelled and TCT No. 170385 was issued in the name of Rita and Benjamin. The latter title was further cancelled and two (2) new TCTs were issued, namely, TCT No. 171639 in the name of Benjamin corresponding to his share of the subject property and TCT No. 171640 in the name of Rita for her share.13 On July 25, 1973, Emilios daughters (Irma and Imelda) of his second marriage filed a complaint against Rita and Benjamin for the annulment of title, docketed as Civil Case No. Q-17933. In addition to the annulment and cancellation of the TCT, Irma and Imelda prayed that the property covered thereby be partitioned in accordance with the law on intestate succession.14 The parties, thereafter, entered into a Compromise Agreement 15 which was approved by the court on August 29, 1974.16 The subject property was supposed to be partitioned among the siblings of the first and second marriage. Pursuant to the said agreement as approved by the court, the children of the first marriage were supposed to receive a total area of 1,091.90 sq m, while the children of the second marriage, including the surviving spouse Monica, were supposed to receive a total area of 472.10 sq m. 17 It was further agreed upon by the parties that the shares of Monica and her children were to be taken from Ritas 1,000-sq-m portion of the subject property.18 However, instead of executing the judgment based on the compromise agreement, Rita divided her 1,000-sq-m property 555 sq m for herself and 445 sq m for Monica and her children. Consequently, TCT No. 171640 was cancelled and TCT No. 207117 was issued to Monica and her children, while TCT No. 207116 to Rita.19 On April 17, 1975, a permanent service road was constructed on Ritas property. Consequently, a Deed of Exchange was executed between Rita on the one hand, and Monica and her children, on the other. This resulted in the issuance of TCT No. 207210 for 445 sq m in the name of Rita and TCT No. 207211 for 555 sq m to Monica and her children.20 On August 22, 1979, Rita sold her property covered by TCT No. 207210 to petitioner Norma Dimalanta Garcia (Norma) resulting in the registration and issuance of TCT No. 278765 in the name of Norma married to Benjamin.21

Respondents Ester, Adela, Amado, Rosa and David filed a complaint for reconveyance, which was later amended22 on October 26, 1982, of the parcel of land originally covered by TCT No. 18550, against Rita, Benjamin, and Monica and her children. The case was docketed as Civil Case No. Q-36147. They alleged that Benjamin and Rita were able to adjudicate between themselves the subject property by claiming to be the only heirs of Emilio, when in fact they were not. They, thus, demanded for their shares in the subject property since, as children of the first marriage (which includes Benjamin and Rita), they are entitled to a total area of 1,091 sq m, pursuant to the August 28, 1974 Compromise Agreement. On March 15, 1989, the RTC rendered a Decision 23 in favor of respondents, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff[s] and against the defendants as follows: 1. Defendants are ordered to convey to plaintiffs the portions corresponding to their shares in the property in question based upon the Compromise Agreement dated August 28, 1974, computed in accordance with the law on intestate succession; and 2. Defendants are ordered to pay attorney[s] fees amounting to P5,000.00. Costs against the defendants. SO ORDERED.24 The court noted that Benjamin and Ritas basis in adjudicating between themselves the subject property was the GPA allegedly executed by respondents in favor of Rita. However, the court held that the law requires a special power of attorney, not a GPA, in repudiating an inheritance. It follows that the deed of extrajudicial settlement executed by Benjamin and Rita is defective for having knowingly and willingly excluded compulsory heirs. The partition earlier made by Benjamin and Rita, and later by Monica and her children based on the compromise agreement, is incomplete. Consequently, there is a need to complete the distribution to the omitted heirs.25 On appeal, except for the deletion of the award of attorneys fees, the CA affirmed 26 the RTC decision. When elevated before the Court, we denied the petition and, consequently, affirmed the CA decision. The decision attained finality. 27 The corresponding Writ of Execution28 was issued thereafter. Meanwhile on August 30, 1993, Norma filed a Petition for Quieting of Title 29 against Amado with the RTC. The case was docketed as Civil Case No. Q-93-17396. Norma alleged that she is the owner of a portion of the property being claimed by Amado and his siblings in a reconveyance case in which she was not made a party. She added that she bought the property from Rita.30 The case, however, was dismissed on motion of Amado on the ground of res judicata considering that the title to the property claimed by Norma emanated from TCT No. 18550 which was already declared to have been fraudulently partitioned by Rita and Benjamin.31 42

On motion of respondents, an Alias Writ of Execution 32 in the reconveyance case was issued, the pertinent portion of which reads: NOW THEREFORE, the defendants are hereby ordered to convey to plaintiffs the portions corresponding their shares in the property in question based upon the Compromise Agreement dated August 28, 1974, computed in accordance with the law on intestate succession and to show proof of compliance with this writ within sixty (60) days from receipt. Likewise, the Branch Deputy Sheriff, Mr. Cesar M. Torio, is ordered to return this writ into [this] court within sixty (60) days from date with your proceedings endorsed thereon.33 Petitioners, however, opposed the writ on the ground that the compromise agreement referred to in the decision did not cover their properties. 34 In an Urgent Motion to Quash Order of Execution,35 petitioners insisted that in including the properties of Benjamin and Norma in the order of execution, the judge amended the judgment sought to be executed.36 They likewise pointed out that Norma was never impleaded in the reconveyance case. In an Order37 dated April 24, 1996, the RTC denied the motion to quash. The RTC explained that the issue of Normas non-inclusion in the reconveyance case had been finally settled when her case had been dismissed for quieting of title precisely because of the reconveyance case that had become final and executory. Petitioners motion for reconsideration38 was likewise denied in an Order39 dated July 9, 1996. In a special civil action for certiorari, the CA found no grave abuse of discretion on the part of the RTC in issuing the above orders. The CA pointed out that the assailed order of execution did not amend the March 15, 1989 decision sought to be executed. 40 It explained that the order of execution merely clarified the dispositive portion of the decision with reference to the other portions thereof.41 It found that the parcels of land in the name of petitioners form part of the decision as they originated from the mother title TCT No. 18550 against which the execution may be had in favor of respondents. 42 As to the non-inclusion of Norma as indispensable party in the reconveyance case, the appellate court applied the rule on estoppel by laches, considering that Norma was very much aware of the existence of the litigations involving the subject property.43 Finally, on petitioners claim of the indefeasibility of the Torrens title, the CA stressed that mere issuance of the certificate of title does not foreclose the possibility that the property may be under co-ownership with persons not named in the title.44 Aggrieved, petitioners filed this petition assailing in general the denial of their urgent motion to quash writ of execution. The petition is without merit. The existence of the courts decision in Civil Case No. Q-36147 for reconveyance and the August 28, 1974 Compromise Agreement, is undisputed. In said decision, the court ordered Benjamin, Rita, Monica and her children, to convey to respondents the portions corresponding to their shares in the subject property based on the compromise agreement. In the compromise agreement, the subject property was divided as follows: 1,091 sq m as the total shares of the children of the first marriage and 472 sq m for Monica and her

children. Pursuant to the final and executory decision above, the RTC issued a Writ of Execution and eventually the assailed Alias Writ of Execution. Petitioners, however, opposed the implementation of the writ of execution on two grounds: (1) the compromise agreement did not include the portion of the subject property in the name of Benjamin, thus, should not be considered part of the property ordered by the court to be reconveyed to respondents; and (2) the writ of execution could not cover the portion of the subject property in the name of Norma, since she was not impleaded in the reconveyance case, and as such, is not bound by the decision sought to be executed. We do not agree with petitioners. To determine the propriety of petitioners claims, it is necessary to look into the terms of the compromise agreement and the conclusions of the court in the decision sought to be executed. First, the compromise agreement. It must be recalled that the compromise agreement came about because of the case for annulment of title instituted by Monica and her children against Benjamin and Rita. At the time of the institution of the annulment case, the subject property had been divided between Benjamin and Rita, wherein they were issued their respective titles, TCT No. 171639 in the name of Benjamin covering 564 sq m and TCT No. 171640 in the name of Rita covering 1,000 sq m. The parties later entered into a compromise agreement recognizing the rights of Monica and her children to the subject property as heirs of Emilio being the surviving wife and children of the second marriage. To facilitate the delivery of their 45 shares, it was stated in the compromise agreement that their shares shall be taken from Ritas portion covered by TCT No. 171640. Respondents were not parties to the annulment case or to the compromise agreement but their rights to the subject property as heirs of Emilio were recognized. Of the 1,564 sq m property, 1,091 sq m was agreed upon as the total shares of the children of the first marriage which include Rita, Benjamin and respondents, and 472 sq m for Monica and her children. From Ritas 1,000 sq m share, 472 46 sq m was supposed to be given to Monica and her children. After deducting said area, 528 sq m remained for the children of the first marriage who are entitled to 1,091 sq m. Although it was not specifically stated in the compromise agreement, obviously, the shares of the children of the first marriage should be taken from the remaining 528 sq m of Rita and the 564 sq m of Benjamin. Benjamins claim that the portion of the property registered in his name is not covered by the compromise agreement, certainly, has no leg to stand on. Second, the decision in the reconveyance case sought to be executed. The action for reconveyance was instituted by the other heirs of Emilio who were not parties to the annulment case nor to the compromise agreement. They based their claim on their entitlement to 1,091 sq m as children of the first marriage. Although several cancellations of titles had already taken place, it is clear from the decision sought to be executed that the subject property was that originally covered by TCT No. 18550. Considering that Benjamins title which is TCT No. 171639 was derived from TCT No. 18550, the same was definitely included.

43

Moreover, in deciding the reconveyance case in favor of respondents, the court took into consideration how TCT No. 18550, covering the subject property, was cancelled and how TCT Nos. 171639 and 171640, in the names of Benjamin and Rita, came about. The court applied the laws on intestate succession and implied trust before it finally concluded that respondents were excluded from the partition and are thus entitled to their shares. Undoubtedly, these rules apply not only to Rita but also to Benjamin. If we were to sustain Benjamins claim that the portion of the property registered in his name is excluded, the shares of the omitted heirs will not be completed. Neither can we sustain petitioners contention that the writ of execution cannot include the portion of the subject property registered in the name of Norma as she was never a party to the reconveyance case. As clearly stated above, several cancellations of titles had taken place since the death of Emilio until the present case was instituted, which we now reiterate for a proper perspective. The subject property was originally covered by TCT No. 18550 in the name of Emilio, married to Eleuteria. By virtue of the extrajudicial settlement of estate executed by Rita and Benjamin, a new title was issued in their names, TCT No. 170385. Two new titles were later issued, TCT No. 171639 in the name of Benjamin and TCT No. 171640 in the name of Rita. Pursuant to the compromise agreement entered into with their brothers and sisters of the second marriage, TCT No. 171640 was cancelled and new ones were issued, TCT No. 207117 in the name of Monica and her children and TCT No. 207116 in the name of Rita. A Deed of Exchange was, thereafter, executed resulting in the cancellation of the latter titles and new ones were issued, TCT No. 207211 in the name of Monica and her children and TCT No. 207210 in the name of Rita. Eventually, Rita decided to sell the portion of the property registered in her name to Norma resulting in the cancellation of her title and the issuance of the new title in the name of Norma, TCT No. 278765. In sum, at the time of the issuance of the questioned writ of execution, the subject property was covered by TCT No. 171639 covering 564 sq m in the name of Benjamin; TCT No. 207211 covering 555 sq m in the name of Monica and her children; and TCT No. 278765 covering 445 sq m in the name of Norma, the wife of Benjamin. Respondents instituted the action for reconveyance involving the subject property originally covered by TCT No. 18550. At that time, Norma had been the registered owner of a portion of the subject property. As such, she was an indispensable party as her title to the property was affected. The Court had thoroughly discussed in a number of cases the nature and definition of an indispensable party, to wit: x x x [I]ndispensable parties [are] parties-in-interests without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial power. x x x47 An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting

his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward.48 Thus, a person who was not impleaded in the complaint cannot be bound by the decision rendered therein, for no man shall be affected by a proceeding in which he is a stranger.49 Otherwise stated, things done between strangers ought not to injure those who are not parties to them.50 In this case, however, as aptly held by the RTC and CA, Norma is estopped from invoking the rule on indispensable party. Estoppel by laches or "stale demands" ordains that the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, or the negligence or omission to assert a right within a reasonable time, warrants a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 51 There is no absolute rule as to what constitutes laches; it is addressed to the sound discretion of the court. Being an equitable doctrine, its application is controlled by equitable considerations.52 The CA has thoroughly explained the circumstances showing Normas knowledge of the existence of the pending litigation involving the subject property which includes the portion registered in her name. We quote with approval the exhaustive observations and explanations of the CA in this wise: [Records show] that petitioner Norma D. Garcia had knowledge of the existence of Civil Case No. Q-36147 [for reconveyance] as well as the subject thereof. The Amended Complaint dated 26 October 1982 specifically mentioned petitioner Benjamin Garcia as being married to herein petitioner Norma Dimalanta Garcia. It even alleged in paragraph 14 thereof that the property covered by TCT No. 207210 in the name of Rita Garcia-Shipley was transferred to petitioner Norma Dimalanta Garcia by virtue of a Deed of Sale dated 22 August 1979 executed between petitioner Norma Garcia and Rita Garcia-Shipley and resulted to the registration and issuance of TCT No. 278765, now TCT No. 66234, in the name of Norma Garcia married to Benjamin Garcia. Likewise, in paragraph 15 of the said Amended Complaint, private respondents alleged that demands were made on Rita GarciaShipley, Benjamin Garcia and Norma D. Garcia for the conveyance to them (plaintiffs) of their legitimate shares. Further, the private respondents alleged in their Comment dated 10 January 1997, that petitioner Norma D. Garcia was very much aware of the existence of Civil Case No. Q36147 as the same involves the estate of her deceased parent-in-law Emilio Garcia from which her property covered by TCT No. 66234 came from; that she knew very well that her property is involved in the litigation yet she did not take steps to have the same excluded therefrom, and that she even participated actively during the trial of the case and testified to support the theory put up by the defendants. Petitioner Norma Garcias filing of the Petition for Quieting of Title with [the] RTC of Quezon City docketed as Q-93-17396 raffled to Branch 103 (Judge Jaime N. Salazar, Jr.) supports private respondentsassertion of petitioner Norma Garcias knowledge of the existence and subject matter of the reconveyance case 44

(Civil Case No. Q-36147) as she categorically stated in paragraph 6 of said Petition that said case for reconveyance of property apparently includes the property registered in her name. xxx xxxx We, therefore, find that petitioner Norma Garcia is estopped by laches from invoking the rule on indispensable parties. Taking into consideration the established circumstances surrounding the transfer in her name of the parcel of land covered by TCT No. 66234 (278765), her non-joinder as an indispensable party is a mere technicality that cannot prevail over considerations of substantial justice. x x x53 Indeed, evidence clearly shows that Norma had knowledge of the existence and the pendency of the reconveyance case filed by respondents against her husband Benjamin, Rita, and Monica and her children. She is now estopped from claiming that the RTC had not acquired jurisdiction over her and thus not bound by the decision sought to be executed.54 The RTC, therefore, did not abuse its discretion in denying petitioners urgent motion to quash the writ of execution. WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated May 12, 2005 and Resolution dated August 3, 2005 in CA-G.R. SP No. 41556, are AFFIRMED. SO ORDERED. G.R. No. 183789

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION August 24, 2011

POWER SECTOR ASSETS AND lIABILITIES MANAGEMENT CORPORATION, Petitioner, vs. POZZOLANIC PHILIPPINES INCORPORATED, Respondent. DECISION PEREZ, J.: The Case This petition1 for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assails (1) the Decision2dated 30 April 2008 of the Regional Trial Court of Quezon City, Branch 96, upholding the validity of respondents right of first refusal and holding such right binding on petitioner, and (2) the Order 3 dated 27 June 2008 of the same court, denying petitioners Motion for Reconsideration and Supplemental Motion for Reconsideration of the 30 April 2008 Decision of the trial court in Civil Case No. Q-00-40731. The Antecedents Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned and controlled corporation created by virtue of Republic Act No. 9136, 45

otherwise known as the Electric Power Industry Reform Act (EPIRA) of 2001. 4 Its principal purpose is to manage the orderly sale, disposition, and privatization of the National Power Corporations (NPCs) generation assets, real estate and other disposable assets, and Independent Power Producer (IPP) contracts, with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.5 Respondent Pozzolanic Philippines Incorporated (Pozzolanic) is the local subsidiary of Pozzolanic Australia Pty. Ltd. (Pozzolanic Australia), 6 an Australian corporation which claims to have perfected the techniques in the processing of fly ash for use in the making of cement.7 In 1986, Pozzolanic Australia won the public bidding for the purchase of the fly ash generated by NPCs power plant in Batangas.8 Pozzolanic Australia then negotiated with NPC for a long-term contract for the purchase of all fly ash to be produced by NPCs future power plants. NPC accepted Pozzolanic Australias offer and they entered into a long-term contract, dated 20 October 1987, denominated as "Contract for the Purchase of Fly Ash of Batangas Coal-Fired Thermal Power Plant Luzon" (the Batangas Contract).9 Under Article I of the contract, NPC, referred to therein as the "CORPORATION," granted Pozzolanic Australia, the "PURCHASER," a right of first refusal to purchase the fly ash generated by the coal-fired plants that may be put up by NPC in the future. The specific provision of the contract states: PURCHASER has first option to purchase Fly Ash under similar terms and conditions as herein contained from the second unit of Batangas Coal-Fired Thermal Plant that the CORPORATION may construct. PURCHASER may also exercise the right of first refusal to purchase fly ash from any new coal-fired plants which will be put up by CORPORATION. 10 In 1988, while the necessary clearances and approvals were being obtained by Pozzolanic Australia in connection with the operation of its fly ash business in the Philippines, its major stockholders decided that it would be more advantageous for the company to organize a Philippine corporation and to assign to such corporation Pozzolanic Australias rights to the commercial use of fly ash in the Philippines. Accordingly, in April 1989, respondent Pozzolanic was formally incorporated to take over Pozzolanic Australias business in the Philippines.11 Respondent then commenced to exercise its rights under the Batangas contract in June, 1989.12 In 1998, the Masinloc Coal-Fired Thermal Power Plant (Masinloc Plant) started operations to provide power for NPC. Late that year, respondent began the installation of its fly ash processing equipment in the Masinloc Plant and began off taking the fly ash produced therein. 13 Subsequently, on 15 February 1999, NPC and respondent, on an interim basis and prior to the conduct of a public bidding for the contract to purchase the Masinloc Plants fly ash, executed a contract whereby respondent was given the right to purchase the said fly ash for a period of one year.14 The fourth and fifth "WHEREAS" clauses of the contract provide:

WHEREAS, under the Contract for the Purchase of the Fly Ash of Batangas Coal-Fired Thermal Power Plant dated 20 October 1987, PURCHASER was granted the right of first refusal over any and all fly ash that may be produced by any of NPCs coal-fired power plants in the Philippines; WHEREAS, NPC intends to bid out the long term contract for the Fly Ash that may be produced by the (Masinloc Coal Fired Thermal Power) Plant subject to the second paragraph of Article I of the original contract between the parties which was signed on 20 October 1987 giving PURCHASER the right of first refusal.15 In October 1999, the Sual Coal-Fired Power Plant started providing electricity in the Luzon region.16 NPC thereafter caused to be published in the Philippine Star and the Manila Bulletin17 an "Invitation to Pre-Qualify and to Bid," inviting all interested buyers to pre-qualify for the purchase of fly ash from the Masinloc and/or Sual Power Plants.18 As a result, respondent sent letters to NPC calling its attention to respondents right of first refusal under the Batangas Contract. It also demanded that any tender documents to be issued in connection with the bidding on the right to purchase the Masinloc and Sual Plants fly ash include notices informing prospective bidders of respondents right of first refusal. In a letter dated 7 March 2000, NPC informed respondent that it had decided to defer indefinitely the bidding on the right to purchase the Masinloc Plants fly ash and to proceed first with the bidding on the right to purchase the Sual Plants fly ash. Thus, on 7 April 2000, NPC released the tender documents for the bidding on the Sual Plants fly ash, which tender documents made no reference to respondents right of first refusal.19 This prompted respondent to file a complaint 20 (later amended21 ) with the trial court praying that NPC be ordered to allow Pozzolanic to exercise its right of first refusal by permitting it to match the price and terms offered by the winning bidder and by awarding the contract for the purchase of the Sual Plants fly ash to Pozzolanic if it matches the price and terms offered by said winning bidder.22 While the case was pending before the lower court, NPC decided to also dispose of the fly ash from the Masinloc Plant through public bidding, without allowing respondent to exercise its right of first refusal. Thus, respondent filed a Supplementary Complaint 23 , dated 8 August 2002, praying for the same reliefs as those prayed for in the amended complaint earlier filed, but as regards the Masinloc Plant.24 Meanwhile, on 4 June 2001, Congress enacted the EPIRA (RA 9136) which created PSALM. This resulted in the filing of a Second Supplementary Complaint, dated 5 March 2003, impleading petitioner PSALM as a necessary and indispensable party. 25 The litigation became more complicated when petitioner, NPC, and the Department of Energy entered into a Memorandum of Agreement with the Provincial Government of Zambales and several local government units of Zambales, pursuant to which the Provincial Government of Zambales was awarded the exclusive right to withdraw the fly ash from the Masinloc Plant.26 With this development, respondent filed a Third Supplementary Complaint seeking the annulment of the aforesaid Memorandum of Agreement and other documents 46

related thereto.27 This complaint was dismissed by the trial court on the ground of forum shopping, it appearing that the Province of Zambales, et al. had previously filed a case against respondent and NPC, claiming exclusive right to withdraw the fly ash of the Masinloc Plant.28 Respondent appealed the order of dismissal to the Court of Appeals. On 18 July 2007, while the appeal was pending, respondent and the Provincial Government of Zambales executed an "Agreement"29 (the Masinloc Contract) by virtue of which the Province of Zambales awarded to respondent the exclusive right to withdraw the fly ash from the Masinloc Power Plant. Respondent then moved for the dismissal of its appeal in the Court of Appeals. As a result, the assailed Order of the trial court dismissing respondents Third Supplementary Complaint became final.30 Also, previously, on 30 March 2005, respondent and NPC entered into a "Purchase Agreement for the Purchase of Fly Ash of Sual Coal-Fired Thermal Power Plant" 31 (the Sual Contract) whereby NPC awarded to respondent the exclusive right to withdraw the fly ash from the Sual Plant.32 As a result, NPC filed, on 4 February 2008, a Motion to Dismiss 33 the Complaint against it on the ground that the issues between it and respondent had become moot and academic. This is in view of the Purchase Agreement executed by NPC and respondent for the fly ash of the Sual Plant and the Agreement between respondent and the Provincial Government of Zambales with respect to the fly ash of the Masinloc Plant.34 During the hearing on NPCs Motion to Dismiss held on 7 February 2008, the trial court ordered herein petitioner PSALM and respondent Pozzolanic to comment on the Motion. Petitioner, through counsel, manifested that in addition to commenting on the Motion to Dismiss, it would also like to challenge, through a position paper, the validity of respondents right of first refusal.35 Respondent herein interposed no objection to the Motion to Dismiss. On the other hand, in its Comment37 dated 14 February 2008, petitioner asserted that the following issues should first be resolved before a resolution on the Motion to Dismiss may be had:
36

Pursuant to its manifestation in open court during the 7 February 2008 hearing on NPCs Motion to Dismiss, petitioner submitted its Position Paper 39 on 29 February 2008 raising the same issues as those in its Comment to NPCs Motion to Dismiss. Petitioner prayed that the complaint against it be dismissed and that respondents right of first refusal contained in the second paragraph, Article 1 of the Batangas Contract be declared void ab initio for being contrary to law and public policy. In an Order40 dated 17 March 2008, the trial court dismissed in toto the Amended Complaint and the First Supplementary Complaint. The Second Supplementary Complaint was PARTIALLY DISMISSED insofar as it refers to herein respondents complaint against NPC only. Thus, on 30 April 2008, the trial court rendered the herein assailed Decision declaring respondents right of first refusal valid and binding on petitioner. The Motion for Reconsideration and Supplemental Motion for Reconsideration filed by petitioner seeking a reversal of the decision of the trial court were both denied for lack of merit.41 Hence, this petition. The Issues Petitioner PSALM prays for the reversal of the challenged decision on the following grounds: 1. THE TRIAL COURT WAS DIVESTED OF JURISDICTION AFTER IT ISSUED THE ORDER DATED 17 MARCH 2008 DISMISSING WITH PREJUDICE THE AMENDED COMPLAINT AND THE FIRST SUPPLEMENTARY COMPLAINT. THUS, THE "DECISION" DATED 30 APRIL 2008 RENDERED SUBSEQUENT TO SUCH DISMISSAL IS NULL AND VOID; AND 2. EVEN ASSUMING THAT THE TRIAL COURT WAS NOT DIVESTED OF JURISDICTION, THE RIGHT OF FIRST REFUSAL IS NOT VALID, AND THEREFORE, WITHOUT BINDING EFFECT, FOR BEING CONTRARY TO PUBLIC POLICY. The Courts Ruling On whether or not the trial court was divested of jurisdiction Petitioner contends that by virtue of the Order of the trial court dated 17 March 2008, respondents Amended Complaint was dismissed with prejudice; and, since no motion for reconsideration or appeal was filed by any of the parties in the lower court, the Order attained finality. Thus, petitioner argues, the trial court can no longer take any further action since it had lost all power or authority over the case. The Order of dismissal effectively deprived it of jurisdiction.42

1. whether or not fly ash, which is/are [sic] not yet existing, can be considered assets of the government, the disposition of which is subject to government rules particularly public bidding; 2. whether or not the alleged right of first refusal of plaintiff is not contrary to law; and 3. whether or not PSALM is bound by the said alleged right.38 Petitioner thus prayed that resolution on the Motion to Dismiss be held in abeyance pending determination of the issues concerning respondents alleged right of first refusal.

47

We cannot subscribe to petitioners argument. Petitioner is barred by the doctrine of estoppel from challenging the lower courts authority to render the 30 April 2008 Decision since it was petitioner itself which called for the exercise of such authority. In its Comment to NPCs Motion to Dismiss, it raised the following issues: 1. whether or not fly ash, which is/are [sic] not yet existing, can be considered assets of the government, the disposition of which is subject to government rules particularly public bidding; 2. whether or not the alleged right of first refusal of plaintiff is not contrary to law; and 3. whether or not PSALM is bound by the said alleged right. Then, again, in its Position Paper, it reiterated the aforesaid issues and petitioned the trial court to dismiss herein respondents complaint against it and to invalidate respondents right of first refusal as contained in the Batangas Contract. Clearly, petitioner invoked the courts jurisdiction by seeking to obtain a definite pronouncement from it. Having thus called upon the court to settle the issues it has raised, petitioner cannot now repudiate that same jurisdiction it has invoked in the first place. This Court has consistently held that "a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction." 43 The Supreme Court frowns upon the undesirable practice of a party submitting his case for decision and then accepting the judgment only if favorable, and attacking it for lack of jurisdiction if adverse. 44 If a party invokes the jurisdiction of a court, he cannot thereafter challenge the courts jurisdiction in the same case. To rule otherwise would amount to speculating on the fortune of litigation, which is against the policy of the Court.45 Petitioner maintains that it had tried to prevent the current situation wherein a decision was rendered by the trial court without a standing complaint. According to petitioner, in its Comment to NPCs Motion to Dismiss, it prayed for a deferral of the courts action on the Motion until after the resolution of the issues it has raised. Thus, petitioner claims, it cannot be faulted for the lower courts own procedural lapse in dismissing the Amended Complaint despite petitioners prayer.46 Again, we cannot sustain petitioners contention. It must be noted that petitioner did not raise the foregoing argument in its Comment on NPCs Motion to Dismiss. Neither was it mentioned in the Position Paper it filed before the trial court. Not even in its Motion for Reconsideration of the herein challenged Decision did petitioner discuss the issue. The matter was raised for the first time in its Supplemental Motion for Reconsideration, thereby giving credence to respondents contention that the same was just an afterthought47 on the part of petitioner.

If petitioners claim is to be accepted as true, it should have raised the issue regarding the trial courts jurisdiction at the very first opportunity, which was, at the time of its receipt of the 17 March 2008 Order dismissing the Amended and First Supplementary Complaints in toto and only partially dismissing the Second Supplementary Complaint wherein petitioner was impleaded. At that point, petitioner should have been forewarned that the proceedings, as against it, have not been terminated. Then, too, as far as the issues it raised in its Comment and Position Paper were concerned, no pronouncement had, as yet, been made by the court at the time. Obviously, there were still matters that needed to be resolved by the court. Thus, if petitioner truly believed that the court had lost its jurisdiction after it dismissed the Amended Complaint, it should have questioned the 17 March 2008 Order of the court which failed to completely dispose of the case. Instead, it waited for the court to issue the questioned Decision, and only then did petitioner broach the subject. Clearly, under the circumstances, petitioner is estopped from questioning the courts jurisdiction. On the validity of respondents right of first refusal We hold the right of first refusal granted to respondent in the Batangas Contract invalid for being contrary to public policy as the same violates the requirement of competitive public bidding in the award of government contracts, for the following reasons: One: The grant to respondent of the right of first refusal constitutes an unauthorized provision in the contract that was entered into pursuant to the bidding. By respondents own admission, the right of first refusal granted to it was "contractually bargained for and acquired from NPC"48 after it won the public bidding for the purchase of the fly ash produced by the Batangas Power Plant. 49 This clearly indicates that the right of first refusal was not included in the bid documents presented to the other bidders who participated in the bidding. As a result, the contract signed by NPC and respondent is different from that which was bidded out. It has been held that the three principles in public bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption.50 Thus, in the case of Agan, Jr. v. Philippine International Air Terminals Co., Inc. 51 (PIATCO), the Supreme Court declared as null and void, for being contrary to public policy, the Concession Agreement entered into by the government with PIATCO because it contained provisions that substantially departed from the draft Concession Agreement included in the bid documents.52 Also, in Commission on Audit v. Link Worth International, Inc., 53 the Court affirmed the respective decisions of the trial court and the Court of Appeals annulling the award of a procurement contract to a bidder whose technical proposal varied from the bid specifications. It appears that during the post-qualification stage, the Bids and Awards Committee of the Commission on Audit considered some factors in the verification and validation of the winning bidders proposal which were extraneous to and not included in the bid documents.54 Thus, the Court emphasized that the function of post-qualification is to 48

verify, inspect and test whether the technical specifications of the goods offered comply with the requirements of the contract and the bidding documents. It does not give occasion for the procuring entity to arbitrarily exercise its discretion and brush aside the very requirements it specified as vital components of the goods it bids out. 55 In Caltex (Philippines), Inc., et al. v. Delgado Brothers, Inc. et al., 56 the Supreme Court likewise affirmed a decision of the trial court declaring as null and void the amendment to an arrastre contract for the reason that the same was done without public bidding. Citing the appealed decision, the Court held that: x x x the said agreement of June 1, 1951 executed and entered into without previous public bidding, is null and void, and can not adversely affect the rights of third parties, x x x and of the public in general. x x x the due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding.57 Finally, in Information Technology Foundation of the Philippines v. Commission on Elections,58 the Court nullified the award by the Commission on Elections (COMELEC) of a contract for the automation of the counting and canvassing of the ballots in the 2004 elections on the ground, among others, that it permitted the winning bidder to change and alter the subject of the contract, in effect allowing a substantive amendment without public bidding.59Said the Supreme Court therein: "it is contrary to the very concept of public bidding to permit a variance between the conditions under which the bids are invited and those under which proposals are submitted and approved; or, as in this case, the conditions under which the bid is won and those under which the awarded contract will be complied with. The substantive amendment of the contract bidded out, without any public bidding after the bidding process had been concluded is violative of the public policy on public biddings, x x x. The whole point in going through the public bidding exercise was completely lost. The very rationale of public bidding was totally subverted by the Commission." 60 By its very nature, public bidding aims to protect public interest by giving the public the best possible advantages through open competition. Thus, competition must be legitimate, fair and honest. In the field of government contract law, competition requires not only bidding upon a common standard, a common basis, upon the same thing, the same subject matter, and the same undertaking, but also that it be legitimate, fair and honest and not designed to injure or defraud the government. 61 An essential element of a publicly bidded contract is that "all bidders must be on equal footing, not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing."62 As pointed out by the Court in Agan, if the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any

material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would be a farce if, after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders.63 The government cannot enter into a contract with the highest bidder and incorporate substantial provisions beneficial to him, not included or contemplated in the terms and specifications upon which the bids were invited.64 Aside from protecting public interest by giving the public the best possible advantages through open competition, "[a]nother self-evident purpose of public bidding is to avoid or preclude suspicion of favoritism and anomalies in the execution of public contracts." 65 Such bias or partiality and irregularities may be validly presumed if, as in this case, after a contract has been awarded, the parties carry out changes or make amendments thereto which gives the winning bidder an edge or advantage over the other bidders who participated in the bidding, or which makes the signed contract unfavorable to the government. Thus, there can be no substantial or material change to the parameters of the project, including the essential terms and conditions of the contract bidded upon, after the contract award.66 The Court acknowledges that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon. However, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alteration and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon.67 The grant of the right of first refusal in this case did not only substantially amend the terms of the contract bidded upon, so that resultantly, the other bidders thereto were deprived of the terms and opportunities granted to respondent after it won the public auction, it so altered the bid terms the very admission by all parties that the disposal of fly ash must be through public bidding by effectively barring any and all true biddings in the future. The grant of first refusal was a grant to respondent of the right to buy fly ash in all coal-fired plants of NPC. Proceeding from the afore-cited jurisprudence, the Batangas Contract is, consequently, a nullity. Two: The right to buy fly ash precedes and is the basis of the right of first refusal, and the consequent right cannot be acquired together with and at the same time as the precedent right. The right of first refusal has long been recognized, both legally and jurisprudentially, as valid in our jurisdiction. It is significant to note, however, that in those cases where the right of refusal is upheld by both law and jurisprudence, the party in whose favor the right is granted has an interest on the object over which the right of first refusal is to be exercised. In those instances, the grant of the right of first refusal is a means to protect such interest.

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Thus, Presidential Decree (P.D.) No. 1517,68 as amended by P.D. No. 2016,69 grants to qualified tenants of land in areas declared as urban land reform zones, the right of first refusal to purchase the same within a reasonable time and at a reasonable price.70 The same right is accorded by Republic Act No. 727971 (Urban Development and Housing Act of 1992) to qualified beneficiaries of socialized housing, with respect to the land they are occupying. Accordingly, in Valderama v. Macalde, 72 Paraaque Kings Enterprises, Inc. v. Court of Appeals,73 and Conculada v. Court of Appeals, 74 the Supreme Court sustained the tenants right of first refusal pursuant to P.D. 1517. In Polytechnic University of the Philippines v. Court of Appeals 75 and Polytechnic University of the Philippines v. Golden Horizon Realty Corporation 76 , this Court upheld the right of refusal of therein respondent private corporations concerning lots they are leasing from the government. In the case of Republic v. Sandiganbayan, 77 the Presidential Commission on Good Government (PCGG) sought to exercise its right of first refusal as a stockholder of Eastern Telecommunications Philippines, Inc. (ETPI), a corporation sequestered by the PCGG, to purchase ETPI shares being sold by another stockholder to a non-stockholder. While the Court recognized that PCGG had a right of first refusal with respect to ETPIs shares, 78 it nevertheless did not sustain such right on the ground that the same was not seasonably exercised.79 Finally, in Litonjua v. L & R Corporation,80 the Supreme Court recognized the validity and enforceability of a stipulation in a mortgage contract granting the mortgagee the right of first refusal should the mortgagor decide to sell the property subject of the mortgage. In all the foregoing cases, the party seeking to exercise the right has a vested interest in, if not a right to, the subject of the right of first refusal. Thus, on account of such interest, a tenant (with respect to the land occupied), a lessee (vis--vis the property leased), a stockholder (as regards shares of stock), and a mortgagor (in relation to the subject of the mortgage), are all granted first priority to buy the property over which they have an interest in the event of its sale. Even in the JG Summit Case, 81 which case was heavily relied upon by the lower court in its decision and by respondent in support of its arguments, the right of first refusal to the corporations shares of stock later exchanged for the right to top granted to KAWASAKI was based on the fact that it was a shareholder in the joint venture for the construction, operation, and management of the Philippine Shipyard and Engineering Corporation (PHILSECO). In the case at bar, however, there is no basis whatsoever for the grant to respondent of the right of first refusal with respect to the fly ash of NPC power plants since the right to purchase at the time of bidding is that which is precisely the bidding subject, not yet existent much more vested in respondent. KAWASAKIs situation is different from that of respondent in that the former has an established interest in the shares subject of the right of first refusal. In the words of the Court in that case: "KAWASAKI is not a mere non-bidder. It is a PARTNER in the joint venture x x x."82 (Emphasis supplied).

Further, in the JG Summit Case,83 what was involved was not merely a right to match but a right to top by five percent (5%) the highest bid for the shares subject of the public bidding.84 Undoubtedly, such an arrangement is truly advantageous to the government. Here, aside from respondent not having a vested interest in the subject matter of the public bidding, its right of first refusal allows it to merely match the highest bid offered at the public auction. This agreement clearly makes a farce of the bidding process, as the government will merely go through the motion of holding a public bidding and declaring a highest bidder only to award the contract to respondent, who did not even participate in the bidding. It is significant to note that, in the tender documents for the bidding of the fly ash of the Masinloc Power Plant, NPC gave respondent the opportunity to top the highest bid by fifteen percent (15%). Respondent protested this, however, as an infringement upon its alleged right of first refusal to purchase the Masinloc fly ash, as supposedly guaranteed by the Batangas Contract.85 In effect, therefore, in asserting its right of first refusal, what respondent is asking is that it be given undue advantage over any other party interested to purchase the fly ash of NPCs power plants. Obviously, this cannot be countenanced. It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings provide the common ground or basis for the bidders. The specifications should, accordingly, operate equally or indiscriminately upon all bidders.86 It should also be pointed out that while respondent maintains that it never sought to disallow the public bidding of the fly ash in question, the records of this case, nevertheless, disclose that the right to withdraw the fly ash of the Sual and Masinloc Plants was awarded to respondent without the benefit of a public auction.87 Thus, the grant to respondent of the right of first refusal in the Batangas Contract paved the way for respondent to obtain the right to withdraw fly ash from the aforementioned power plants without public bidding. The second and third "WHEREAS" clauses of the Sual Contract are particularly telling on this score: WHEREAS, in the Contract for the Purchase of Fly Ash of BCFTPP provides for the "Right of First Refusal" to PURCHASER to purchase fly ash from any new coal-fired plants which will be put up by NPC; WHEREAS, NPC owns the fly ash generated by the two (2) units of 1,200 MW Sual CoalFired Thermal Power Plant (SCFTPP) located at Barangay Pangascasan, Sual, Pangasinan, hereinafter referred to as the Plant;88 With respect to the Masinloc Plant, it will be recalled that the right to withdraw the fly ash from the same was the subject of the Third Supplementary Complaint, filed by respondent before the trial court to enforce the right of first refusal provision in the Batangas Contract, which complaint was, however, dismissed on the ground of forum shopping. Nevertheless, while the order of dismissal was on appeal in the Court of Appeals, the right to withdraw the fly ash of the Masinloc Plant was granted to respondent by the Provincial Government of Zambales, by virtue of which, respondent moved for the dismissal of its appeal, thereby resulting in the finality of the order of dismissal of the trial court.

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It can be easily deduced from the foregoing that the Masinloc Contract was likewise sourced from respondents supposed right of first refusal, thereby giving respondent preferential right to the fly ash of the Masinloc Plant and allowing it to withdraw the Plants fly ash without having to go through a public bidding. Had the Masinloc Contract not been drafted, it is clear that respondents complaint for the enforcement of the provision granting it the right of first refusal would have continued. The Masinloc Contract, then, is a virtual recognition of respondents alleged right of first refusal. The rationale behind the requirement of a public bidding, as a mode of awarding government contracts, is to ensure that the people get maximum benefits and quality services from the contracts. More significantly, strict compliance with the requirement of public bidding echoes the call for transparency in government transactions and accountability of public officers. Public biddings are intended to minimize occasions for corruption and temptations to abuse discretion on the part of government authorities in awarding contracts.89 Based on the afore-quoted "WHEREAS" clauses of the Sual Contract, the right to purchase the fly ash from the Sual Plant was granted to respondent, without having to undergo a public auction, on the basis of its right of first refusal embodied in the Batangas Contract. This negates respondents claim that the right of first refusal granted to it does not preclude a public bidding. The right of first refusal provision was used to subvert the rule that all government contracts should be awarded after competitive public bidding. This demonstrates the iniquity of allowing the provision to prevail over requirements of public policy. Thus, the evil precisely sought to be prevented by the requirement of public bidding came to pass in this case: the Sual and Masinloc Contracts were awarded to respondent without any public bidding having been conducted. Three: The right of first refusal is against the public policy that contracts must be awarded through public bidding. Respondent would have us sustain its right of first refusal on the ground that Article 1159 of the New Civil Code provides that "obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith." Hence, respondent argues, the Batangas Contract is binding upon NPC and respondent and their respective successors-in-interest.90 True, it is a fundamental rule that contracts, once perfected, bind both contracting parties and a contract freely entered into should be respected since a contract is the law between the parties.91 However, it must be understood that contracts are not the only source of law that govern the rights and obligations between parties. More specifically, no contractual stipulation may contradict law, morals, good customs, public order or public policy.92 The principle of party autonomy in contracts is not an absolute principle. The rule in Article 1306 of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient provided they are not contrary to law, morals, good customs, public order or public policy. Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable laws, especially provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently, the governing principle is that parties may not contract away applicable

provisions of law, especially peremptory provisions dealing with matters heavily impressed with public interest.93 In this jurisdiction, public bidding is the established procedure in the grant of government contracts. The award of public contracts through public bidding is a matter of public policy.94 Public policy has been defined as that principle under which freedom of contract or private dealing is restricted for the good of the community. 95 Under the principles relating to the doctrine of public policy, as applied to the law of contracts, courts of justice will not recognize or uphold a transaction when its object, operation, or tendency is calculated to be prejudicial to the public welfare, to sound morality or to civic honesty.96 Consistent with the principle that public auction in the conferment of government contract involves public policy, Congress enacted various laws governing the procedure in the conduct of public bidding and prescribing policies and guidelines therefor. With respect to the disposal of government assets and property, of particular application in this case are Circular Nos. 86-26497 and 89-29698 of the Commission on Audit, dated 16 October 1986 and 27 January 1989, respectively. Both circulars provide that the divestment or disposal of government property shall be undertaken primarily through public auction.99 Respondent puts forth the argument that fly ash is a waste product 100 and therefore cannot be considered as an asset of the government within the contemplation of the laws governing disposal of government property. The peculiarity of fly ash as property of the government is that, from its inception, it is already a residual product. Unlike the government properties subject of P.D. 1445 101 and the Government Auditing and Accounting Manual, fly ash is not property previously utilized by the government in its operations which has become unserviceable. Justifiably, the government did not foresee the possibility of any use for and, much less, of deriving profit from it. Hence, the lack of a specific law governing its disposal and its non-inclusion in existing laws on the divestment of government property. There is no doubt, however that fly ash is property and more importantly, asset of the government. Fly ash is produced by power plants owned by the government and both the government and respondent derive profit from it. Besides, the fact that respondent is fighting tooth and nail for the right to withdraw the same from NPCs power plants is indubitable proof of its value. Its sale is, therefore, subject to the rules on the disposal of government assets and property. Applicable laws form part of, and are read into, contracts without need for any express reference thereto; more so, to a government contract which is imbued with public interest. 102 In the case of Ongsiako v. Gamboa,103 this Court declared that an agreement is against public policy if it is injurious to the interests of the public, contravenes some established interest of society, violates some public statute, is against good morals, tends to interfere with the public welfare or safety, or, as it is sometimes put, if it is at war with the interests of society and is in conflict with the morals of the time.104 Thus, respondents right of first refusal cannot take precedence over the dictates of public policy.

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The right of first refusal of respondent being invalid, it follows that it has no binding effect. It does not create an obligation on the part of petitioner to acknowledge the same. Neither does it confer a preferential right upon respondent to the fly ash of NPCs power plants. How, then, does the invalidation of respondents right of first refusal affect the Sual and Masinloc Contracts which were executed pursuant to such right? As discussed above, the right of first refusal granted to respondent in the Batangas Contract paved the way for the award to respondent of the Sual Contract without any public bidding having been conducted therefor. In a long line of cases, this Court has pronounced that government contracts shall not be entered into or renewed without public bidding. 105 Thus, the Supreme Court has struck down contracts and agreements entered into in violation of this requirement. In the case of National Food Authority v. Court of Appeals, 106 the Court ruled against the legality of negotiated security contracts awarded by the National Food Authority (NFA) to several private security agencies in default of a public bidding. According to the Court, the NFAs manifest reluctance to hold a public bidding and award a contract to the winning bidder smacks of favoritism and partiality toward the security agencies to whom it awarded the negotiated contracts and cannot be countenanced.107 Likewise, in Manila International Airport Authority v. Mabunay, 108 the Supreme Court dismissed a petition for review seeking the annulment of a decision of the lower court declaring that under the laws and regulations, it is necessary for the Manila International Airport Authority to contract for security services through public bidding. The Court reiterated the basic principle that in the execution of all government contracts, public bidding is the accepted method for arriving at a fair and reasonable price. [I]t ensures that overpricing and favoritism, and other anomalous practices are eliminated or minimized.109 In Chavez v. Public Estates Authority,110 the Amended Joint Venture Agreement (JVA) entered into between the Public Estates Authority and the Amari Coastal Bay and Development Corporation (AMARI) was declared null and void ab initio because it, among others, sought to convey to AMARI, a private entity, reclaimed public lands without the benefit of a public bidding. The Court cited Section 79 of Presidential Decree (P.D.) No. 1445, otherwise known as the Government Auditing Code, which requires the government to sell valuable government property through public bidding. 111 The Court stated further that the Commission on Audit implements Section 79 of the Government Auditing Code through Circular No. 89-296112 dated 27 January 1989. This circular emphasizes that government assets must be disposed of only through public auction. 113 In denying respondents Second Motions for Reconsideration and sustaining the invalidity of the Amended JVA, this Court reiterated that the JVA is a negotiated contract which clearly contravenes Section 79 of P.D. 1445.114 Section 79 of P.D. 1445 and COA Circular No. 89-296, among others, were also relied upon by the Supreme Court in declaring as inexistent and void ab initio the Compromise Agreement between the Philippine National Construction Corporation and Radstock Securities Limited in the case of Strategic Alliance Development Corporation v. Radstock Securities Limited.115 Under the Compromise Agreement in that case, the PNCC shall dispose of substantial parcels of land, by way of dacion en pago, in favor of Radstock, a

private corporation incorporated in the British Virgin Islands.116 Citing the aforementioned case of Chavez v. Public Estates Authority, 117 the Court echoed the necessity of a public bidding for the disposal of government properties.118 Finally, in Gana v. Triple Crown Services Inc., 119 the Supreme Court declared as null and void the negotiated contract for janitorial and maintenance services between the Manila International Airport Authority (MIAA) and Goodline Staffers & Allied Services, Inc. According to the Supreme Court, the constitutional right of Olongapo Maintenance Services, Inc. (OMSI) and Triple Crown Services, Inc. (TCSI), the incumbent service contractors, to equal protection of the law was violated by MIAA and its general manager when no public bidding was called precisely because the latter were going to award the subject service contracts through negotiation. Worse, the Court continued, the acts of MIAA and Gana smack of arbitrariness and discrimination as they not only did not call for the required public bidding but also did not even accord OMSI and TCSI the opportunity to submit their proposals in a public bidding.120
1avvphi1

By the very language of the Sual Contract, the same was entered pursuant to respondents right of first refusal and in consideration of respondents conformity to withdraw its complaint against NPC. The pertinent provisions of the Sual Contract are herein below quoted: WHEREAS, NPC and PURCHASER [Pozzolanic] entered into a Contract for the Purchase of Fly Ash of Batangas Coal Fired Thermal Power Plant (BCFTPP) on October 20, 1987 and Contract for the Purchase of Fly Ash of Masinloc Coal Fired Thermal Power Plant (MCFTPP) dated February 10, 1999; WHEREAS, in the Contract for the Purchase of Fly Ash of BCFTPP provided for the Right of First Refusal to PURCHASER to purchase fly ash from any new coal-fired plants which will be put up by NPC; WHEREAS, NPC owns the fly ash generated by the two (2) units of 1,200 MW Sual CoalFired Thermal Power Plant (SCFTPP) located at Barangay Pangascasan, Sual, Pangasinan, hereinafter referred to as the Plant; XXX WHEREAS, PURCHASER filed a case for Specific Performance with Injunction under Civil Case No. Q-00-40731 before the Branch 90 of the Regional Trial Court of Quezon City and which Court issued a Preliminary Injunction against NPC on the public bidding and sale of Fly Ash of MCFTPP and Sual Coal Fired Thermal Power Plant (SCFTPP); WHEREAS, in a letter dated December 2, 2004, NPC and PURCHASER have agreed that in order to settle the issue, NPC fully recognizes and honors the Right of First Refusal of PURCHASER to the fly ash produced at SCFTPP in lieu of the fly ash produced at MCFTPP; WHEREAS, in consideration of NPCs recognition of the Right of First Refusal in said letter dated 2 December 2004 and the execution of this Purchase Agreement, PURCHASER 52

waives any and all claims to the fly ash produced at MCFTPP and arising out of its rights under the Contract for the Purchase of Fly Ash of the Masinloc Coal-Fired Thermal Power Plant dated February 10, 1999; XXX ARTICLE VI WAIVER NPC hereby fully recognizes and honors the Right of First Refusal of PURCHASER to the fly ash produced at SCFTPP in lieu of the fly ash produced at the Masinloc Plant. XXX It is agreed that within thirty (30) days from and after execution of this Agreement, NPC and PURCHASER will jointly, together with PSALM Corporation move for the dismissal, with prejudice of Civil Case No. Q-00-40731 at the Regional Trial Court, Branch 90 of Quezon City. The pertinent Motion for the dismissal of Civil Case No. Q-00-40731, to be filed in Branch 90 of the Regional Trial Court of Quezon City, or before any other Court who may then be hearing the above case, shall include therein a complete textual copy of this Purchase Agreement, duly signed by all the parties hereto, which shall become an integral part of the compromise, for the dismissal of the said case, to be approved by the Trial Court. X X X121 (Emphases supplied). Based on the foregoing, the Sual Contract is clearly a negotiated contract by virtue of which, NPC awards to respondent the right to withdraw the fly ash of the Sual Plant without public bidding in exchange for which, respondent (1) waives its rights to the fly ash of the Masinloc Plant and (2) consents to withdraw its case against NPC. As a result, the Sual Contract is invalid for failure to comply with the rules on public bidding. The foregoing principles on the necessity of a public bidding for all government contracts obviously apply to the Masinloc Contract as well, the same being a public contract since one of the parties thereto is a government entity. While its terms do not expressly provide that the same was executed pursuant to the right of first refusal granted to respondent under the Batangas Contract, the circumstances under which it was drafted, as narrated above, clearly indicate that the Masinloc Contract is a recognition of the challenged right of first refusal. The case filed by respondent for the recognition and enforcement of its right of first refusal was settled only after the execution of the Masinloc Contract, pursuant to which, respondent was awarded the exclusive right to withdraw the fly ash of the Masinloc Power Plant without the benefit of a public bidding.
lawphi1

resorted to only in case of failure of public auction. 123 For failure to abide by the requirement of a public bidding in the disposal of government assets, this Court is left with no option but to likewise declare the Sual and Masinloc Contracts null and void. In conclusion, this Court stresses that although a right of first refusal is a contractual prerogative recognized by both law and jurisprudence, the grant of such right in this case is invalid for being contrary to public policy. WHEREFORE, we GRANT the petition for review on certiorari. The Decision dated 30 April 2008 and Order dated 27 June 2008 of the Regional Trial Court of Quezon City, Branch 96 in Civil Case No. Q-00-40731 are hereby REVERSED AND SET ASIDE. Further, the Batangas, Sual and Masinloc Contracts are hereby declared NULL AND VOID for being contrary to law and public policy. Petitioner is hereby ordered to conduct a bidding of the right to purchase the fly ash produced by the Batangas, Masinloc and Sual Power Plants within thirty (30) days from the finality of this Decision.

SO ORDERED.

As adverted to above, the disposal of NPC power plants fly ash is governed by COA Circular Nos. 86-264 and 89-296. 122 These circulars direct that public auction shall be the primary mode of disposal of assets of the government and sale through negotiation shall be 53

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 165025 August 31, 2011

FEDMAN DEVELOPMENT CORPORATION, Petitioner, vs. FEDERICO AGCAOILI, Respondent. DECISION BERSAMIN, J.: The non-payment of the prescribed filing fees at the time of the filing of the complaint or other initiatory pleading fails to vest jurisdiction over the case in the trial court. Yet, where the plaintiff has paid the amount of filing fees assessed by the clerk of court, and the amount paid turns out to be deficient, the trial court still acquires jurisdiction over the case, subject to the payment by the plaintiff of the deficiency assessment. Fedman Development Corporation (FDC) appeals the decision promulgated on August 20, 2004, 1 whereby the Court of Appeals (CA) affirmed the judgment rendered on August 28, 1998 by the Regional Trial Court (RTC), Branch 150, Makati City, in favor of the respondent.2 Antecedents FDC was the owner and developer of a condominium project known as Fedman Suites Building (FSB) located on Salcedo Street, Legazpi Village, Makati City. On June 18, 1975, Interchem Laboratories Incorporated (Interchem) purchased FSBs Unit 411 under a contract to sell. On March 31, 1977, FDC executed a Master Deed with Declaration of Restrictions,3 and formed the Fedman Suite Condominium Corporation (FSCC) to manage FSB and hold title over its common areas.4

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On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in Unit 411 to respondent Federico Agcaoili (Agcaoili), a practicing attorney who was then also a member of the Provincial Board of Quezon Province. 5 As consideration for the transfer, Agcaoili agreed: (a) to pay Interchem 150,000.00 upon signing of the deed of transfer; (b) to update the account by paying to FDC the amount of 15,473.17 through a 90 day-postdated check; and (c) to deliver to FDC the balance of 137,286.83 in 135 equal monthly installments of 1,857.24 effective October 1980, inclusive of 12% interest per annum on the diminishing balance. The obligations Agcaoili assumed totaled 302,760.00.6 In December 1983, the centralized air-conditioning unit of FSBs fourth floor broke down.7 On January 3, 1984, Agcaoili, being thereby adversely affected, wrote to Eduardo X. Genato (Genato), vice-president and board member of FSCC, demanding the repair of the air-conditioning unit.8 Not getting any immediate response, Agcaoili sent follow-up letters to FSCC reiterating the demand, but the letters went unheeded. He then informed FDC and FSCC that he was suspending the payment of his condominium dues and monthly amortizations.9 On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and cut off the electric supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC in the RTC, Makati City, Branch 144 for injunction and damages. 10 The parties later executed a compromise agreement that the RTC approved through its decision of August 26, 1985. As stipulated in the compromise agreement, Agcaoili paid FDC the sum of 39,002.04 as amortizations for the period from November 1983 to July 1985; and also paid FSCC an amount of 17,858.37 for accrued condominium dues, realty taxes, electric bills, and surcharges as of March 1985. As a result, FDC reinstated the contract to sell and allowed Agcaoili to temporarily install two window-type air-conditioners in Unit 411.11 On April 22, 1986, FDC again disconnected the electric supply of Unit 411. 12 Agcaoili thus moved for the execution of the RTC decision dated August 26, 1985.13 On July 17, 1986, the RTC issued an order temporarily allowing Agcaoili to obtain his electric supply from the other units in the fourth floor of FSB until the main meter was restored.14 On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and FSCC in the RTC, which was raffled to Branch 150 in Makati City. He alleged that the disconnection of the electric supply of Unit 411 on April 22, 1986 had unjustly deprived him of the use and enjoyment of the unit; that the disconnection had seriously affected his law practice and had caused him sufferings, inconvenience and embarrassment; that FDC and FSCC violated the compromise agreement; that he was entitled to actual damages amounting to 21,626.60, as well as to moral and exemplary damages, and attorneys fees as might be proven during the trial; that the payment of interest sought by FDC and FSCC under the contract to sell was illegal; and that FDC and FSCC were one and the same corporation. He also prayed that FDC and FSCC be directed to return the excessive amounts collected for real estate taxes.15 In its answer, FDC contended that it had a personality separate from that of FSCC; that it had no obligation or liability in favor of Agcaoili; that FSCC, being the manager of FSB and the title-holder over its common areas, was in charge of maintaining all central and appurtenant equipment and installations for utility services (like air-conditioning unit, elevator, light and others); that Agcaoili failed to comply with the terms of the contract to sell;

that despite demands, Agcaoili did not pay the amortizations due from November 1983 to March 1985 and the surcharges, the total amount of which was 376,539.09; that due to the non-payment, FDC cancelled the contract to sell and forfeited the amount of 219,063.97 paid by Agcaoili, applying the amount to the payment of liquidated damages, agents commission, and interest; that it demanded that Agcaoili vacate Unit 411, but its demand was not heeded; that Agcaoili did not pay his monthly amortizations of 1,883.84 from October 1985 to May 1986, resulting in FSCC being unable to pay the electric bills on time to the Manila Electric Company resulting in the disconnection of the electric supply of FSB; that it allowed Agcaoili to obtain electric supply from other units because Agcaoili promised to settle his accounts but he reneged on his promise; that Agcaoilis total obligation was 55,106.40; that Agcaoilis complaint for damages was baseless and was intended to cover up his delinquencies; that the interest increase from 12% to 24% per annum was authorized under the contract to sell in view of the adverse economic conditions then prevailing in the country; and that the complaint for damages was barred by the principle of res judicata because the issues raised therein were covered by the RTC decision dated August 26, 1985. As compulsory counterclaim, FDC prayed for an award of moral and exemplary damages each amounting to 1,000,000.00, attorneys fees amounting to 100,000.00 and costs of suit.16 On its part, FSCC filed an answer, admitting that the electric supply of Unit 411 was disconnected for the second time on April 22, 1986, but averring that the disconnection was justified because of Agcaoilis failure to pay the monthly amortizations and condominium dues despite repeated demands. It averred that it did not repair the air-conditioning unit because of dwindling collections caused by the failure of some unit holders to pay their obligations on time; that the unit holders were notified of the electricity disconnection; and that the electric supply of Unit 411 could not be restored until Agcaoili paid his condominium dues totaling 14,701.16 as of April 1987. 17 By way of counterclaim, FSCC sought moral damages and attorneys fees of 100,000.00 and 50,000.00, respectively, and cost of suit.18 On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that his complaint for damages was not barred by res judicata; that he was justified in suspending the payment of his monthly amortizations; that FDCs cancellation of the contract to sell was improper; that FDC and FSCC had no separate personalities; and that Agcaoili was entitled to damages. The RTC disposed thuswise: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and as against both defendants, declaring the increased rates sought by defendants to be illegal, and ordering defendant FDC/FSCC to reinstate the contract to sell, as well as to provide/restore the airconditioning services/electric supply to plaintiffs unit. Both defendants are likewise ordered to pay plaintiff: a. The amount of 21,626.60 as actual damages; b. 500,000.00 as moral damages; 55

c. 50,000.00 as exemplary damages; and d. 50,000.00 as and for attorneys fees. and to return to plaintiff the excess amount collected from him for real estate taxes. SO ORDERED.19 FDC appealed, but the CA affirmed the RTC.20 Hence, FDC comes to us on further appeal.21 Issues FDC claims that there was a failure to pay the correct amount of docket fee herein because the complaint did not specify the amounts of moral damages, exemplary damages, and attorneys fees; that the payment of the prescribed docket fee by Agcaoili was necessary for the RTC to acquire jurisdiction over the case; and that, consequently, the RTC did not acquire jurisdiction over this case. FDC also claims that the proceedings in the RTC were void because the jurisdiction over the subject matter of the action pertained to the Housing and Land Use Regulatory Board (HLURB); and that both the RTC and the CA erred in ruling: (a) that Agcaoili had the right to suspend payment of his monthly amortizations; (b) that FDC had no right to cancel the contract to sell; and (c) that FDC and FSCC were one and same corporation, and as such were solidarily liable to Agcaoili for damages.22 Ruling The petition has no merit. I The filing of the complaint or other initiatory pleading and the payment of the prescribed docket fee are the acts that vest a trial court with jurisdiction over the claim. 23 In an action where the reliefs sought are purely for sums of money and damages, the docket fees are assessed on the basis of the aggregate amount being claimed.24Ideally, therefore, the complaint or similar pleading must specify the sums of money to be recovered and the damages being sought in order that the clerk of court may be put in a position to compute the correct amount of docket fees. If the amount of docket fees paid is insufficient in relation to the amounts being sought, the clerk of court or his duly authorized deputy has the responsibility of making a deficiency assessment, and the plaintiff will be required to pay the deficiency. 25 The non-specification of the amounts of damages does not immediately divest the trial court of its jurisdiction over the case, provided there is no bad faith or intent to defraud the Government on the part of the plaintiff.26

The prevailing rule is that if the correct amount of docket fees are not paid at the time of filing, the trial court still acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring prescription. 27 The "prescriptive period" that bars the payment of the docket fees refers to the period in which a specific action must be filed, so that in every case the docket fees must be paid before the lapse of the prescriptive period, as provided in the applicable laws, particularly Chapter 3, Title V, Book III, of the Civil Code, the principal law on prescription of actions.28 In Rivera v. Del Rosario,29 the Court, resolving the issue of the failure to pay the correct amount of docket fees due to the inadequate assessment by the clerk of court, ruled that jurisdiction over the complaint was still validly acquired upon the full payment of the docket fees assessed by the Clerk of Court. Relying on Sun Insurance Office, Ltd., (SIOL) v. Asuncion,30 the Court opined that the filing of the complaint or appropriate initiatory pleading and the payment of the prescribed docket fees vested a trial court with jurisdiction over the claim, and although the docket fees paid were insufficient in relation to the amount of the claim, the clerk of court or his duly authorized deputy retained the responsibility of making a deficiency assessment, and the party filing the action could be required to pay the deficiency, without jurisdiction being automatically lost. Even where the clerk of court fails to make a deficiency assessment, and the deficiency is not paid as a result, the trial court nonetheless continues to have jurisdiction over the complaint, unless the party liable is guilty of a fraud in that regard, considering that the deficiency will be collected as a fee in lien within the contemplation of Section 2, 31 Rule 141 (as revised by A.M. No. 00-2-01-SC). 32 The reason is that to penalize the party for the omission of the clerk of court is not fair if the party has acted in good faith. Herein, the docket fees paid by Agcaoili were insufficient considering that the complaint did not specify the amounts of moral damages, exemplary damages and attorneys fees. Nonetheless, it is not disputed that Agcaoili paid the assessed docket fees. Such payment negated bad faith or intent to defraud the Government. 33Nonetheless, Agcaoili must remit any docket fee deficiency to the RTCs clerk of court. II FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction over the case. As already stated, Agcaoili filed a complaint against FDC in the RTC on February 28, 1985 after FDC disconnected the electric supply of Unit 411. Agcaoili and FDC executed a compromise agreement on August 16, 1985. The RTC approved the compromise agreement through its decision of August 26, 1985. In all that time, FDC never challenged the RTCs jurisdiction nor invoked the HLURBs authority. On the contrary, FDC apparently recognized the RTCs jurisdiction by its voluntary submission of the compromise agreement to the RTC for approval. Also, FDC did not assert the HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6, 1987). Instead, it even averred in that answer that the decision of August 26, 1985 approving the compromise agreement already barred Agcaoili from filing the second complaint under the doctrine of res judicata. FDC also thereby sought affirmative relief from the RTC through its counterclaim.

56

FDC invoked HLURBs authority only on September 10, 1990, 34 or more than five years from the time the prior case was commenced on February 28, 1985, and after the RTC granted Agcaoilis motion to enjoin FDC from cancelling the contract to sell.35 The principle of estoppel, which is based on equity and public policy, 36 dictates that FDCs active participation in both RTC proceedings and its seeking therein affirmative reliefs now precluded it from denying the RTCs jurisdiction. Its acknowledgment of the RTCs jurisdiction and its subsequent denial of such jurisdiction only after an unfavorable judgment were inappropriate and intolerable. The Court abhors the practice of any litigant of submitting a case for decision in the trial court, and then accepting the judgment only if favorable, but attacking the judgment for lack of jurisdiction if it is not.37 III In upholding Agcaoilis right to suspend the payment of his monthly amortizations due to the increased interest rates imposed by FDC, and because he found FDCs cancellation of the contract to sell as improper, the CA found and ruled as follows: It is the contention of the appellee that he has the right to suspend payments since the increase in interest rate imposed by defendant-appellant FDC is not valid and therefore cannot be given legal effect. Although Section II, paragraph d of the Contract to Sell entered into by the parties states that, "should there be an increase in bank interest rate for loans and/or other financial accommodations, the rate of interest provided for in this contract shall be automatically amended to equal the said increased bank interest rate, the date of said amendment to coincide with the date of said increase in interest rate," the said increase still needs to [be] accompanied by valid proofs and not one of the parties must unilaterally alter what was originally agreed upon. However, FDC failed to substantiate the alleged increase with sufficient proof, thus we quote with approval the findings of the lower court, to wit: "In the instant case, defendant FDC failed to show by evidence that it incurred loans and /or other financial accommodations to pay interest for its loans in developing the property. Thus, the increased interest rates said defendant is imposing on plaintiff is not justified, and to allow the same is tantamount to unilaterally altering the terms of the contract which the law proscribes. Article 1308 of the Civil Code provides: Art. 1308 The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them." For this reason, the court sees no valid reason for defendant FDC to cancel the contract to sell on ground of default or non-payment of monthly amortizations." (RTC rollo, pp. 79-80) It was also grave error on the part of the FDC to cancel the contract to sell for non-payment of the monthly amortizations without taking into consideration Republic Act 6552, otherwise known as the Maceda Law. The policy of law, as embodied in its title, is "to provide protection to buyers of real estate on installment payments." As clearly specified in Section 3, the declared public policy espoused by Republic Act No. 6552 is "to protect buyers of real estate on installment payments against onerous and oppressive conditions." Thus, in order for FDC to have validly cancelled the existing contract to sell, it must have first complied with

Section 3 (b) of RA 6552. FDC should have refund the appellee the cash surrender value of the payments on the property equivalent to fifty percent of the total payments made. At this point, we, find no error on the part of the lower court when it ruled that: "There is nothing in the record to show that the aforementioned requisites for a valid cancellation of a contract where complied with by defendant FDC. Hence, the contract to sell which defendant FDC cancelled as per its letter dated August 17, 1987 remains valid and subsisting. Defendant FDC cannot by its own forfeit the payments already made by the plaintiff which as of the same date amounts to 263,637.73."(RTC rollo, p. 81)38 We sustain the aforequoted findings and ruling of the CA, which were supported by the records and relevant laws, and were consistent with the findings and ruling of the RTC. Factual findings and rulings of the CA are binding and conclusive upon this Court if they are supported by the records and coincided with those made by the trial court.39 FDCs claim that it was distinct in personality from FSCC is unworthy of consideration due to its being a question of fact that cannot be reviewed under Rule 45.40 Among the obligations of FDC and FSCC to the unit owners or purchasers of FSBs units was the duty to provide a centralized air-conditioning unit, lighting, electricity, and water; and to maintain adequate fire exit, elevators, and cleanliness in each floor of the common areas of FSB.41 But FDC and FSCC failed to repair the centralized air-conditioning unit of the fourth floor of FSB despite repeated demands from Agcaoili. 42 To alleviate the physical discomfort and adverse effects on his work as a practicing attorney brought about by the breakdown of the air-conditioning unit, he installed two window-type air-conditioners at his own expense.43 Also, FDC and FSCC failed to provide water supply to the comfort room and to clean the corridors.44 The fire exit and elevator were also defective.45 These defects, among other circumstances, rightly compelled Agcaoili to suspend the payment of his monthly amortizations and condominium dues. Instead of addressing his valid complaints, FDC disconnected the electric supply of his Unit 411 and unilaterally increased the interest rate without justification.46 Clearly, FDC was liable for damages. Article 1171 of the Civil Code provides that those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof are liable for damages. WHEREFORE, we DENY the petition for review; AFFIRM the decision of the Court of Appeals; and DIRECT the Clerk of Court of the Regional Trial Court, Makati City, Branch 150, or his duly authorized deputy to assess and collect the additional docket fees from the respondent as fees in lien in accordance with Section 2, Rule 141 of the Rules of Court. SO ORDERED.

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SECOND DIVISION JESSE U. LUCAS, Petitioner, Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: JESUS S. LUCAS, Respondent. June 6, 2011 G.R. No. 190710

- versus -

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

DECISION NACHURA, J.:

Is a prima facie showing necessary before a court can issue a DNA testing order? In this petition for review on certiorari, we address this question to guide the Bench and the Bar in dealing with a relatively new evidentiary tool. Assailed in this petition are the Court of Appeals (CA) Decision[1] dated September 25, 2009 and Resolution dated December 17, 2009.

The antecedents of the case are, as follows:

On July 26, 2007, petitioner, Jesse U. Lucas, filed a Petition to Establish Illegitimate Filiation (with Motion for the Submission of Parties to DNA Testing) [2] before the Regional Trial Court (RTC), Branch 72, Valenzuela City. Petitioner narrated that, sometime in 1967, his mother, Elsie Uy (Elsie), migrated to Manila from Davao and stayed with a certain Ate 58

Belen (Belen) who worked in a prominent nightspot in Manila. Elsie would oftentimes accompany Belen to work. On one occasion, Elsie got acquainted with respondent, Jesus S. Lucas, at Belens workplace, and an intimate relationship developed between the two. Elsie eventually got pregnant and, on March 11, 1969, she gave birth to petitioner, Jesse U. Lucas. The name of petitioners father was not stated in petitioners certificate of live birth. However, Elsie later on told petitioner that his father is respondent. On August 1, 1969, petitioner was baptized at San Isidro Parish, Taft Avenue, Pasay City. Respondent allegedly extended financial support to Elsie and petitioner for a period of about two years. When the relationship of Elsie and respondent ended, Elsie refused to accept respondents offer of support and decided to raise petitioner on her own. While petitioner was growing up, Elsie made several attempts to introduce petitioner to respondent, but all attempts were in vain.

On September 4, 2007, unaware of the issuance of the September 3, 2007 Order, respondent filed a Special Appearance and Comment. He manifested inter alia that: (1) he did not receive the summons and a copy of the petition; (2) the petition was adversarial in nature and therefore summons should be served on him as respondent; (3) should the court agree that summons was required, he was waiving service of summons and making a voluntary appearance; and (4) notice by publication of the petition and the hearing was improper because of the confidentiality of the subject matter.[4]

On September 14, 2007, respondent also filed a Manifestation and Comment on Petitioners Very Urgent Motion to Try and Hear the Case. Respondent reiterated that the petition for recognition is adversarial in nature; hence, he should be served with summons. After learning of the September 3, 2007 Order, respondent filed a motion for

Attached to the petition were the following: (a) petitioners certificate of live birth; (b) petitioners baptismal certificate; (c) petitioners college diploma, showing that he graduated from Saint Louis University in Baguio City with a degree in Psychology; (d) his Certificate of Graduation from the same school; (e) Certificate of Recognition from the University of the Philippines, College of Music; and (f) clippings of several articles from different newspapers about petitioner, as a musical prodigy. Respondent was not served with a copy of the petition. Nonetheless, respondent learned of the petition to establish filiation. His counsel therefore went to the trial court on August 29, 2007 and obtained a copy of the petition.

reconsideration.[5] Respondent averred that the petition was not in due form and substance because petitioner could not have personally known the matters that were alleged therein. He argued that DNA testing cannot be had on the basis of a mere allegation pointing to respondent as petitioners father. Moreover, jurisprudence is still unsettled on the acceptability of DNA evidence.

On July 30, 2008, the RTC, acting on respondents motion for reconsideration, issued an Order[6] dismissing the case. The court remarked that, based on the case of Herrera v. Alba,[7] there are four significant procedural aspects of a traditional paternity action which the parties have to face: a prima facie case, affirmative defenses, presumption of legitimacy,

Petitioner filed with the RTC a Very Urgent Motion to Try and Hear the Case. Hence, on September 3, 2007, the RTC, finding the petition to be sufficient in form and substance, issued the Order setting the case for hearing and urging anyone who has any objection to the petition to file his opposition. The court also directed that the Order be published once a week for three consecutive weeks in any newspaper of general circulation in the Philippines, and that the Solicitor General be furnished with copies of the Order and the petition in order that he may appear and represent the State in the case.
[3]

and physical resemblance between the putative father and the child. The court opined that petitioner must first establish these four procedural aspects before he can present evidence of paternity and filiation, which may include incriminating acts or scientific evidence like blood group test and DNA test results. The court observed that the petition did not show that these procedural aspects were present. Petitioner failed to establish a prima facie case considering that (a) his mother did not personally declare that she had sexual relations with respondent, and petitioners statement as to what his mother told him about his father was clearly hearsay; (b) the certificate of live birth was not signed by respondent; and (c) although petitioner used the surname of respondent, there was no allegation that he was treated as the child of respondent by the latter or his family. The court opined that, having 59

failed to establish a prima facie case, respondent had no obligation to present any affirmative defenses. The dispositive portion of the said Order therefore reads: WHEREFORE, for failure of the petitioner to establish compliance with the four procedural aspects of a traditional paternity action in his petition, his motion for the submission of parties to DNA testing to establish paternity and filiation is hereby DENIED. This case is DISMISSED without prejudice. SO ORDERED.[8] Respondent filed a Motion for Reconsideration of Order dated October 20, 2008 and for Dismissal of Petition,[12] reiterating that (a) the petition was not in due form and substance as no defendant was named in the title, and all the basic allegations were hearsay; and (b) there was no prima facie case, which made the petition susceptible to dismissal.

The RTC denied the motion in the Order dated January 19, 2009, and Petitioner seasonably filed a motion for reconsideration to the Order dated July 30, 2008, which the RTC resolved in his favor. Thus, on October 20, 2008, it issued the Order[9] setting aside the courts previous order, thus: WHEREFORE, in view of the foregoing, the Order dated July 30, 2008 is hereby reconsidered and set aside. Let the Petition (with Motion for the Submission of Parties to DNA Testing) be set for hearing on January 22, 2009 at 8:30 in the morning. xxxx SO ORDERED.[10] Aggrieved, respondent filed a petition for certiorari with the CA, questioning the Orders dated October 20, 2008 and January 19, 2009. rescheduled the hearing.[13]

On September 25, 2009, the CA decided the petition for certiorari in favor of respondent, thus: WHEREFORE, the instant petition for certiorari is hereby GRANTED for being meritorious. The assailed Orders dated October 20, 2008 and January 19, 2009 both issued by the Regional Trial Court, Branch 172 of Valenzuela City in SP. Proceeding Case No. 30-V-07 are REVERSED and SET ASIDE. Accordingly, the case docketed as SP. Proceeding Case No. 30-V-07 is DISMISSED.[14]

This time, the RTC held that the ruling on the grounds relied upon by petitioner for filing the petition is premature considering that a full-blown trial has not yet taken place. The court stressed that the petition was sufficient in form and substance. It was verified, it included a certification against forum shopping, and it contained a plain, concise, and direct statement of the ultimate facts on which petitioner relies on for his claim, in accordance with Section 1, Rule 8 of the Rules of Court. The court remarked that the allegation that the statements in the petition were not of petitioners personal knowledge is a matter of evidence. The court also dismissed respondents arguments that there is no basis for the taking of DNA test, and that jurisprudence is still unsettled on the acceptability of DNA evidence. It noted that the new Rule on DNA Evidence [11] allows the conduct of DNA testing, whether at the courts instance or upon application of any person who has legal interest in the matter in litigation.

The CA held that the RTC did not acquire jurisdiction over the person of respondent, as no summons had been served on him. Respondents special appearance could not be considered as voluntary appearance because it was filed only for the purpose of questioning the jurisdiction of the court over respondent. Although respondent likewise questioned the courts jurisdiction over the subject matter of the petition, the same is not equivalent to a waiver of his right to object to the jurisdiction of the court over his person.

The CA remarked that petitioner filed the petition to establish illegitimate filiation, specifically seeking a DNA testing order to abbreviate the proceedings. It noted that petitioner failed to show that the four significant procedural aspects of a traditional paternity

60

action had been met. The CA further held that a DNA testing should not be allowed when the petitioner has failed to establish a prima facie case, thus: While the tenor [of Section 4, Rule on DNA Evidence] appears to be absolute, the rule could not really have been intended to trample on the substantive rights of the parties. It could have not meant to be an instrument to promote disorder, harassment, or extortion. It could have not been intended to legalize unwarranted expedition to fish for evidence. Such will be the situation in this particular case if a court may at any time order the taking of a DNA test. If the DNA test in compulsory recognition cases is immediately available to the petitioner/complainant without requiring first the presentation of corroborative proof, then a dire and absurd rule would result. Such will encourage and promote harassment and extortion. xxxx At the risk of being repetitious, the Court would like to stress that it sees the danger of allowing an absolute DNA testing to a compulsory recognition test even if the plaintiff/petitioner failed to establish prima facie proof. x x x If at anytime, motu proprio and without pre-conditions, the court can indeed order the taking of DNA test in compulsory recognition cases, then the prominent and wellto-do members of our society will be easy prey for opportunists and extortionists. For no cause at all, or even for [sic] casual sexual indiscretions in their younger years could be used as a means to harass them. Unscrupulous women, unsure of the paternity of their children may just be taking the chances-just in case-by pointing to a sexual partner in a long past one-time encounter. Indeed an absolute and unconditional taking of DNA test for compulsory recognition case opens wide the opportunities for extortionist to prey on victims who have no stomach for scandal.[15]

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FAILED TO REALIZE THAT THE RESPONDENT HAD ALREADY SUBMITTED VOLUNTARILY TO THE JURISDICTION OF THE COURT A QUO. I.C WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY RULED THAT THE TITLE OF A PLEADING, RATHER THAN ITS BODY, IS CONTROLLING. II. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ORDERED THE DISMISSAL OF THE PETITION BY REASON OF THE MOTION (FILED BY THE PETITIONER BEFORE THE COURT A QUO) FOR THE CONDUCT OF DNA TESTING. II.A WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY RULED THAT DNA TESTING CAN ONLY BE ORDERED AFTER THE PETITIONER ESTABLISHES PRIMA FACIE PROOF OF FILIATION. III. WHETHER OR NOT THE COURT OF APPEALS ERRED WITH ITS MISPLACED RELIANCE ON THE CASE OF HERRERA VS. ALBA, ESPECIALLY AS REGARDS THE FOUR SIGNIFICANT PROCEDURAL ASPECTS OF A TRADITIONAL PATERNITY ACTION.[17]

Petitioner moved for reconsideration. On December 17, 2009, the CA denied the motion for lack of merit.[16] In this petition for review on certiorari, petitioner raises the following issues:
I.

Petitioner contends that respondent never raised as issue in his petition for certiorari the courts lack of jurisdiction over his person. Hence, the CA had no legal basis to discuss the same, because issues not raised are deemed waived or abandoned. At any rate, respondent had already voluntarily submitted to the jurisdiction of the trial court by his filing of several motions asking for affirmative relief, such as the (a) Motion for Reconsideration of the Order dated September 3, 2007; (b) Ex Parte Motion to Resolve Motion for Reconsideration of the Order dated November 6, 2007; and (c) Motion for Reconsideration of the Order dated October 20, 2008 and for Dismissal of Petition. Petitioner points out that respondent even expressly admitted that he has waived his right to summons in his Manifestation and Comment on Petitioners Very Urgent Motion to Try and Hear the Case. Hence, the issue is already moot and academic. 61

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RESOLVED THE ISSUE OF LACK OF JURISDICTION OVER THE PERSON OF HEREIN RESPONDENT ALBEIT THE SAME WAS NEVER RAISED IN THE PETITION FOR CERTIORARI. I.A WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT JURISDICTION WAS NOT ACQUIRED OVER THE PERSON OF THE RESPONDENT. I.B

the merits. As such, the general rule is that the denial of a motion to dismiss cannot be Petitioner argues that the case was adversarial in nature. Although the caption of the petition does not state respondents name, the body of the petition clearly indicates his name and his known address. He maintains that the body of the petition is controlling and not the caption. questioned in a special civil action for certiorari, which is a remedy designed to correct errors of jurisdiction and not errors of judgment. Neither can a denial of a motion to dismiss be the subject of an appeal unless and until a final judgment or order is rendered. In a number of cases, the court has granted the extraordinary remedy of certiorari on the denial of the motion to dismiss but only when it has been tainted with grave abuse of discretion Finally, petitioner asserts that the motion for DNA testing should not be a reason for the dismissal of the petition since it is not a legal ground for the dismissal of cases. If the CA entertained any doubt as to the propriety of DNA testing, it should have simply denied the motion.[18] Petitioner points out that Section 4 of the Rule on DNA Evidence does not require that there must be a prior proof of filiation before DNA testing can be ordered. He adds that the CA erroneously relied on the four significant procedural aspects of a paternity case, as enunciated in Herrera v. Alba.
[19]

amounting to lack or excess of jurisdiction. [21] In the present case, we discern no grave abuse of discretion on the part of the trial court in denying the motion to dismiss.

The grounds for dismissal relied upon by respondent were (a) the courts lack of jurisdiction over his person due to the absence of summons, and (b) defect in the form and substance of the petition to establish illegitimate filiation, which is equivalent to failure to state a cause of action.

Petitioner avers that these procedural aspects are not

applicable at this point of the proceedings because they are matters of evidence that should be taken up during the trial.[20] We need not belabor the issues on whether lack of jurisdiction was raised before the CA, whether the court acquired jurisdiction over the person of respondent, or whether In his Comment, respondent supports the CAs ruling on most issues raised in the petition for certiorari and merely reiterates his previous arguments. However, on the issue of lack of jurisdiction, respondent counters that, contrary to petitioners assertion, he raised the issue before the CA in relation to his claim that the petition was not in due form and substance. Respondent denies that he waived his right to the service of summons. He insists that the alleged waiver and voluntary appearance was conditional upon a finding by the court that summons is indeed required. He avers that the assertion of affirmative defenses, aside from lack of jurisdiction over the person of the defendant, cannot be considered as waiver of the defense of lack of jurisdiction over such person. The petition is meritorious. An action in personam is lodged against a person based on personal liability; an action in rem is directed against the thing itself instead of the person; while an action quasi in rem names a person as defendant, but its object is to subject that person's interest in a property to a corresponding lien or obligation. A petition directed against the "thing" itself or the res, which concerns the status of a person, like a petition for adoption, annulment of marriage, or correction of entries in the birth certificate, is an action in rem.[22] Primarily, we emphasize that the assailed Orders of the trial court were orders denying respondents motion to dismiss the petition for illegitimate filiation. An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a case, as it leaves something to be done by the court before the case is finally decided on In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction 62 respondent waived his right to the service of summons. We find that the primordial issue here is actually whether it was necessary, in the first place, to serve summons on respondent for the court to acquire jurisdiction over the case. In other words, was the service of summons jurisdictional? The answer to this question depends on the nature of petitioners action, that is, whether it is an action in personam, in rem, or quasi in rem.

on the court, provided that the latter has jurisdiction over the res. Jurisdiction over the res is acquired either (a) by the seizure of the property under legal process, whereby it is brought into actual custody of the law, or (b) as a result of the institution of legal proceedings, in which the power of the court is recognized and made effective. [23]

proceeding was likewise satisfied by the publication of the petition and the giving of notice to the Solicitor General, as directed by the trial court.

The petition to establish filiation is sufficient in substance. It satisfies Section 1, Rule 8 of the Rules of Court, which requires the complaint to contain a plain, concise, and

The herein petition to establish illegitimate filiation is an action in rem. By the simple filing of the petition to establish illegitimate filiation before the RTC, which undoubtedly had jurisdiction over the subject matter of the petition, the latter thereby acquired jurisdiction over the case. An in rem proceeding is validated essentially through publication.Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be minded to make an objection of any sort to the right sought to be established.[24] Through publication, all interested parties are deemed notified of the petition.

direct statement of the ultimate facts upon which the plaintiff bases his claim. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action inadequate.[28] A complaint states a cause of action when it contains the following elements: (1) the legal right of plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right.[29]

The petition sufficiently states the ultimate facts relied upon by petitioner to establish his filiation to respondent. Respondent, however, contends that the allegations in the petition were hearsay as they were not of petitioners personal knowledge. Such matter

If at all, service of summons or notice is made to the defendant, it is not for the purpose of vesting the court with jurisdiction, but merely for satisfying the due process requirements.
[25]

is clearly a matter of evidence that cannot be determined at this point but only during the trial when petitioner presents his evidence.

This is but proper in order to afford the person concerned the opportunity to In a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for determination is the sufficiency of the allegations made in the complaint to constitute a cause of action and not whether those allegations of fact are true, for said motion must hypothetically admit the truth of the facts alleged in the complaint. [30] The inquiry is confined to the four corners of the complaint, and no other. [31] The test of the sufficiency of the facts alleged in the complaint is whether or not, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the

protect his interest if he so chooses.[26] Hence, failure to serve summons will not deprive the court of its jurisdiction to try and decide the case. In such a case, the lack of summons may be excused where it is determined that the adverse party had, in fact, the opportunity to file his opposition, as in this case. We find that the due process requirement with respect to respondent has been satisfied, considering that he has participated in the proceedings in this case and he has the opportunity to file his opposition to the petition to establish filiation.

To address respondents contention that the petition should have been adversarial in form, we further hold that the herein petition to establish filiation was sufficient in form. It was indeed adversarial in nature despite its caption which lacked the name of a defendant, the failure to implead respondent as defendant, and the non-service of summons upon respondent. A proceeding is adversarial where the party seeking relief has given legal warning to the other party and afforded the latter an opportunity to contest it.
[27]

complaint.[32]

If the allegations of the complaint are sufficient in form and substance but their veracity and correctness are assailed, it is incumbent upon the court to deny the motion to dismiss and require the defendant to answer and go to trial to prove his defense. The veracity of the assertions of the parties can be ascertained at the trial of the case on the merits.[33]

In this

petitionclassified as an action in remthe notice requirement for an adversarial

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The statement in Herrera v. Alba[34] that there are four significant procedural aspects in a traditional paternity case which parties have to face has been widely misunderstood and misapplied in this case. A party is confronted by these so-called procedural aspects during trial, when the parties have presented their respective evidence. They are matters of evidence that cannot be determined at this initial stage of the proceedings, when only the petition to establish filiation has been filed. The CAs observation that petitioner failed to establish a prima facie casethe first procedural aspect in a paternity caseis therefore misplaced. A prima facie case is built by a partys evidence and not by mere allegations in the initiatory pleading. SEC. 4. Application for DNA Testing Order. The appropriate court may, at any time, either motu proprio or on application of any person who has a legal interest in the matter in litigation, order a DNA testing. Such order shall issue after due hearing and notice to the parties upon a showing of the following: Clearly then, it was also not the opportune time to discuss the lack of a prima facie case vis--vis the motion for DNA testing since no evidence has, as yet, been presented by petitioner. More essentially, it is premature to discuss whether, under the circumstances, a DNA testing order is warranted considering that no such order has yet been issued by the trial court. In fact, the latter has just set the said case for hearing. (a) A biological sample exists that is relevant to the case; (b) The biological sample: (i) was not previously subjected to the type of DNA testing now requested; or (ii) was previously subjected to DNA testing, but the results may require confirmation for good reasons; (c) The DNA testing uses a scientifically valid technique; (d) The DNA testing has the scientific potential to produce new information that is relevant to the proper resolution of the case; and (e) The existence of other factors, if any, which the court may consider as potentially affecting the accuracy or integrity of the DNA testing. This Rule shall not preclude a DNA testing, without need of a prior court order, at the behest of any party, including law enforcement agencies, before a suit or proceeding is commenced. Not surprisingly, Section 4 of the Rule on DNA Evidence merely provides for conditions that are aimed to safeguard the accuracy and integrity of the DNA testing. Section 4 states:

At any rate, the CAs view that it would be dangerous to allow a DNA testing without corroborative proof is well taken and deserves the Courts attention. In light of this observation, we find that there is a need to supplement the Rule on DNA Evidence to aid the courts in resolving motions for DNA testing order, particularly in paternity and other filiation cases. We, thus, address the question of whether a prima facie showing is necessary before a court can issue a DNA testing order.

The Rule on DNA Evidence was enacted to guide the Bench and the Bar for the introduction and use of DNA evidence in the judicial system. It provides the prescribed parameters on the requisite elements for reliability and validity ( i.e., the proper procedures, protocols, necessary laboratory reports, etc.), the possible sources of error, the available objections to the admission of DNA test results as evidence as well as the probative value of DNA evidence. It seeks to ensure that the evidence gathered, using various methods of DNA analysis, is utilized effectively and properly, [and] shall not be misused and/or abused and, more importantly, shall continue to ensure that DNA analysis serves justice and protects, rather than prejudice the public.[35]

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This does not mean, however, that a DNA testing order will be issued as a matter of right if, during the hearing, the said conditions are established.

evidence to establish paternity and the DNA test result would only be corroborative, the court may, in its discretion, disallow a DNA testing.

In some states, to warrant the issuance of the DNA testing order, there must be a show cause hearing wherein the applicant must first present sufficient evidence to establish a prima facie case or a reasonable possibility of paternity or good cause for the holding of the test.
[36]

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals Decision dated September 25, 2009 and Resolution dated December 17, 2009 areREVERSED and SET ASIDE. The Orders dated October 20, 2008 and January 19, 2009 of the Regional Trial Court of Valenzuela City are AFFIRMED. SO ORDERED.

In these states, a court order for blood testing is considered a search, which,

under their Constitutions (as in ours), must be preceded by a finding of probable cause in order to be valid. Hence, the requirement of a prima facie case, or reasonable possibility, was imposed in civil actions as a counterpart of a finding of probable cause. The Supreme Court of Louisiana eloquently explained Although a paternity action is civil, not criminal, the constitutional prohibition against unreasonable searches and seizures is still applicable, and a proper showing of sufficient justification under the particular factual circumstances of the case must be made before a court may order a compulsory blood test. Courts in various jurisdictions have differed regarding the kind of procedures which are required, but those jurisdictions have almost universally found that a preliminary showing must be made before a court can constitutionally order compulsory blood testing in paternity cases. We agree, and find that, as a preliminary matter, before the court may issue an order for compulsory blood testing, the moving party must show that there is a reasonable possibility of paternity. As explained hereafter, in cases in which paternity is contested and a party to the action refuses to voluntarily undergo a blood test, a show cause hearing must be held in which the court can determine whether there is sufficient evidence to establish a prima facie case which warrants issuance of a court order for blood testing.[37]

The same condition precedent should be applied in our jurisdiction to protect the putative father from mere harassment suits. Thus, during the hearing on the motion for DNA testing, the petitioner must present prima facie evidence or establish a reasonable possibility of paternity.

Notwithstanding these, it should be stressed that the issuance of a DNA testing order remains discretionary upon the court. The court may, for example, consider whether there is absolute necessity for the DNA testing. If there is already preponderance of 65

This case is about the authority of the court in an expropriation case to adjudicate questions of ownership of the subject properties where such questions involve the determination of the validity of the issuance to the defendants of Certificates of Land Ownership Awards (CLOAs) and Emancipation Patents (EPs), questions that fall within the jurisdiction of the Department of Agrarian Reform Adjudication Board (DARAB). The Facts and the Case In late 2003 respondent Bases Conversion Development Authority (BCDA), a government corporation, filed several expropriation actions before the various branches of the Regional Trial Court (RTC) of Angeles City, for acquisition of lands needed for the construction of the Subic-Clark-Tarlac Expressway Project. Ten of these cases were raffled to Branch 58 of the court1 and it is these that are the concern of the present petition. The defendants in Branch 58 cases were respondents Armando Simbillo, Christian Marcelo, Rolando David, Ricardo Bucud, Pablo Santos, Agrifina Enriquez, Conrado Espeleta, Catgerube Castro, Carlito Mercado, and Alfredo Suarez. They were the registered owners of the expropriated lands that they acquired as beneficiaries of the comprehensive agrarian reform program. Another defendant was Land Bank of the Philippines, the mortgagee of the lands by virtue of the loans it extended for their acquisition. The lands in these cases were located in Porac and Floridablanca, Pampanga. On learning of the expropriation cases before Branch 58, petitioner Philippine Veterans Bank (PVB) filed motions to intervene in all the cases with attached complaints-inintervention, a remedy that it adopted in similar cases with the other branches. PVB alleged that the covered properties actually belonged to Belmonte Agro-Industrial Development Corp. which mortgaged the lands to PVB in 1976. PVB had since foreclosed on the mortgages and bought the same at public auction in 1982. Unfortunately, the bank had been unable to consolidate ownership in its name. But, in its order of August 18, 2004,2 Branch 58 denied PVBs motion for intervention on the ground that the intervention amounts to a third-party complaint that is not allowed in expropriation cases and that the intervention would delay the proceedings in the cases before it. Besides, said Branch 58, PVB had a pending action for annulment of the titles issued to the individual defendants and this was pending before Branch 62 of the court. PVB filed its motion for reconsideration but Branch 58 denied the same, prompting the bank to file a petition for certiorari with the Court of Appeals (CA). 3 On January 26, 2006 the CA rendered a decision, dismissing the petition for lack of merit. 4 It also denied in a resolution dated June 2, 20065 PVBs motion for reconsideration. Meanwhile, on April 3, 2006 Branch 58 issued separate decisions in all 10 cases before it, granting the expropriation of the subject properties. The court noted the uncertainty as to the ownership of such properties but took no action to grant BCDAs prayer in its complaint that it determine the question of ownership of the same pursuant to Section 9, Rule 67 of the Revised Rules of Civil Procedure.6 The Issue Presented 66

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 173085 January 19, 2011

PHILIPPINE VETERANS BANK, Petitioner, vs. BASES CONVERSION DEVELOPMENT AUTHORITY, LAND BANK OF THE PHILIPPINES, ARMANDO SIMBILLO, CHRISTIAN MARCELO, ROLANDO DAVID, RICARDO BUCUD, PABLO SANTOS, AGRIFINA ENRIQUEZ, CONRADO ESPELETA, CATGERUBE CASTRO, CARLITO MERCADO and ALFREDO SUAREZ, Respondents. DECISION ABAD, J.:

The issue presented in this case is whether or not the CA erred in holding that PVB was not entitled to intervene in the expropriation cases before Branch 58 of the Angeles City RTC. The Courts Ruling PVB maintains that in deciding the case, the RTC and the CA ignored Section 9, Rule 67 of the 1997 Rules of Civil Procedure, which authorizes the court adjudicating the expropriation case to hear and decide conflicting claims regarding the ownership of the properties involved while the compensation for the expropriated property is in the meantime deposited with the court. Section 9 provides: Sec. 9. Uncertain ownership; conflicting claims. If the ownership of the property taken is uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums awarded as compensation for the property to be paid to the court for the benefit of the person adjudged in the same proceeding to be entitled thereto. But the judgment shall require the payment of the sum or sums awarded to either the defendant or the court before the plaintiff can enter upon the property, or retain it for the public use or purpose if entry has already been made. PVBs point regarding the authority of the court in expropriation cases to hear and adjudicate conflicting claims over the ownership of the lands involved in such cases is valid. But such rule obviously cannot apply to PVB for the following reasons: 1. At the time PVB tried to intervene in the expropriation cases, its conflict with the farmer beneficiaries who held CLOAs, EPs, or TCTs emanating from such titles were already pending before Angeles City RTC Branch 62, a co-equal branch of the same court. Branch 58 had no authority to pre-empt Branch 62 of its power to hear and adjudicate claims that were already pending before it. 2. Of course, subsequently, after the CA dismissed PVBs petition on January 26, 2006, the latter filed a motion for reconsideration, pointing out that it had in the meantime already withdrawn the actions it filed with Branch 62 after learning from the decision of the Supreme Court in Department of Agrarian Reform v. Cuenca,7 that jurisdiction over cases involving the annulment of CLOAs and EPs were vested by Republic Act 6657 in the DARAB. 8 PVB now points out that, since there was no longer any impediment in RTC Branch 58 taking cognizance of its motion for intervention and adjudicating the parties conflicting claims over the expropriated properties, the CA was in error in not reconsidering its decision. But PVBs withdrawal of its actions from Branch 62 cannot give Branch 58 comfort. As PVB itself insists, jurisdiction over the annulment of the individual defendants CLOAs and EPs (which titles if annulled would leave PVBs titles to the lands unchallenged) lies with the DARAB. Branch 58 would still have no power to adjudicate the issues of ownership presented by the PVBs intervention. Actually, PVBs remedy was to secure an order from Branch 58 to have the proceeds of the expropriation deposited with that branch in the meantime, pending adjudication of the issues

of ownership of the expropriated lands by the DARAB. Section 9 above empowers the court to order payment to itself of the proceeds of the expropriation whenever questions of ownership are yet to be settled. There is no reason why this rule should not be applied even where the settlement of such questions is to be made by another tribunal.
1avvphi1

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated January 26, 2006 and its resolution dated June 2, 2006 in CA-G.R. SP 88144. SO ORDERED.

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DECISION CARPIO, J.: The Case This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific). The Antecedents The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as follows:1 On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared by this Court to be owned by the Republic of the Philippines. 2 In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510 million. Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and instead, yielded its right to PTIC itself which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28 February 2007.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 176579 June 28, 2011

WILSON P. GAMBOA, Petitioner, vs. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P. SEVILLA, AND COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE COMMISSION, and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, Respondents. PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioners-in-Intervention.

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Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or about 6.3 percent of the outstanding common shares of PLDT.With the sale, First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40 percent.3 On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the following relevant facts: On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263 PLDT common shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in 1977, and became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Courts decision 4 which became final and executory on 8 August 2006. The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of stock of PLDT, and designated the InterAgency Privatization Council (IPC), composed of the Department of Finance and the PCGG, as the disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8 December 2006. The extension was published in nine different newspapers. During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000. The government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first refusal in accordance with PTICs Articles of Incorporation. First Pacific announced its intention to match Parallaxs bid. On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the public hearing. The HR Committee Report No. 2270 concluded that: (a) the auction of the governments 111,415 PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and (b) First Pacifics intended acquisition of the governments 111,415 PTIC shares resulting in First Pacifics 100% ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First Pacific and its affiliates); (b) Parallax offered the highest bid amounting toP25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its shareholders granted in PTICs Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. Respondent Pangilinan denies the other allegations of facts of petitioner. On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacifics common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMos common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.6 Petitioner asserts: If and when the sale is completed, First Pacifics equity in PLDT will go up from 30.7 percent to 37.0 percent of its common or voting- stockholdings, x x x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT First Pacific and Japans NTT DoCoMo, which is the worlds largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDTs common equity. x x x x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x"7 Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse of discretion in allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility.8 On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention. Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by respondents of the 111,415 PTIC shares to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT subscribers, they have a "stake in the outcome of the controversy x x x where the Philippine Government is completing the

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sale of government owned assets in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution." The Issue This Court is not a trier of facts. Factual questions such as those raised by petitioner, which indisputably demand a thorough examination of the evidence of the parties, are generally beyond this Courts jurisdiction. Adhering to this well-settled principle, the Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term "capital" in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility.
9

therefore required respondents Central Bank of the Philippines, the local bank, and the accused to comply with the writ of execution issued in the civil case for damages and to release the dollar deposit of the accused to satisfy the judgment. In Alliance of Government Workers v. Minister of Labor ,14 the Court similarly brushed aside the procedural infirmity of the petition for declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the question was: "Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or controlled corporations included among the four employers under Presidential Decree No. 851 which are required to pay their employees x x x a thirteenth (13th) month pay x x x ?" The Constitutional principle involved therein affected all government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the interpretation of the assailed presidential decree. In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching implications. As this Court held in Salvacion: The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.15 (Emphasis supplied) In the present case, petitioner seeks primarily the interpretation of the term "capital" in Section 11, Article XII of the Constitution. He prays that this Court declare that the term "capital" refers to common shares only, and that such shares constitute "the sole basis in determining foreign equity in a public utility." Petitioner further asks this Court to declare any ruling inconsistent with such interpretation unconstitutional. The interpretation of the term "capital" in Section 11, Article XII of the Constitution has farreaching implications to the national economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own country. What is at stake here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this case. The Court first encountered the issue on the definition of the term "capital" in Section 11, Article XII of the Constitution in the case of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the same private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that the petition involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Courts Decision of 21 February 2003 via a petition for review under Rule 45. The Courts Resolution, denying the petition, became final on 21 December 2004.

The Ruling of the Court The petition is partly meritorious. Petition for declaratory relief treated as petition for mandamus At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is within the original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the Court of Appeals. The actions for declaratory relief, 10 injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme Court. On this ground alone, the petition could have been dismissed outright. While direct resort to this Court may be justified in a petition for prohibition, 11 the Court shall nevertheless refrain from discussing the grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. However, since the threshold and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national economy, the Court treats the petition for declaratory relief as one for mandamus. 12 In Salvacion v. Central Bank of the Philippines ,13 the Court treated the petition for declaratory relief as one for mandamus considering the grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by a foreign tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the tourists dollar deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment, garnishment or any other order or process of any court, inapplicable due to the peculiar circumstances of the case. The Court held that "injustice would result especially to a citizen aggrieved by a foreign guest like accused x x x" that would "negate Article 10 of the Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail." The Court

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The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issuewhich is of transcendental importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The Court must forthwith seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in the words of the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos."18 Besides, in the light of vague and confusing positions taken by government agencies on this purely legal issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their participation in the capital of public utilities and other nationalized businesses. Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since the 1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the term "capital," which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and joint venture agreements for the development of our natural resources,19 in Section 7, Article XII on ownership of private lands, 20 in Section 10, Article XII on the reservation of certain investments to Filipino citizens, 21 in Section 4(2), Article XIV on the ownership of educational institutions, 22 and in Section 11(2), Article XVI on the ownership of advertising companies.23 Petitioner has locus standi There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to violate the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a possibility that PLDTs franchise could be revoked, a dire consequence directly affecting petitioners interest as a stockholder. More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people, far outweighs any perceived impediment in the legal personality of the petitioner to bring this action. In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus: In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action . In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing, the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the land.

Legaspi v. Civil Service Commission , while reiterating Taada, further declared that when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general public which possesses the right. Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved. We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioners standing. (Emphasis supplied) Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the requisite locus standi. Definition of the Term "Capital" in Section 11, Article XII of the 1987 Constitution Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit: Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens ; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied) The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus: Section 5. 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 the capital of which is owned by such citizens , nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public 71

utility enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis supplied) The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz: Section 8. 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 other entities organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires. (Emphasis supplied) Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention. 25 The 1987 Constitution "provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of public utilities should be granted only to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens. The provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for national security." 26 The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest.27 This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to "conserve and develop our patrimony" 28 and ensure "a self-reliant and independent national economy effectively controlled by Filipinos."29 Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60 percent of its "capital" must be owned by Filipino citizens. The crux of the controversy is the definition of the term " capital." Does the term "capital" in Section 11, Article XII of the Constitution refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)? Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such shares are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term "capital" in Section 11, Article XII of the Constitution refers to "the ownership of common capital stock subscribed and outstanding, which class of shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of directors." It is undisputed that PLDTs non-voting preferred shares are held mostly by Filipino citizens.30 This arose from Presidential Decree No. 217,31 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting preferred shares to pay for the investment cost of installing the telephone line.32

Petitioners-in-intervention basically reiterate petitioners arguments and adopt petitioners definition of the term "capital." 33 Petitioners-in-intervention allege that "the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least 63.54% of the total outstanding common stock," which means that foreigners exercise significant control over PLDT, patently violating the 40 percent foreign equity limitation in public utilities prescribed by the Constitution. Respondents, on the other hand, do not offer any definition of the term "capital" in Section 11, Article XII of the Constitution. More importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares of PLDT are held by foreigners. In particular, respondent Nazarenos Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition and the supposed violation of the due process rights of the "affected foreign common shareholders." Respondent Nazareno does not deny petitioners allegation of foreigners dominating the common shareholdings of PLDT. Nazareno stressed mainly that the petition " seeks to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership over their shares ." Thus, "the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that they can be heard." 34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders. While Nazareno does not introduce any definition of the term "capital," he states that "among the factual assertions that need to be established to counter petitioners allegations is the uniform interpretation by government agencies (such as the SEC), institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of including both preferred shares and common shares in "controlling interest" in view of testing compliance with the 40% constitutional limitation on foreign ownership in public utilities."35 Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in Section 11, Article XII of the Constitution. Neither does he refute petitioners claim of foreigners holding more than 40 percent of PLDTs common shares. Instead, respondent Pangilinan focuses on the procedural flaws of the petition and the alleged violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in his Memorandum (1) the absence of this Courts jurisdiction over the petition; (2) petitioners lack of standing; (3) mootness of the petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights. Moreover, respondent Pangilinan alleges that the issue should be whether "owners of shares in PLDT as well as owners of shares in companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law requiring them to surrender their shares and also without notice and trial." Respondent Pangilinan further asserts that " Section 11, [Article XII of the Constitution] imposes no nationality requirement on the shareholders of the utility company as a condition for keeping their shares in the utility company. " According to him, "Section 11 does not authorize taking one persons property (the shareholders stock in the utility company) on the basis of another partys alleged failure to satisfy a requirement that is a condition only for that other partys retention of another piece of property (the utility company being at least 60% Filipino-owned to keep its franchise)."36 72

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise silent on the definition of the term "capital." In its Memorandum 37 dated 24 September 2007, the OSG also limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of interested parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term "capital" in Section 11, Article XII of the Constitution. The OSG contends that "the petition actually partakes of a collateral attack on PLDTs franchise as a public utility," which in effect requires a "full-blown trial where all the parties in interest are given their day in court." 38 Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not also define the term "capital" and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and timely disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market. In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended that the term "capital" in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus: The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Courts ruling upholding respondents arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Courts ruling adopting respondents arguments, the common shares can be owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the public utility corporation. xxxx Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest. xxxx Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of

SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution. Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning of the word "capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot prevail over the clear intent of the framers of the Constitution. In the same vein, the SECs construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally determine what a law means.39 On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term "capital" in Section 11, Article XII of the Constitution includes preferred shares since the Constitution does not distinguish among classes of stock, thus: 16. The Constitution applies its foreign ownership limitation on the corporations "capital," without distinction as to classes of shares. x x x In this connection, the Corporation Code which was already in force at the time the present (1987) Constitution was drafted defined outstanding capital stock as follows: Section 137. Outstanding capital stock defined. The term "outstanding capital stock", as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in determining the outstanding capital stock (the "capital") of a corporation. Consequently, petitioners suggestion to reckon PLDTs foreign equity only on the basis of PLDTs outstanding common shares is without legal basis. The language of the Constitution should be understood in the sense it has in common use. xxxx 17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the Constitutional Commission (Vol. III) which 73

petitioner misleadingly cited in the Petition x x x which supports petitioners view that only common shares should form the basis for computing a public utilitys foreign equity. xxxx 18. In addition, the SEC the government agency primarily responsible for implementing the Corporation Code, and which also has the responsibility of ensuring compliance with the Constitutions foreign equity restrictions as regards nationalized activities x x x has categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and the nationality composition thereof.40 We agree with petitioner and petitioners-in-intervention. The term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, 41 and not to the total outstanding capital stock comprising both common and non-voting preferred shares. The Corporation Code of the Philippines classifies shares as common or preferred, thus:
42

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock;

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The Board of Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange Commission. Shares of capital stock issued without par value shall be deemed fully paid and nonassessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends. A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.

6. Merger or consolidation of the corporation with another corporation or other corporations; 7. Investment of corporate funds in another corporation or business in accordance with this Code; and 8. Dissolution of the corporation. Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights. Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation.43 This is exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation. 44 In the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in the corporation for income in the same manner as bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to vote. 46 Common shares cannot be deprived of the right to vote in any corporate meeting, and any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid.47 Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term "capital" in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares 74

also have the right to vote in the election of directors, then the term "capital" shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and management of public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting stock or controlling interest of a corporation, to wit: MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15. MR. VILLEGAS. That is right. MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee please enlighten me on this? MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock." MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote. MR. 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.48 xxxx MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest." MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens." MR. VILLEGAS. Yes. MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens. MR. 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.49 (Emphasis supplied) Thus, 60 percent of the "capital" assumes, or should result in, " controlling interest" in the corporation. Reinforcing this interpretation of the term "capital," as referring to controlling interest or shares entitled to vote, is the definition of a "Philippine national" in the Foreign Investments Act of 1991,50 to wit: SEC. 3. Definitions. - As used in this Act: a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least 75

sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (Emphasis supplied) In explaining the definition of a "Philippine national," the Implementing Rules and Regulations of the Foreign Investments Act of 1991 provide: b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose. Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered. For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals. Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals. (Emphasis supplied) Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital" required in the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is "considered as non-Philippine national[s]." Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments." Thus, in numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the " capital" of

which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term "capital" in Section 11, Article XII of the Constitution is also used in the same context in numerous laws reserving certain areas of investments to Filipino citizens. To construe broadly the term "capital" as the total outstanding capital stock, including both common and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the "State shall develop a self-reliant and independent national economy effectively controlled by Filipinos." A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the public utility. We shall illustrate the glaring anomaly in giving a broad definition to the term "capital." Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having a par value of one peso (P1.00) per share. Under the broad definition of the term "capital," such corporation would be considered compliant with the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd. In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language of the Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an independent national economy effectively controlled by Filipinos. The example given is not theoretical but can be found in the real world, and in fact exists in the present case. Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDTs Articles of Incorporation expressly state that " the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of stockholders." 51 On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDTs Articles of Incorporation 52 state that "each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other purposes."53

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In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control over PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control over PLDT. In fact, under PLDTs Articles of Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred shares have no voting right for any purpose whatsoever. It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet (GIS),54 which is a document required to be submitted annually to the Securities and Exchange Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares. 56 In other words, foreigners hold 64.27% of the total number of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution. Moreover, the Dividend Declarations of PLDT for 2009, 57 as submitted to the SEC, shows that per share the SIP58preferred shares earn a pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at P70.00 per share, while the declared dividends for the preferred shares amounted to a measlyP1.00 per share.59 So the preferred shares not only cannot vote in the election of directors, they also have very little and obviously negligible dividend earning capacity compared to common shares. As shown in PLDTs 2010 GIS, 60 as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%. 62 This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required for the States grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public utility. In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the Constitution that "[n]o franchise, certificate, or any other form of

authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x." To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the soleright to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDTs common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution. Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value ofP2,328.00 per share,64 while PLDT preferred shares with a par value of P10.00 per share have a current stock market value ranging from only P10.92 to P11.06 per share,65 is a glaring confirmation by the market that control and beneficial ownership of PLDT rest with the common shares, not with the preferred shares. Indisputably, construing the term "capital" in Section 11, Article XII of the Constitution to include both voting and non-voting shares will result in the abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the States constitutional duty to limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain areas of investment to Filipino citizens, such as the exploitation of natural resources as well as the ownership of land, educational institutions and advertising businesses. The Court should never open to foreign control what the Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of the Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos." Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinosspecific areas of investment, such as the development of natural resources and ownership of land, educational institutions and advertising business, is selfexecuting. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why these constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus: x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are selfexecuting. If the constitutional provisions are treated as requiring legislation instead of selfexecuting, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that . . . in case of doubt, the Constitution should be considered self-executing rather than nonself-executing. . . .Unless the contrary is clearly intended , the provisions of the 77

Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective . These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied) In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that constitutional provisions are presumed to be selfexecuting. Justice Puno stated: Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative actions may give breath to constitutional rights but congressional inaction should not suffocate them . Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use without just compensation. (Emphasis supplied) Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68this Court ruled: x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that should be allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy should be followed in cases of violations against the constitutional prohibition, courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution . x x x (Emphasis supplied) To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last 75 years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent of the "capital" of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities, the exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the ownership of educational institutions. All the legislatures that convened since 1935 also

miserably failed to enact legislations to implement these vital constitutional provisions that determine who will effectively control the national economy, Filipinos or foreigners. This Court cannot allow such an absurd interpretation of the Constitution. This Court has held that the SEC "has both regulatory and adjudicative functions." 69 Under its regulatory functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by law to investigate such violation.
1awphi1

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution." Thus, the SEC is the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted to the SEC. Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the "power and function" to "suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law." The SEC is mandated under Section 5(d) of the same Code with the "power and function" to " investigate x x x the activities of persons to ensure compliance" with the laws and regulations that SEC administers or enforces. The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of the ownership structure of PLDTs voting shares, as admitted by respondents and as stated in PLDTs 2010 GIS that PLDT submitted to SEC. WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of the term "capital" in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law. SO ORDERED.

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In the course of the proceedings, Laureano, one of the defendants, died on 1 December 2003 and was substituted by his son petitioner Manuel A. Rayos. Meanwhile, petitioner Orlando A. Rayos intervened while petitioner Fe A. Rayos Dela Paz was added as a defendant. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 196063 December 14, 2011 On 7 December 2009, petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos filed a Motion to Dismiss on the grounds that (1) Ordinance No. 7949 is unconstitutional and (2) the cases of Lagcao v. Labra7 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila 8apply squarely to the present case. On 11 March 2010, the trial court denied the motion to dismiss. The trial court ruled that the motion to dismiss did not show any compelling reason to convince the court that the doctrine of stare decisis applies. Petitioners failed to demonstrate how or why the facts in this case are similar with the cited cases in order that the issue in this case be resolved in the same manner. The trial court disposed of the motion to dismiss in this wise: In view of the foregoing, and after intense evaluation of the records on hand, the Motion to Dismiss cannot be granted. In order to prevent further delay to the prejudice of all the proper parties in this case, continue with the trial for the determination of just compensation on July 7, 2010 at one oclock in the afternoon. The Case SO ORDERED.9 This petition, captioned as a petition for review on certiorari and declaratory relief, 1 assails the Order of 6 January 20112 of the Regional Trial Court of Manila, Branch 49, denying reconsideration of the trial courts Order of 11 March 2010 3 which denied the motion to dismiss filed by petitioners Orlando A. Rayos, Fe A. Rayos Dela Paz, and Engr. Manuel A. Rayos.4 The Facts The present case originated from a complaint for eminent domain filed by respondent City of Manila against Remedios V. De Caronongan, Patria R. Serrano, Laureano M. Reyes, Paz B. Sison, Teofila B. Sison, Leticia R. Ventanilla, Rosalinda R. Barrozo (defendants), docketed as Civil Case No. 03108154. In its Complaint,5 the City of Manila alleged that it passed Ordinance No. 7949 authorizing the City Mayor to acquire "by expropriation, negotiation or by any other legal means" the parcel of land co-owned by defendants, which is covered by TCT No. 227512 and with an area of 1,182.20 square meters. The City of Manila offered to purchase the property at P1,000.00 per square meter. In their Answer,6 defendants conveyed their willingness to sell the property to the City of Manila, but at the price ofP50,000.00 per square meter which they claimed was the fair market value of the land at the time. On 6 January 2011, the trial court denied the motion for reconsideration. Petitioners filed with this Court the present petition reiterating the arguments in their motion to dismiss, namely, (1) Ordinance No. 7949 is unconstitutional, and (2) the cases of Lacgao v. Labra10 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila11 apply squarely to this case. The Ruling of the Court We deny the petition. An order denying a motion to dismiss is interlocutory and not appealable. 12 An order denying a motion to dismiss does not finally dispose of the case, and in effect, allows the case to proceed until the final adjudication thereof by the court. As such, it is merely interlocutory in nature and thus, not appealable.13 Section 1(c), Rule 41 of the Rules of Court provides: SECTION 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.

ORLANDO A. RAYOS, FE A. RAYOS-DELA PAZ, represented by DR. ANTONIO A. RAYOS, and ENGR. MANUEL A. RAYOS, Petitioners, vs. THE CITY OF MANILA, Respondent. RESOLUTION CARPIO, J.:

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No appeal may be taken from: xxx (c) An interlocutory order; xxx In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule 65. Clearly, no appeal, under Rule 45 of the Rules of Court, may be taken from an interlocutory order. In case of denial of an interlocutory order, the immediate remedy available to the aggrieved party is to file a special civil action for certiorari under Rule 65 of the Rules of Court. In this case, since the trial courts order denying the motion to dismiss is not appealable, petitioners should have filed a petition for certiorari under Rule 65 to assail such order, and not a petition for review on certiorari under Rule 45 of the Rules of Court. For being a wrong remedy, the present petition deserves outright dismissal. Even if the Court treats the present petition as a petition for certiorari under Rule 65, which is the proper remedy to challenge the order denying the motion to dismiss, the same must be dismissed for violation of the principle of hierarchy of courts. This well-settled principle dictates that petitioners should file the petition for certiorari with the Court of Appeals, and not directly with this Court. Indeed, this Court, the Court of Appeals and the Regional Trial Courts exercise concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction.14 However, such concurrence in jurisdiction does not give petitioners unbridled freedom of choice of court forum. 15 In Heirs of Bertuldo Hinog v. Melicor,16 citing People v. Cuaresma,17 the Court held: This Courts 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 Courts 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 Courts time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket. (Emphasis supplied.) In short, to warrant a direct recourse to this Court, petitioners must show exceptional and compelling reasons therefor, clearly and specifically set out in the petition. This petitioners failed to do. Petitioners merely rehashed the arguments in their motion to dismiss, which consist mainly of unsubstantiated allegations. Petitioners invoke the cases of Lagcao v. Labra18 and Jesus Is Lord Christian School Foundation, Inc. v. Municipality (now City) of Pasig, Metro Manila19 in challenging the constitutionality of Ordinance No. 7949 without, however, showing clearly the applicability and similarity of those cases to the present controversy. Neither did petitioners explain why Ordinance No. 7949 is repugnant to the Constitution. Nor did petitioners specifically and sufficiently set forth any extraordinary and important reason to justify direct recourse to this Court.20 Likewise, assuming the present petition is one for declaratory relief, 21 as can be gleaned from the caption of the petition, this Court has only appellate, not original, jurisdiction over such a petition. While this Court may treat a petition for declaratory relief as one for prohibition22 or mandamus, over which this Court exercises original jurisdiction, 23 it must be stressed that this special treatment is undertaken only in cases with far reaching implications and transcendental issues that need to be resolved.24 In the present case, there is absolutely nothing which shows that it has far-reaching implications and involves transcendental questions deserving of this Courts treatment of the petition as one for prohibition or mandamus. WHEREFORE, we DENY the petition. SO ORDERED.

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DECISION Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 193247 September 14, 2011 In G.R. No. 193247, petitioners Sergio I. Carbonilla, Emilio Y. Legaspi IV, and Adonais Y. Rejuso (Carbonilla, et al.) assail the Resolution 3 promulgated on 5 August 2010 by the Court of Appeals in CA-G.R. SP No. 103250. In G.R. No. 194276, petitioners Office of the President, represented by Paquito N. Ochoa in his capacity as Executive Secretary, Department of Finance, represented by Cesar V. Purisima in his capacity as Secretary of Finance, and the Bureau of Customs (BOC), represented by Angelito A. Alvarez in his capacity as Commissioner of Customs (Office of the President, et al.), assail the Resolution4promulgated on 26 October 2010 by the Court of Appeals in CA-G.R. SP No. 103250. The Antecedent Facts The facts, as gathered from the assailed Decision of the Court of Appeals, are as follows: The Bureau of Customs5 issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending CAO 7-92.6 The Department of Finance7 approved CAO 1-2005 on 9 February 2006. CAO 7-92 and CAO 1-2005 were promulgated pursuant to Section 3506 8 in relation to Section 6089 of the Tariff and Customs Code of the Philippines (TCCP). Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC created on 23 April 2002 a committee to review the overtime pay of Customs personnel in Ninoy Aquino International Airport (NAIA) and to propose its adjustment from the exchange rate of P25 to US$1 to the then exchange rate of P55 to US$1. The Office of the President, et al. alleged that for a period of more than two years from the creation of the committee, several meetings were conducted with the agencies concerned, including respondent Board of Airlines Representatives (BAR), to discuss the proposed rate adjustment that would be embodied in an Amendatory Customs Administrative Order. On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only sometime in 2004 and only through unofficial reports. On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse Division, BOC-NAIA, informing the latter of its objection to the proposed increase in the overtime rates. BAR further requested for a meeting to discuss the matter. CARPIO, J.: The Cases Before the Court are two petitions for review1 assailing the Decision2 promulgated on 9 July 2009 by the Court of Appeals in CA-G.R. SP No. 103250.

SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, and ADONAIS Y. REJUSO, Petitioners, vs. BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL AIRWAYS Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 194276 OFFICE OF THE PRESIDENT, represented by HON. PAQUITO N. OCHOA,* in his capacity as EXECUTIVE SECRETARY, DEPARTMENT OF FINANCE, represented by HON. CESAR V. PURISIMA** in his capacity as SECRETARY OF FINANCE, and THE BUREAU OF CUSTOMS, represented by HON. ANGELITO A. ALVAREZ**** in his capacity as COMMISSIONER OF CUSTOMS, Petitioners, vs. BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL AIRWAYS), Respondents. DEL CASTILLO,***

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BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns against the issuance of CAO 1-2005. In a letter dated 3 March 2005, the Acting District Collector of BOC informed BAR that the Secretary of Finance already approved CAO 1-2005 on 9 February 2005. As such, the increase in the overtime rates became effective on 16 March 2005. BAR still requested for an audience with the Secretary of Finance which was granted on 12 October 2005. The BOC then sent a letter to BARs member airlines demanding payment of overtime services to BOC personnel in compliance with CAO 1-2005. The BARs member airlines refused and manifested their intention to file a petition with the Commissioner of Customs and/or the Secretary of Finance to suspend the implementation of CAO 1-2005. In a letter dated 31 August 2006,10 Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal and Revenue Operations Group, Department of Finance informed BAR, through its Chairman Felix J. Cruz (Cruz), that they "find no valid ground to disturb the validity of CAO 1-2005, much less to suspend its implementation or effectivity" and that its implementation effective 16 March 2005 is legally proper. In separate letters both dated 4 December 2006, 11 Cruz requested the Office of the President and the Office of the Executive Secretary to review the decision of Usec. Mendoza. Cruz manifested the objection of the International Airlines operating in the Philippines to CAO 1-2005. On 13 December 2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec. Sec. Gaite) issued an Order12requiring BAR to pay its appeal fee and submit an appeal memorandum within 15 days from notice. BAR paid the appeal fee and submitted its appeal memorandum on 19 January 2007. The Decision of the Office of the President In a Decision13 dated 12 March 2007, the Office of the President denied the appeal of BAR and affirmed the Decision of the Department of Finance. The Office of the President ruled that the BOC was merely exercising its rule-making or quasi-legislative power when it issued CAO 1-2005. The Office of the President ruled that since CAO 1-2005 was issued in the exercise of BOCs rule-making or quasi-legislative power, its validity and constitutionality may only be assailed through a direct action before the regular courts. The Office of the President further ruled that, assuming that BARs recourse before the Office of the President was proper and in order, the appeal was filed out of time because BAR received the letter-decision of the Secretary of Finance on 4 September 2006 but it filed its appeal only on 4 December 2006, beyond the 30-day period provided under Administrative Order No. 18 dated 12 February 1987. The Office of the President also ruled that the grounds raised by BAR, namely, (1) the failure to comply with the publication requirement; (2) that the foreign exchange cannot be a basis for rate increase; and (3) that increase in rate was ill-timed, were already deliberated during the meetings held between the BOC and the stakeholders and were also considered by the Secretary of Finance. The Office of the President further adopted the position of the BOC that several public hearings and consultations were conducted by the BOC-NAIA Collection District, which were in substantial compliance with Section 9, Chapter I, Book VII of the

Administrative Code of 1987. BAR did not oppose the exchange rate used in CAO 7-92 which was the exchange rate at that time and thus, the BOC-NAIA Collection District found it strange that BAR was questioning the fixing of the adjusted pay rates which were lower than the rate provided under Section 3506 of the TCCP. The Office of the President ruled that there is a legal presumption that the rates fixed by an administrative agency are reasonable, and that the fixing of the rates by the Government, through its authorized agents, involved the exercise of reasonable discretion. BAR filed a motion for reconsideration. In its Resolution 14 dated 14 March 2008, the Office of the President denied BARs motion for reconsideration. BAR filed a petition for review under Rule 45 before the Court of Appeals. Petitioners Carbonilla, et al. filed an Omnibus Motion to Intervene before the Court of Appeals on the ground that as customs personnel, they would be directly affected by the outcome of the case. Petitioners Carbonilla, et al. also adopted the Comment filed by the Office of the Solicitor General (OSG). The Decision of the Court of Appeals In its 26 February 2009 Resolution,15 the Court of Appeals denied the motion for intervention filed by Carbonilla, et al. The Court of Appeals ruled that the petition before it involved the resolution of whether the decision of the Office of the President was correctly rendered. The Court of Appeals held that the intervenors case was for collection of their unpaid overtime services and their interests could not be protected or addressed in the resolution of the case. The Court of Appeals ruled that Carbonilla, et al. should pursue their case in a separate proceeding against the proper respondents. Carbonilla, et al. filed a motion for reconsideration of the 26 February 2009 resolution. Without resolving Carbonilla, et al.s motion for reconsideration, the Court of Appeals promulgated the assailed 9 July 2009 Decision which set aside the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President and declared Section 3506 of the TCCP, CAO 7-92 and CAO 1-2005 unenforceable against BAR. Ruling that it could take cognizance of BARs appeal, the Court of Appeals held that BAR could not be faulted for not filing a case before the Court of Tax Appeals (CTA) because the Office of the President admitted that it preempted any action before the CTA. Deputy Exec. Sec. Gaite treated the letters of BAR as an appeal and required it to pay appeal fee and to submit an appeal memorandum. The Court of Appeals further ruled that what the Office of the President treated as a decision of the Department of Finance was merely an advisory letter dated 31 August 2006 and to treat it as a decision from which an appeal could be taken and then rule that it was not perfected on time would deprive BAR of its right to due process. The Court of Appeals further ruled that it has the power to resolve the constitutional issue raised against CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that Section 8, 82

Article IX(B) of the Constitution prohibits an appointive public officer or employee from receiving additional, double or indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section 3506 of the TCCP only authorized payment of additional compensation for overtime work, and thus, the payment of traveling and meal allowances under CAO 7-92 and CAO 1-2005 are unconstitutional and could not be enforced against BAR members. The Court of Appeals ruled that Section 3506 of the TCCP failed the completeness and sufficient standard tests to the extent that it attempted to cover BAR members through CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that the phrase "other persons served" did not provide for descriptive terms and conditions that might be completely understood by the BOC. The Court of Appeals ruled that devoid of common distinguishable characteristic, aircraft owners and operators should not have been lumped together with importers and shippers. The Court of Appeals also ruled that Section 3506 of the TCCP failed the sufficient standard test because it does not contain adequate guidelines or limitations needed to map out the boundaries of the delegates authority. The dispositive portion of the Court of Appeals Decision reads: WHEREFORE, the petition is GRANTED. Declaring Section 3506 of the TCCP as well as CAO 7-92 and CAO 1-2005 to be unenforceable as against the petitioners, the appealed Decision dated March 12, 2007 and Resolution dated March 14, 2008 are hereby SET ASIDE. SO ORDERED.16 Petitioners Carbonilla, et al. filed their motion for reconsideration of the 9 July 2009 Decision. In its 5 August 2010 Resolution, the Court of Appeals, among others, denied Carbonilla, et al.s motion for reconsideration. Carbonilla, et al. came to this Court via a petition for review, docketed as G.R. No. 193247, on the following grounds: I. The Honorable Court of Appeals seriously erred in law in ruling that the Court of Tax Appeals did not have jurisdiction on the subject controversy. II. The Honorable Court of Appeals seriously erred in law in ruling that Section 3506 of the TCCP failed the completeness and sufficient standard tests. III. The Honorable Court of Appeals seriously erred in law in ruling that CAO 7-92 as amended by CAO 1-2005 as well as Section 3506 of the TCCP are not enforceable against BARs members. IV. The Honorable Court of Appeals seriously erred in law in not ruling that estoppel and/or laches should have prevented the BAR from questioning CAO 12005.

V. The Honorable Court of Appeals seriously erred in law in issuing the decision dated July 9, 2009 in denying petitioners intervention and motion for reconsideration dated August 3, 2009.17 The Office of the President, et al. also filed a motion for reconsideration dated 28 July 2009 assailing the 9 July 2009 Decision of the Court of Appeals. Meanwhile, in a Resolution promulgated on 12 May 2010, 18 the Court of Appeals directed BAR to continue complying with the 12 March 2007 Decision of the Office of the President. The Court of Appeals ruled that BAR unlawfully withheld the rightful overtime payment of BOC employees when it stopped paying its obligations under CAO 7-92, as amended by CAO 1-2005, since the Court of Appeals 9 July 2009 Decision had not attained finality pending the resolution of the motion for reconsideration filed by the Office of the President, et al. BAR filed a motion for reconsideration dated 26 May 2010 for the reversal of the 12 May 2010 Resolution of the Court of Appeals. In a Resolution promulgated on 26 October 2010, the Court of Appeals granted BARs 26 May 2010 motion for reconsideration and denied the 28 July 2009 motion for reconsideration of the Office of the President, et al. The Office of the President, et al. filed a petition for review before this Court, docketed as G.R. No. 194276, raising the following grounds: I. The Court of Appeals erred in giving due course to respondents BAR and its member airlines petition for review because it had no jurisdiction over the issues raised therein by respondents, to wit: 1. CAO No. 1-2005 is invalid as the increased overtime pay rates and meal and transportation allowances fixed therein are unreasonable and confiscatory; and 2. The act of the Bureau of Customs charging and/or collecting from BARs member airlines the cost of the overtime pay and meal and transportation allowances of Bureau of Customs (BOC) personnel in connection with the discharge of their government duties, functions and responsibilities is legally impermissible and, therefore, invalid. These issues involve the validity and collection of money charges authorized by the Customs Law and thus the Court of Tax Appeals (CTA) has exclusive jurisdiction thereof. I. Granting arguendo that the Court of Appeals has jurisdiction over the said issues raised by the BAR and its member airlines, the Court of Appeals should have dismissed their petition for review filed under Rule 45 of the Rules of Court on the following grounds: 1. A petition for review under Ruled 43 of the Rules of Court cannot be filed to question the quasi-legislative or rule-making power of the Commissioner of Customs;

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2. BARs appeal to the Office of the President questioning the 31 August 2006 Decision of the Department of Finance (DOF), finding that CAO No. 1-2005 is valid, was filed out of time; 3. Some of respondents BAR member airlines country managers who executed the verification and certification of non-forum shopping of their petition for review did not have the necessary authorization of the said member airlines for them to execute the same; and 4. Administrative procedural due process was observed in the promulgation by the Commissioner of Customs of the questioned CAO No. 1-2005. II. Respondents BAR and its member airlines are guilty of laches and estoppel and thus are effectively barred from questioning the authority of the Commissioner of Customs to promulgate pursuant to Section 608 in relation to Section 3506 of the Tariff and Customs Code (TCCP), as amended, not only CAO No. 1-2005, but also CAO No. 7-92. III. The Court of Appeals erred in going beyond the issues raised by respondents BAR and its member airlines not only in the pleadings filed by them in the proceedings below but also in their petition for review. IV. Section 3506 of the TCCP, CAO No. 1-2005 and CAO No. 7-92 are valid. Said law and its implementing regulations neither constitute undue delegation of legislative power nor authorize overpayment of BOC personnel.19 The Issues For resolution in these cases are the following issues: 1. Whether the Court of Appeals committed a reversible error in denying the intervention of Carbonilla, et al.; 2. Whether the Court of Appeals has jurisdiction over BARs petition; 3. Whether BARs appeal before the Office of the President was filed on time; 4. Whether the officers of some of BARs member airlines who executed the verification and certification of non-forum shopping have the necessary authorization to execute them; 5. Whether BAR was guilty of laches and/or estoppel; and 6. Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the TCCP, CAO 7-92, and CAO 1-2005 unenforceable against BAR.

The Ruling of this Court The petition in G.R. No. 193247 has no merit while the petition in G.R. No. 194276 is meritorious. Intervention in G.R. No. 193247 On the matter of the intervention of Carbonilla, et al., Section 1, Rule 19 of the 1997 Rules of Civil Procedure provides: Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenors rights may be fully protected in a separate proceeding. Intervention is not a matter of right but it may be permitted by the courts when the applicant shows facts which satisfy the requirements authorizing intervention. 20 In G.R. No. 193247, the Court of Appeals denied Carbonilla, et al.s motion for intervention in its 26 February 2009 Resolution on the ground that the case was for collection of unpaid overtime services and thus should be pursued in a separate proceeding against the proper respondents. A reading of the Carbonilla, et al.s Omnibus Motion 21 supports the ground invoked by the Court of Appeals in denying the motion. The Omnibus Motion states: 3. The said movants-intervenors all held offices or were stationed at the Ninoy Aquino International Airport [NAIA] and who have all been rendering overtime services thereat for so many years. 4. Movant-Intervenor Carbonilla has retired from government service last September 2007 without his being paid the additional rates set by CAO No. 1-2005 which became effective on March 16, 2007. The effectivity and implementation of the said CAO No. 1-2005 is the main issue in this case. 5. Thus, it is noteworthy to mention that all the movants-intervenors all rendered overtime services since March 16, 2005 or for all the time material to the issue in this case. 6. Movants-Intervenors urgently need their respective [differential]/back payments representing overtime services rendered from 16 March 2005 to the present pursuant to the implementation of CAO No. 1-2005. 7. Said differential/back payments pursuant to CAO No. 1-2005 would be of great help to the movants-intervenors considering that as of 24 January 2008, herein movants-intervenors were stripped of their respective overtime duties by the District Collector of Customs at NAIA for reasons only known to the latter.

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8. The full implementation of CAO No. 1-2005 would not only benefit the cause and financial needs of herein movants-intervenors but also that of the other 900 or so employees of the Bureau of Customs-NAIA who are rendering overtime services thereat up to the present.22 Clearly, Carbonilla, et al. were really after the payment of their differential or back payments for services rendered. Hence, the Court of Appeals correctly denied the motion for intervention. It should be stressed that the allowance or disallowance of a motion for intervention is addressed to the sound discretion of the courts.23 The permissive tenor of the Rules of Court shows the intention to give the courts the full measure of discretion in allowing or disallowing the intervention.24 Once the courts have exercised this discretion, it could not be reviewed by certiorari or controlled by mandamus unless it could be shown that the discretion was exercised in an arbitrary or capricious manner. 25 Carbonilla, et al. failed to show that the Court of Appeals rendered its resolution in an arbitrary or capricious manner. In addition, Carbonilla, et al. admitted in their petition that their motion for reconsideration of the 26 February 2009 Resolution of the Court of Appeals had been denied in open court during the oral arguments held by the Court of Appeals on 16 December 2009. 26 Carbonilla, et al. did not act on the denial of this motion but only pursued their motion for reconsideration of the 9 July 2009 Decision of the Court of Appeals. Hence, the denial of Carbonilla, et al.s motion for intervention had already attained finality. Having ruled against the right of Carbonilla, et al. to intervene, we see no reason to rule on the other issues they raise unless raised in G.R. No. 194276. We now discuss the issues raised in G.R. No. 194276. Jurisdiction of the Court of Appeals The Office of the President, et al. argue that the Court of Appeals should have denied BARs petition because it had no jurisdiction over the issues raised, involving the validity and collection of money charges authorized by Customs Law, which are under the jurisdiction of the CTA. We do not agree. The jurisdiction of the Court of Appeals over BARs petition stems from Section 1 in relation to Section 3, Rule 43 of the 1997 Rules of Civil Procedure which states that appeals from "awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi judicial functions[,]" which includes the Office of the President, may be taken to the Court of Appeals. BARs petition for review to the Court of Appeals from the 12 March 2007 Decision and 14 March 2008 Resolution of the Office of the President falls within the jurisdiction of the Court of Appeals. As noted by the Court of Appeals, the Office of the President took cognizance of Cruzs letter dated 4 December 2006 requesting for a review of the 31 August 2006 letter of Usec.

Mendoza. Deputy Exec. Sec. Gaite required BAR to pay the appeal fee and submit its appeal memorandum. Thereafter, the Office of the President issued its 12 March 2007 Decision affirming the decision of the Department of Finance and then denied BARs motion for reconsideration in its 14 March 2008 Resolution. BARs only recourse is to file a petition for review before the Court of Appeals under Rule 43 of the 1997 Rules on Civil Procedure. The exercise by the Court of Appeals of its appellate jurisdiction over the decision of the Office of the President is entirely distinct from the issue of whether BAR committed a procedural error in elevating the case before the Office of the President instead of filing its appeal before the CTA. Timeliness of the Appeal before the Office of the President The Court of Appeals ruled that the question of whether BARs appeal before the Office of the President was filed on time was rendered academic when BAR paid the appeal fee and submitted its appeal memorandum on time. The Court of Appeals held that Deputy Exec. Sec. Gaite could not validly require BAR to perfect its appeal in his 13 December 2006 Order and then rule, after its perfection, that the appeal was not filed on time. The Court of Appeals ruled that the 13 December 2006 Order of Deputy Exec. Sec. Gaite stopped BAR from pursuing any recourse with the CTA. The Court of Appeals further ruled that the Office of the President did not explain how the 31 August 2006 letter of Usec. Mendoza became a decision of the Secretary of Finance when it was only an advisory letter. We do not agree with the Court of Appeals. The Office of the President is not precluded from issuing the assailed decision in the same way that this Court is not proscribed from accepting a petition before it, requiring the payment of docket fees, directing the respondent to comment on the petition, and after studying the case, from ruling that the petition was filed out of time or that it lacks merit. However, Cruzs 4 December 2006 letters to then President Gloria Macapagal Arroyo and then Exec. Sec. Eduardo Ermita are not in the nature of an appeal provided for under Administrative Order No. 18, series of 1987 (AO 18).27 Section 1 of AO 18 provides that an appeal to the Office of the President shall be taken within 30 days from receipt by the aggrieved party of the decision, resolution or order complained of or appealed from. Section 2 of AO 18 cites caption, docket number of the case as presented in the office of origin, and addresses of the parties. Section 3 mentions pauper litigants. In sum, the appeal provided under AO 18 refers to adversarial cases. It does not refer to a review of administrative rules and regulations, as what BAR asked the Office of the President to do in this case. BAR, in writing the Office of the President, was exhausting its administrative remedies. BAR could still go to the regular courts after the Office of the President acted on its request for a review of Usec. Mendozas 31 August 2006 letter. The decision of the Office of the President did not foreclose BARs remedy to bring the matter to the regular courts. BAR is assailing the issuance and implementation of CAO 1-2005. CAO 1-2005 is an amendment to CAO 7-92. CAO 7-92 was issued "[b]y authority of Section 608, in relation to Section 3506, of the Tariff and Customs Code of the Philippines x x x." On this score, we do not agree with the Office of the President that BAR, instead of filing an appeal before its office, should have filed an appeal before the CTA in accordance with Section 7 of Republic Act No. 928228 (RA 9282) which reads: 85

Section 7. Jurisdiction. - The CTA shall exercise: (a) Exclusive appellate jurisdiction, to review by appeal, as herein provided: xxxx 4. Decisions of the Commissioner of Customs in vases involving liability for customs duties, fees and other money charges, seizure, detention or release of property affected, fines forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. Under Section 11 of RA 9282, an appeal to the CTA should be taken within 30 days from receipt of the assailed decision or ruling. However, Section 2313, Book II of Republic Act No. 1937 (RA 1937)29 provides: Section 2313. Review of Commissioner. - The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification on writing by the Collector of his action or decision, file a written notice to the Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision. Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed. If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall automatically be reviewed by the Commissioner and the records of the case shall be elevated within five (5) days from the promulgation of the decision of the Collector. The Commissioner shall render a decision on the automatic appeal within thirty (30) days from receipts of the records of the case. If the Collectors decision is reversed by the Commissioner, the decision of the Commissioner shall be final and executory. However, if the Collectors decision is affirmed, or if within thirty (30) days from receipt of the record of the case by the Commissioner no decision is rendered of the decision involves imported articles whose published value is five million pesos (P5,000,000) or more, such decision shall be deemed automatically appealed to the Secretary of Finance and the records of the proceedings shall be elevated within five (5) days from the promulgation of the decision of the Commissioner or of the Collector under appeal, as the case may be. Provided, further, That if the decision of the Commissioner or of the Collector under appeal, as the case may be, is affirmed by the Secretary of Finance, or if within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision is rendered, the decision of the Secretary of Finance, or of the Commissioner, or of the Collector under appeal, as the case may be, shall become final and executory. xxxx

Section 2402 of RA 1937 further provides: Section 2402. Review by Court of Appeals. - The party aggrieved by a ruling of the Commissioner in any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations. Clearly, what is appealable to the CTA are cases involving protest or seizure, which is not the subject of BARs appeal in these cases. BARs actions, including seeking an audience with the Secretary of Finance,30 as well as writing to the Executive Secretary and the Office of the President, are part of the administrative process to question the validity of the issuance of an administrative regulation, that is, of CAO 1-2005, entitled Amendments to Customs Administrative Order No. 7-92 (Rules and Regulations Governing the Overtime Pay and Other Compensations Related Thereto Due to Customs Personnel at the NAIA) . CAO 1-2005 was issued pursuant to Section 608 of the TCCP which provides: Section 608. Commissioner to Make Rules and Regulations. - The Commissioner shall, subject to the approval of the Secretary of Finance, promulgate all rules and regulations necessary to enforce the provisions of this Code. x x x The jurisdiction over the validity and constitutionality of rules and regulations issued by the Commissioner under Section 608 of the TCCP lies before the regular courts. It is not within the jurisdiction of the Office of the President or the CTA. Hence, the Office of the President erred in holding that BARs appeal was filed late because BAR can still raise the issue before the regular courts. Verification and Certification of Non-Forum Shopping The Office of the President, et al. allege that the Court of Appeals should have dismissed the petition because of BARs failure to comply fully with the requirements of verification and certification of non-forum shopping. We agree with the Court of Appeals in its liberal interpretation of the Rules. Verification of a pleading is a formal, not jurisdictional, requirement. 31 The requirement is simply a condition affecting the form of the pleading and non-compliance with the requirement does not render the pleading fatally defective.32 As regards the certification of non-forum shopping, this Court may relax the rigid application of the rules to afford the parties the opportunity to fully ventilate their cases on the merits.33 This is in line with the principle that cases should be decided only after giving all parties the chance to argue their causes and defenses.34 Technicality and procedural imperfections should not serve as basis of decisions and should not be used to defeat the substantive rights of the other party.35 Estoppel and Laches 86

The Office of the President, et al. allege that BAR is guilty of estoppel and laches because it did not question CAO 7-92 which had been in effect since 1992. The Office of the President, et al. argue that a direct attack of CAO 1-2005 is a collateral attack of CAO 7-92 since CAO 7-92 is the main administrative regulation enacted to implement Section 3506 of the TCCP. The argument has no merit. BAR is not questioning the validity of CAO 7-92 or Section 3506 of the TCCP. BAR is questioning the validity of CAO 1-2005 on the following grounds: (1) that it was approved in violation of BARs right to due process because its approval did not comply with the required publication notice under Section 9(2), Chapter I, Book VII, of the Administrative Code of the Philippines; (2) that CAO 1-2005 inappropriately based its justification on the declining value of the Philippine peso versus the U.S. dollar when services of the BOC are rendered without spending any foreign currency; and (3) that the increase in BOC rates aggravates the already high operating cost paid by the airlines which are still reeling from the impact of consecutive negative events such as SARS, Iraqi war, avian flu and the unprecedented increase in fuel prices. BARs objection to CAO 1-2005 could not be considered a direct attack on CAO 7-92 because BAR was merely objecting to the amendments to CAO 7-92. BAR did not question the validity of CAO 7-92 itself. Even during the pendency of these cases before the Court of Appeals, BAR members continued to pay the rates prescribed under CAO 7-92. It was only upon the promulgation of the Court of Appeals Decision declaring CAO 7-92 and CAO 1-2005 unconstitutional that BAR recommended to its members to stop paying the charges imposed by the BOC. Hence, BAR is not estopped from questioning CAO 1-2005 on the ground alone that it did not question the validity of CAO 7-92. Constitutionality of and Section 3506 of the TCCP CAO 7-92, CAO 1-2005

case or to serve the interests of justice or to avoid dispensing piecemeal justice. 36 Further, while it is true that the issue of constitutionality must be raised at the first opportunity, this Court, in the exercise of sound discretion, can take cognizance of the constitutional issues raised by the parties in accordance with Section 5(2)(a), Article VII of the 1987 Constitution.37 The Court has further ruled: When an administrative regulation is attacked for being unconstitutional or invalid, a party may raise its unconstitutionality or invalidity on every occasion that the regulation is being enforced. For the Court to exercise its power of judicial review, the party assailing the regulation must show that the question of constitutionality has been raised at the earliest opportunity. This requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same.38 Section 3506 of the TCCP provides: Section 3506. Assignment of Customs Employees to Overtime Work. - Customs employees may be assigned by a Collector to do overtime work at rates fixed by the Commissioner of Customs when the service rendered is to be paid by the importers, shippers or other persons served. The rates to be fixed shall not be less than that prescribed by law to be paid to employees of private enterprise. We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and operators from the coverage of Section 3506 of the TCCP. The term "other persons served" refers to all other persons served by the BOC employees. Airline companies, aircraft owners, and operators are among other persons served by the BOC employees. As pointed out by the OSG, the processing of embarking and disembarking from aircrafts of passengers, as well as their baggages and cargoes, forms part of the BOC functions. BOC employees who serve beyond the regular office hours are entitled to overtime pay for the services they render. The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft owners, and operators are not in the same category as importers and shippers because an importer "brings goods to the country from a foreign country and pays custom duties" while a shipper is "one who ships goods to another; one who engages the services of a carrier of goods; one who tenders goods to a carrier for transportation." However, airline passengers pass through the BOC to declare whether they are bringing goods that need to be taxed. The passengers cannot leave the airport of entry without going through the BOC. Clearly, airline companies, aircraft owners, and operators are among the persons served by the BOC under Section 3506 of the TCCP. The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the country; (2) the airline passengers; and (3) the airline companies which are expected to pass on the overtime pay to passengers. If the overtime pay is taken from all 87

The Office of the President, et al. allege that the Court of Appeals acted beyond its jurisdiction when it passed upon the validity of CAO 7-92 and Section 3506 of the TCCP. We do not agree with the Office of the President, et al. Section 8, Rule 51 of the 1997 Rules of Civil Procedure also states: Section 8. Questions that may be decided. - No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein, will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors. The Court of Appeals deemed it necessary to rule on the issue for the proper determination of these cases. The Court has ruled that the Court of Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the

taxpayers, even those who do not travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken directly from the passengers or from the airline companies, only those who benefit from the overtime services will pay for the services rendered. Here, Congress deemed it proper that the payment of overtime services shall be shouldered by the "other persons served" by the BOC, that is, the airline companies. This is a policy decision on the part of Congress that is within its discretion to determine. Such determination by Congress is not subject to judicial review. We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and sufficient standard tests. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is to enforce it. 39 The second test requires adequate guidelines or limitations in the law to determine the boundaries of the delegates authority and prevent the delegation from running riot. 40 Contrary to the ruling of the Court of Appeals, Section 3506 of the TCCP complied with these requirements. The law is complete in itself that it leaves nothing more for the BOC to do: it gives authority to the Collector to assign customs employees to do overtime work; the Commissioner of Customs fixes the rates; and it provides that the payments shall be made by the importers, shippers or other persons served. Section 3506 also fixed the standard to be followed by the Commissioner of Customs when it provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise. Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not receiving double compensation for the overtime pay, travel and meal allowances provided for under CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise. The overtime pay, travel and meal allowances are payment for additional work rendered after regular office hours and do not constitute double compensation prohibited under Section 8, Article IX(B) of the 1987 Constitution 41 as they are in fact authorized by law or Section 3506 of the TCCP. BAR raises the alleged failure of BOC to publish the required notice of public hearing and to conduct public hearings to give all parties the opportunity to be heard prior to the issuance of CAO 1-2005 as required under Section 9(2), Chapter I, Book VII of the Administrative Code of the Philippines. Section 9(2) provides: Sec. 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. (2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon. (3) In cases of opposition, the rules on contested cases shall be observed. BARs argument has no merit.

The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for two years, several meetings were conducted with the agencies concerned to discuss the proposal.BAR and the Airline Operators Council participated in these meetings and discussions. Hence, BAR cannot claim that it was denied due process in the imposition of the increase of the overtime rate. CAO 1-2005 was published in the Manila Standard, a newspaper of general circulation in the Philippines on 18 February 2005 42 and while it was supposed to take effect on 5 March 2005, or 15 days after its publication, the BOC-NAIA still deferred BARs compliance until 16 March 2005. WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 andSET ASIDE the 9 July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005 immediately. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. 156556-57 October 4, 2011

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ENRIQUE U. BETOY, Petitioner, vs. THE BOARD OF DIRECTORS, NATIONAL POWER CORPORATION, Respondent. DECISION PERALTA, J.: Before this Court is a special civil action for certiorari1 and supplemental petition for mandamus,2 specifically assailing National Power Board Resolutions No. 2002-124 and No. 2002-125, as well as Sections 11, 34, 38, 48, 52 and 63 of Republic Act (R.A.) No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA). Also assailed is Rule 33 of the Implementing Rules and Regulations (IRR) of the EPIRA. The facts of the case are as follows: On June 8, 2001, the EPIRA was enacted by Congress with the goal of restructuring the electric power industry and privatization of the assets of the National Power Corporation (NPC). Pursuant to Section 483 of the EPIRA, a new National Power Board of Directors (NPB) was created. On February 27, 2002, pursuant to Section 77 4 of the EPIRA, the Secretary of the Department of Energy promulgated the IRR. On the other hand, Section 63 of the EPIRA provides for separation benefits to officials and employees who would be affected by the restructuring of the electric power industry and the privatization of the assets of the NPC, to wit: Section 63. Separation Benefits of Officials and Employees of Affected Agencies. - National Government employees displaced or separated from the service as a result of the restructuring of the electricity industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a separation pay and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges provided under a separation plan which shall be one and one-half month salary for every year of service in the government: Provided, however, That those who avail of such privileges shall start their government service anew if absorbed by any government-owned successor company. In no case shall there be any diminution of benefits under the separation plan until the full implementation of the restructuring and privatization. Displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of the privatized companies. x x x5 Rule 336 of the IRR provided for the coverage and the guidelines for the separation benefits to be given to the employees affected.

On November 18, 2002, pursuant to Section 63 of the EPIRA and Rule 33 of the IRR, the NPB passed NPB Resolution No. 2002-1247 which, among others, resolved that all NPC personnel shall be legally terminated on January 31, 2003 and shall be entitled to separation benefits. On the same day, the NPB passed NPB Resolution No. 2002-125 8 which created a transition team to manage and implement the separation program. As a result of the foregoing NPB Resolutions, petitioner Enrique U. Betoy, together with thousands of his co-employees from the NPC were terminated. Hence, herein petition for certiorari with petitioner praying for the grant of the following reliefs from this Court, to wit: 1. Declaring National Power Board Resolution Nos. 2002-124 and 2002-125 and its Annex "B" Null and Void, the fact [that] it was done with extraordinary haste and in secrecy without the able participation of the Napocor Employees Consolidated Union (NECU) to represent all career civil service employees on issues affecting their rights to due process, equity, security of tenure, social benefits accrued to them, and as well as the disclosure of public transaction provisions of the 1987 Constitution because during its proceeding the National Power Board had acted with grave abuse of discretion and disregarding constitutional and statutory injunctions on removal of public servants and nondiminution of social benefits accrued to separated employees, thus, amounting to excess of jurisdiction; 2. Striking down Section 11, Section 48 and Section 52 of RA 9136 (EPIRA) for being violative of Section 13, Article VII of the 1987 Constitution and, therefore, unconstitutional; 3. Striking Section 34 of RA 9136 (EPIRA) for being exorbitant display of State Power and was not premised on the welfare of the FILIPINO PEOPLE or principle of salus populi est suprema lex; 4. Striking down Section 38 for RA 9136 (EPIRA) for being a prelude to Charter Change without a valid referendum for ratification of the entire voter citizens of the Philippine Republic; 5. Striking down all other provisions of RA 9136 (EPIRA) found repugnant to the 1987 Constitution; 6. Striking down all provisions of the Implementing Rules and Regulations (IRR) of the EPIRA found repugnant to the 1987 Constitution; 7. Striking down Section 63 of RA 9136 (EPIRA) for classifying such provisions in the same vein with Proclamation No. 50 used against MWSS employees and its failure to classify which condition comes first whether the restructuring effecting total reorganization of the electric power industry making NPC financially viable or the privatization of NPC assets where manpower reduction or sweeping/lay-off or 89

termination of career civil service employees follows the disposal of NPC assets. This is a clear case of violation of the EQUAL PROTECTION CLAUSE, therefore, unconstitutional; 8. Striking down Rule 33 of the Implementing Rules [and] Regulations (IRR) for disregarding the constitutional and statutory injunction on arbitrary removal of career civil service employees; and 9. For such other reliefs deemed equitable with justice and fairness to more than EIGHT THOUSAND (8,000) EMPLOYEES of the National Power Corporation (NPC) whose fate lies in the sound disposition of the Honorable Supreme Court.9 In addition, petitioner also filed a supplemental petition for mandamus praying for his reinstatement. The petition is without merit. Before anything else, this Court shall first tackle whether it was proper for petitioner to directly question the constitutionality of the EPIRA before this Court. Section 5(1) and (2), Article VIII of the 1987 Constitution provides that: SECTION 5. The Supreme Court shall have the following powers: 1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. 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.10 Based on the foregoing, this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, and habeas corpus, while concurrent with that of the Regional Trial Courts and the Court of Appeals, does not give litigants unrestrained freedom of choice of forum from which to seek such relief. 11 The determination of whether the assailed law and its implementing rules and regulations contravene the Constitution is within the jurisdiction of regular courts. The Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the Regional Trial Courts. 12 It has long been established that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, or where exceptional and

compelling circumstances justify availment of a remedy within and call for the exercise of our primary jurisdiction.13 Thus, herein petition should already be dismissed at the outset; however, since similar petitions have already been resolved by this Court tackling the validity of NPB Resolutions No. 2002-124 and No. 2002-125, as well as the constitutionality of certain provisions of the EPIRA, this Court shall disregard the procedural defect. Validity of NPB Resolutions No. 2002-124 and No. 2002-125 The main issue raised by petitioner deals with the validity of NPB Resolutions No. 2002-124 and No. 2002-125. In NPC Drivers and Mechanics Association (NPC DAMA) v. National Power Corporation (NPC),14 this Court had already ruled that NPB Resolutions No. 2002-124 and No. 2002-125 are void and of no legal effect. NPC Drivers involved a special civil action for Injunction seeking to enjoin the implementation of the same assailed NPB Resolutions. Petitioners therein put in issue the fact that the NPB Resolutions were not concluded by a duly constituted Board of Directors since no quorum in accordance with Section 48 of the EPIRA existed. In addition, petitioners therein argued that the assailed NPB Resolutions cannot be given legal effect as it failed to comply with Section 47 of the EPIRA which required the endorsement of the Joint Congressional Power Commission and the President of the Philippines. Ruling in favor of petitioners therein, this Court ruled that NPB Resolutions No. 2002-124 and No. 2002-125 are void and of no legal effect for failure to comply with Section 48 of the EPIRA, to wit: We agree with petitioners. In enumerating under Section 48 those who shall compose the National Power Board of Directors, the legislature has vested upon these persons the power to exercise their judgment and discretion in running the affairs of the NPC. Discretion may be defined as "the act or the liberty to decide according to the principles of justice and ones ideas of what is right and proper under the circumstances, without willfulness or favor. Discretion, when applied to public functionaries, means a power or right conferred upon them by law of acting officially in certain circumstances, according to the dictates of their own judgment and conscience, uncontrolled by the judgment or conscience of others. It is to be presumed that in naming the respective department heads as members of the board of directors, the legislature chose these secretaries of the various executive departments on the basis of their personal qualifications and acumen which made them eligible to occupy their present positions as department heads. Thus, the department secretaries cannot delegate their duties as members of the NPB, much less their power to vote and approve board resolutions, because it is their personal judgment that must be exercised in the fulfilment of such responsibility. xxxx In the case at bar, it is not difficult to comprehend that in approving NPB Resolutions No. 2002-124 and No. 2002-125, it is the representatives of the secretaries of the different executive departments and not the secretaries themselves who exercised judgment in passing the assailed Resolution, as shown by the fact that it is the signatures of the respective representatives that are affixed to the questioned Resolutions. This, to our mind, 90

violates the duty imposed upon the specifically enumerated department heads to employ their own sound discretion in exercising the corporate powers of the NPC. Evidently, the votes cast by these mere representatives in favor of the adoption of the said Resolutions must not be considered in determining whether or not the necessary number of votes was garnered in order that the assailed Resolutions may be validly enacted. Hence, there being only three valid votes cast out of the nine board members, namely those of DOE Secretary Vincent S. Perez, Jr.; Department of Budget and Management Secretary Emilia T. Boncodin; and NPC OIC-President Rolando S. Quilala, NPB Resolutions No. 2002-124 and No. 2002-125 are void and are of no legal effect.15 However, a supervening event occurred in NPC Drivers when it was brought to this Court's attention that NPB Resolution No. 2007-55 was promulgated on September 14, 2007 confirming and adopting the principles and guidelines enunciated in NPB Resolutions No. 2002-124 and No. 2002-125. On December 2, 2009, this Court promulgated a Resolution 16 clarifying the amount due the individual employees of NPC in view of NPB Resolution No. 2007-55. In said Resolution, this Court clarified the exact date of the legal termination of each class of NPC employees, thus: From all these, it is clear that our ruling, pursuant to NPB Resolution No. 2002-124, covers all employees of the NPC and not only the 16 employees as contended by the NPC. However, as regards their right to reinstatement, or separation pay in lieu of reinstatement, pursuant to a validly approved Separation Program, plus backwages, wage adjustments, and other benefits, the same shall be computed from the date of legal termination as stated in NPC Circular No. 2003-09, to wit: a) The legal termination of key officials, i.e., the Corporate Secretary, VicePresidents and Senior Vice-Presidents who were appointed under NP Board Resolution No. 2003-12, shall be at the close of office hours of January 31, 2003. b) The legal termination of personnel who availed of the early leavers' scheme shall be on the last day of service in NPC but not beyond January 15, 2003. c) The legal termination of personnel who were no longer employed in NPC after June 26, 2001 shall be the date of actual separation in NPC. d) For all other NPC personnel, their legal termination shall be at the close of office hours/shift schedule of February 28, 2003.17 As to the validity of NPB Resolution No. 2007-55, this Court ruled that the same will have a prospective effect, to wit: What then is the effect of the approval of NPB Resolution No. 2007-55 on 14 September 2007? The approval of NPB Resolution No. 2007-55, supposedly by a majority of the National Power Board as designated by law, that adopted, confirmed and approved the contents of NPB Resolutions No. 2002-124 and No. 2002-125 will have a prospective effect,

not a retroactive effect. The approval of NPB Resolution No. 2007-55 cannot ratify and validate NPB Resolutions No. 2002-124 and No. 2002-125 as to make the termination of the services of all NPC personnel/employees on 31 January 2003 valid, because said resolutions were void. The approval of NPB Resolution No. 2007-55 on 14 September 2007 means that the services of all NPC employees have been legally terminated on this date. All separation pay and other benefits to be received by said employees will be deemed cut on this date. The computation thereof shall, therefore, be from the date of their illegal termination pursuant to NPB Resolutions No. 2002-124 and No. 2002-125 as clarified by NPB Resolution No. 200311 and NPC Resolution No. 2003-09 up to 14 September 2007. Although the validity of NPB Resolution No. 2007-55 has not yet been passed upon by the Court, same has to be given effect because NPB Resolution No. 2007-55 enjoys the presumption of regularity of official acts. The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty. Thus, until and unless there is clear and convincing evidence that rebuts this presumption, we have no option but to rule that said resolution is valid and effective as of 14 September 2007.18 Based on the foregoing, this Court concluded that the computation of the amounts due the employees who were terminated and/or separated as a result of, or pursuant to, the nullified NPB Board Resolutions No. 2002-124 and No. 2002-125 shall be from their date of illegal termination up to September 14, 2007 when NPB Resolution No. 2007-55 was issued. Thus, the resolution of the validity of NPB Board Resolutions No. 2002-124 and No. 2002125 is, therefore, moot and academic in view of the Court's pronouncements in NPC Drivers. Anent the question of the constitutionality of Section 63 of RA 9136, as well as Rule 33 of the IRR, this Court finds that the same is without merit. A reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. 19 It could result in the loss of ones position through removal or abolition of an office. However, for a reorganization for the purpose of economy or to make the bureaucracy more efficient to be valid, it must pass the test of good faith; otherwise, it is void ab initio.20 It is undisputed that NPC was in financial distress and the solution found by Congress was to pursue a policy towards its privatization. The privatization of NPC necessarily demanded the restructuring of its operations. To carry out the purpose, there was a need to terminate employees and re-hire some depending on the manpower requirements of the privatized companies. The privatization and restructuring of the NPC was, therefore, done in good faith as its primary purpose was for economy and to make the bureaucracy more efficient. In Freedom from Debt Coalition v. Energy Regulatory Commission, 21 this Court discussed why there was a need for a shift towards the privatization and restructuring of the electric power industry, to wit:

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One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It established a new policy, legal structure and regulatory framework for the electric power industry. The new thrust is to tap private capital for the expansion and improvement of the industry as the large government debt and the highly capital-intensive character of the industry itself have long been acknowledged as the critical constraints to the program. To attract private investment, largely foreign, the jaded structure of the industry had to be addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution side was fragmented with over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of existing generation capacity; extremely high and uncompetitive power rates; poor quality of service to consumers; dismal to forgettable performance of the government power sector; high system losses; and an inability to develop a clear strategy for overcoming these shortcomings. Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the assets of the National Power Corporation (NPC), the transition to a competitive structure, and the delineation of the roles of various government agencies and the private entities. The law ordains the division of the industry into four (4) distinct sectors, namely: generation, transmission, distribution and supply. Corollarily, the NPC generating plants have to be privatized and its transmission business spun off and privatized thereafter.22 Petitioner argues that bad faith is clearly manifested as the reorganization has an eye to replace current favorite less competent appointees. In addition, petitioner contends that qualifications and behavioral aspect were being set aside.23 Section 2 of R.A. No. 6656 24 cites certain circumstances showing bad faith in the removal of employees as a result of any reorganization, thus: Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and hearing. A valid cause for removal exist when, pursuant to a bona fide reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following circumstances may be considered as evidence of bad faith in the removals made as a result of the reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party: a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; b) Where an office is abolished and another performing substantially the same functions is created; c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;

d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices; and e) Where the removal violates the order of separation provided in Section 3 hereof. The Solicitor General, however, argues that petitioner has not shown any circumstance to prove that the restructuring of NPC was done in bad faith. We agree. Petitioner's allegation that the reorganization was merely undertaken to accommodate new appointees is at most speculative and bereft of any evidence on record. It is settled that bad faith must be duly proved and not merely presumed. It must be proved by clear and convincing evidence,25 which is absent in the case at bar. In addition, petitioner has no legal or vested right to be reinstated as Section 63 of the EPIRA as well as Section 5, Rule 33 of the IRR clearly state that the displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of the privatized companies. Clearly, the law only speaks of preference and by no stretch of the imagination can the same amount to a legal right to the position. Undoubtedly, not all the terminated employees will be re-hired by the selection committee as the manpower requirement of the privatized companies will be different. As correctly observed by the Solicitor General, the selection of employees for purposes of rehiring them necessarily entails the exercise of discretion or judgment. 26 Such being the case, petitioner, cannot, by way of mandamus, compel the selection committee to include him in the re-hired employees, more so, since there is no evidence showing that said committee acted with grave abuse of discretion or that the re-hired employees were merely accommodated and not qualified. Validity of Sections 11, 48, and 52 of RA 9136 Petitioner argues that Sections 11,27 48,28 and 5229 of the EPIRA are unconstitutional for violating Section 13, Article VII of the 1987 Constitution. Section 13, Article VII of the 1987 Constitution provides: Sec. 13. The President, Vice-President, the Members of the Cabinet, and their deputies or assistants shall not, unless otherwise provided in this Constitution, hold any other office or employment during their tenure. They shall not, during said tenure, directly or indirectly practice any other profession, participate in any business, or be financially interested in any contract with, or in any franchise, or special privilege granted by the Government or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries. They shall strictly avoid conflict of interest in the conduct of their office. x x x x.30

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In Civil Liberties Union v. Executive Secretary ,31 this Court explained that the prohibition contained in Section 13, Article VII of the 1987 Constitution does not apply to posts occupied by the Executive officials specified therein without additional compensation in an exofficio capacity as provided by law and as required by the primary function of said official's office, to wit: The prohibition against holding dual or multiple offices or employment under Section 13, Article VII of the Constitution must not, however, be construed as applying to posts occupied by the Executive officials specified therein without additional compensation in an ex-officio capacity as provided by law and as required by the primary functions of said officials' office. The reason is that these posts do not comprise "any other office" within the contemplation of the constitutional prohibition but are properly an imposition of additional duties and functions on said officials. To characterize these posts otherwise would lead to absurd consequences, among which are: The President of the Philippines cannot chair the National Security Council reorganized under Executive Order No. 115 (December 24, 1986). Neither can the Vice-President, the Executive Secretary, and the Secretaries of National Defence, Justice, Labor and Employment and Local Government sit in this Council, which would then have no reason to exist for lack of a chairperson and members. The respective undersecretaries and assistant secretaries, would also be prohibited. xxxx The term "primary" used to describe "functions" refers to the order of importance and thus means chief or principal function. The term is not restricted to the singular but may refer to the plural. The additional duties must not only be closely related to, but must be required by the official's primary functions. Examples of designations to positions by virtue of one's primary functions are the Secretaries of Finance and Budget, sitting as members of the Monetary Board, and the Secretary of Transportation and Communications, acting as Chairman of the Maritime Industry Authority and the Civil Aeronautics Board.32 The designation of the members of the Cabinet to form the NPB does not violate the prohibition contained in our Constitution as the privatization and restructuring of the electric power industry involves the close coordination and policy determination of various government agencies. Section 2 of the EPIRA clearly shows that the policy toward privatization would involve financial, budgetary and environmental concerns as well as coordination with local government units, to wit: SECTION 2. Declaration of Policy. It is hereby declared the policy of the State: (a) To ensure and accelerate the total electrification of the country; (b) To ensure the quality, reliability, security and affordability of the supply of electric power; (c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;

(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors; (e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; (f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power; (g) To assure socially and environmentally compatible energy sources and infrastructure; (h) To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported energy; (i) To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC); (j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; and (k) To encourage the efficient use of energy and other modalities of demand side management. As can be gleaned from the foregoing enumeration, the restructuring of the electric power industry inherently involves the participation of various government agencies. In Civil Liberties, this Court explained that mandating additional duties and functions to Cabinet members which are not inconsistent with those already prescribed by their offices or appointments by virtue of their special knowledge, expertise and skill in their respective executive offices, is a practice long-recognized in many jurisdictions. It is a practice justified by the demands of efficiency, policy direction, continuity and coordination among the different offices in the Executive Branch in the discharge of its multifarious tasks of executing and implementing laws affecting national interest and general welfare and delivering basic services to the people.33 The production and supply of energy is undoubtedly one of national interest and is a basic commodity expected by the people. This Court, therefore, finds the designation of the respective members of the Cabinet, as ex-officiomembers of the NPB, valid. This Court is not unmindful, however, that Section 48 of the EPIRA is not categorical in proclaiming that the concerned Cabinet secretaries compose the NPB Board only in an exofficio capacity. It is only in Section 52 creating the Power Sector Assets and Liabilities 93

Management Corporation (PSALM) that they are so designated in an ex-officio capacity. Sections 4 and 6 of the EPIRA provides: Section 4. TRANSCO Board of Directors. All the powers of the TRANSCO shall be vested in and exercised by a Board of Directors. The Board shall be composed of a Chairman and six (6) members. The Secretary of the DOF shall be the ex-officio Chairman of the Board. The other members of the TRANSCO Board shall include the Secretary of the DOE, the Secretary of the DENR, the President of TRANSCO, and three (3) members to be appointed by the President of the Philippines, each representing Luzon, Visayas and Mindanao, one of whom shall be the President of PSALM. x x x x. Section 6. PSALM Board of Directors. PSALM shall be administered, and its powers and functions exercised, by a Board of Directors which shall be composed of the Secretary of the DOF as the Chairman, and the Secretary of the DOE, the Secretary of the DBM, the Director-General of the NEDA, the Secretary of the DOJ, the Secretary of the DTI and the President of the PSALM as ex-officio members thereof. Nonetheless, this Court agrees with the contention of the Solicitor General that the constitutional prohibition was not violated, considering that the concerned Cabinet secretaries were merely imposed additional duties and their posts in the NPB do not constitute "any other office" within the contemplation of the constitutional prohibition. The delegation of the said official to the respective Board of Directors were designation by Congress of additional functions and duties to the officials concerned, i.e., they were designated as members of the Board of Directors. Designation connotes an imposition of additional duties, usually by law, upon a person already in the public service by virtue of an earlier appointment.34 Designation does not entail payment of additional benefits or grant upon the person so designated the right to claim the salary attached to the position. Without an appointment, a designation does not entitle the officer to receive the salary of the position. The legal basis of an employee's right to claim the salary attached thereto is a duly issued and approved appointment to the position, and not a mere designation.35 Hence, Congress specifically intended that the position of member of the Board of NPB shall be ex-officio or automatically attached to the respective offices of the members composing the board. It is clear from the wordings of the law that it was the intention of Congress that the subject posts will be adjunct to the respective offices of the official designated to such posts. The foregoing discussion, notwithstanding, the concerned officials should not receive any additional compensation pursuant to their designation as ruled in Civil Liberties, thus:

The ex-officio position being actually and in legal contemplation part of the principal office, it follows that the official concerned has no right to receive additional compensation for his services in the said position. The reason is that these services are already paid for and covered by the compensation attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an ex-officio member thereof, he is actually and in legal contemplation performing the primary function of his principal office in defining policy in monetary and banking matters, which come under the jurisdiction of his department. For such attendance, therefore, he is not entitled to collect any extra compensation, whether it be in the form of a per diem or an honorarium or an allowance, or some other such euphemism. By whatever name it is designated, such additional compensation is prohibited by the Constitution. In relation thereto, Section 14 of the EPIRA provides: SEC. 14. Board Per Diems and Allowances. The members of the Board shall receive per diem for each regular or special meeting of the board actually attended by them and, upon approval of the Secretary of the Department of Finance, such other allowances as the Board may prescribe. Section 14 relates to Section 11 which sets the composition of the TRANSCO Board naming the Secretary of the Department of Finance as the ex officio Chairman of the Board. The other members of the TRANSCO Board include the Secretary of the Department of Energy and the Secretary of the Department of Environment and Natural Resources. However, considering the constitutional prohibition, it is clear that such emoluments or additional compensation to be received by the members of the NPB do not apply and should not be received by those covered by the constitutional prohibition, i.e., the Cabinet secretaries. It is to be noted that three of the members of the NPB are to be appointed by the President, who would be representing the interests of those in Luzon, Visayas, and Mindanao, who may be entitled to such honorarium or allowance if they do not fall within the constitutional prohibition. Hence, the said cabinet officials cannot receive any form of additional compensation by way of per diems and allowances. Moreover, any amount received by them in their capacity as members of the Board of Directors should be reimbursed to the government, since they are prohibited from collecting additional compensation by the Constitution. These interpretations are consistent with the fundamental rule of statutory construction that a statute is to be read in a manner that would breathe life into it, rather than defeat it, 36 and is supported by the criteria in cases of this nature that all reasonable doubts should be resolved in favor of the constitutionality of a statute.37 Constitutionality of Section 3438 of the EPIRA The Constitutionality of Section 34 of the EPIRA has already been passed upon by this Court in Gerochi v. Department of Energy,39 to wit: Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution and not one 94

that is doubtful, speculative, or argumentative. Indubitably, petitioners failed to overcome this presumption in favor of the EPIRA. We find no clear violation of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are unconstitutional and void.40 In Gerochi, this Court ruled that the Universal Charge is not a tax but an exaction in the exercise of the State's police power. The Universal Charge is imposed to ensure the viability of the country's electric power industry. Petitioner argues that the imposition of a universal charge to address the stranded debts and contract made by the government through the NCC-IPP contracts or Power Utility-IPP contracts or simply the bilateral agreements or contracts is an added burden to the electricity-consuming public on their monthly power bills. It would mean that the electricityconsuming public will suffer in carrying this burden for the errors committed by those in power who runs the affairs of the State. This is an exorbitant display of State Power at the expense of its people.41 It is basic that the determination of whether or not a tax is excessive oppressive or confiscatory is an issue which essentially involves a question of fact and, thus, this Court is precluded from reviewing the same. Validity of Section 3842 of the EPIRA Petitioner argues that the abolishment of the ERB and its replacement of a very powerful quasi-judicial body named the Energy Regulatory Commission (ERC), pursuant to Section 38 up to Section 43 of the EPIRA or RA 9136, which is tasked to dictate the day-to-day affairs of the entire electric power industry, seems a prelude to Charter Change. Petitioner submits that under the 1987 Constitution, there are only three constitutionally-recognized Commissions, they are: the Civil Service Commission (CSC), the Commission on Audit (COA) and the Commission on Elections (COMELEC).43 Petitioners argument that the creation of the ERC seems to be a prelude to charter change is flimsy and finds no support in law. This Court cannot subscribe to petitioners thesis that "in order for the newly-enacted RA 9136 or EPIRA to become a valid law, we should have to call first a referendum to amend or totally change the People's Charter." 44 In any case, the constitutionality of the abolition of the ERB and the creation of the ERC has already been settled in Kapisanan ng mga Kawani ng Energy Regulatory Board v. Commissioner Fe Barin,45 to wit: All laws enjoy the presumption of constitutionality. To justify the nullification of a law, there must be a clear and unequivocal breach of the Constitution. KERB failed to show any breach of the Constitution. A public office is created by the Constitution or by law or by an officer or tribunal to which the power to create the office has been delegated by the legislature. The power to create an

office carries with it the power to abolish. President Corazon C. Aquino, then exercising her legislative powers, created the ERB by issuing Executive Order No. 172 on 8 May 1987. The question of whether a law abolishes an office is a question of legislative intent. There should not be any controversy if there is an explicit declaration of abolition in the law itself. Section 38 of RA 9136 explicitly abolished the ERB. x x x46 Moreover, in Kapisanan, this Court ruled that because of the expansion of the ERC's functions and concerns, there was a valid abolition of the ERB. 47 Validity of Section 6348 Contrary to petitioner's argument, Section 63 of the EPIRA and Section 33 of the IRR of the EPIRA did not impair the vested rights of NPC personnel to claim benefits under existing laws. Neither does the EPIRA cut short the years of service of the employees concerned. If an employee availed of the separation pay and other benefits in accordance with existing laws or the superior separation pay under the NPC restructuring plan, it is but logical that those who availed of such privilege will start their government service anew if they will later be employed by any government-owned successor company or government instrumentality. It is to be noted that this Court ruled in the case of Herrera v. National Power Corporation,49 that Section 63 of the EPIRA precluded the receipt by the terminated employee of both separation and retirement benefits under the Government Service Insurance System (GSIS) organic law, or Commonwealth Act (C.A.) No. 186.50 However, it must be clarified that this Courts pronouncements in Herrera that separated and retired employees of the NPC "are not entitled to receive retirement benefits under C.A. No. 186," referred only to the gratuity benefits granted by R.A. No. 1616,51 which was to be paid by NPC as the last employer. It did not proscribe the payment of retirement benefits to qualified retirees under R.A. No. 660,52 Presidential Decree (P.D.) No. 1146,53 R.A. No. 8291,54 and other GSIS and social security laws. The factual and procedural antecedents of Herrera reveal that it arose from a case between NPC and several of its separated employees who were asking additional benefits from NPC under R.A. No. 1616 after receiving from the former separation benefits under Section 63 of R.A. No. 9136. Unable to resolve the issue with its former employees amicably, NPC filed a petition for declaratory relief, docketed as Civil Case SCA No. Q-03-50681, 55 before the Regional Trial Court of Quezon City, raising the issue of whether or not the employees of NPC are entitled to receive retirement benefits under R.A. No. 1616 over and above the separation benefits granted by R.A. No. 9136.56 Under R.A. No. 1616, a gratuity benefit is given to qualified retiring members of the GSIS, which is payable by the last employer. In addition to said gratuity benefits, the qualified employee shall also be entitled to a refund of retirement premiums paid, consisting of 95

personal contributions of the employee plus interest, and government share without interest, payable by the GSIS. It effectively amended Section 12 (c) of C.A. No. 186, as follows: (c) Retirement is likewise allowed to any official or employee, appointive or elective, regardless of age and employment status, who has rendered a total of at least twenty years of service, the last three years of which are continuous. The benefit shall, in addition to the return of his personal contributions with interest compounded monthly and the payment of the corresponding employer's premiums described in subsection (a) of Section five hereof, without interest, be only a gratuity equivalent to one month's salary for every year of the first twenty years of service, plus one and one-half months salary for every year of service over twenty but below thirty years and two months salary for every year of service over thirty years in case of employees based on the highest rate received and in case of elected officials on the rates of pay as provided by law . This gratuity is payable on the rates of pay as provided by law. This gratuity is payable by the employer or officer concerned which is hereby authorized to provide the necessary appropriation or pay the same from any unexpended items of appropriations or savings in its appropriations. Officials and employees retired under this Act shall be entitled to the commutation of the unused vacation and sick leave, based on the highest rate received, which they may have to their credit at the time of retirement. x x x 57 (Emphasis supplied.) After trial, the RTC rendered a Decision ruling against the NPC employees, the decretal portion of which reads: WHEREFORE, premises considered, Republic Act No. 9136 DID NOT SPECIFICALLY AUTHORIZE the National Power Corporation to grant retirement benefits under Republic Act No. 1616 in addition to separation pay under Republic Act No. 9136. SO ORDERED.58 Petitioners therein then sought recourse directly to this Court on a pure question of law. In the preparatory statement of the Petition for Review on Certiorari, 59 it is apparent that the case was limited only to the interpretation of Section 63 of R.A. No. 9136, in relation to R.A. No. 1616, on the matter of retirement benefits, to wit: This is a case of first impression limited to the interpretation of Section 63, R.A. 9136 (EPIRA), granting separation pay to terminated NAPOCOR employees, in relation to R.A. 1616, on the matter of retirement benefits. Respondents NAPOCOR and DEPARTMENT OF BUDGET AND MANAGEMENT erroneously contend that the entitlement to the separation pay under R.A. 9136 forfeits the retirement benefit under R.A. 1616. Petitioners most respectfully submit that since R.A. 9136 and R.A. 1616 are not inconsistent with each other and they have distinct noble purposes, entitlement to separation pay will not disqualify the separated employee who is qualified to retire from receiving retirement benefits allowed under another law. x x x60 However, in the Decision dated December 18, 2009, it was held that petitioners therein were not only entitled to receive retirement benefits under R.A. No. 1616 but also were "not entitled to receive retirement benefits under Commonwealth Act No. 186, as amended,"

which, in effect, might lead to the conclusion that the declaration encompassed all other benefits granted by C.A. No. 186 to its qualified members. In relation to R.A. No. 1616, Herrera should have affected only the payment of gratuity benefits by NPC, being the last employer, to its separated employees. It was even categorically stated that petitioners therein were "entitled to a refund of their contributions to the retirement fund, and the monetary value of any accumulated vacation and sick leaves,"61 which is clearly congruous to the mandate of R.A. No. 1616. The matter of availment of retirement benefits of qualified employees under any other law to be paid by the GSIS should not and was not covered by the decision. In the first place, it was never an issue. In the case of Santos v. Servier Philippines, Inc., 62 citing Aquino v. National Labor Relations Commission,63 We declared that the receipt of retirement benefits does not bar the retiree from receiving separation pay. Separation pay is a statutory right designed to provide the employee with the wherewithal during the period that he/she is looking for another employment. On the other hand, retirement benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying about his financial support, and are a form of reward for his loyalty and service to the employer. A separation pay is given during ones employable years, while retirement benefits are given during ones unemployable years. Hence, they are not mutually exclusive.64 Even in the deliberations of Congress during the passage of R.A. No. 9136, it was manifest that it was not the intention of the law to infringe upon the vested rights of NPC personnel to claim benefits under existing laws. To assure the worried and uneasy NPC employees, Congress guaranteed their entitlement to a separation pay to tide them over in the meantime.65 More importantly, to further allay the fears of the NPC employees, especially those who were nearing retirement age, Congress repeatedly assured them in several public and congressional hearings that on top of their separation benefits, they would still receive their retirement benefits, as long as they would qualify and meet the requirements for its entitlement. The transcripts of the Public Consultative Meeting on the Power Bill held on February 16, 2001, disclose the following: xxxx THE CHAIRMAN (SEN. J. OSMENA). Well, the other labor representation here is Mr. Anguluan. MR. ANGULUAN: Yes, Your Honor. THE CHAIRMAN (SEN. J. OSMENA). Okay. Will you present your paper? MR. ANGULUAN: We have prepared a paper which we have sent to the honorable members of the Bicam. x x x.

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THE CHAIRMAN (SEN. J. OSMENA). I dont think anyone is going to deprive you of your rights under the law. You will enjoy all your rights. You will receive retirement benefits, separation pay, and all of the rights that are provided to you by law. What we have objected to in the Senate is retirement benefits higher than what everybody else gets, like 150 percent or subject to the approval of the board which means sky is the limit. So, we have objected to that. But what you are entitled to under the law, you will get under the law and nobody will deprive you of that.66 A year later, on February 12, 2002, the Joint Congressional Power Commission was held. The transcripts of the hearing bare the following: xxxx THE CHAIRMAN (REP. BADELLES). They will still be subject to the same conditions. Meaning, NPC has the discretion whether to reabsorb or hire back those that avail of the separation benefits. SEN. OSMENA (J). No. But they are not being - - the plants are not being sold, so they are but what we are giving them is a special concession of retiring early. No, okay. You consider . . . THE CHAIRMAN (REP. BADELLES). We are not speaking of retirement here , we are speaking of theirseparation benefits . . . SEN. OSMENA (J). Okay, separation benefits. THE CHAIRMAN (REP. BADELLES). Precisely, if they are considered terminated. SEN. OSMENA (J). All right. Separation . . . THE CHAIRMAN (REP. program than separation. BADELLES). A retirement plan is a different

In R.A. No. 1616, which is the subject issue in Herrera, the retirees are entitled to gratuity benefits to be paid by the last employer and refund of premiums to be paid by the GSIS. On the other hand, retirement benefits under C.A. No. 186, as amended by R.A. No. 8291, are to be paid by the GSIS. Stated otherwise, under R.A. No. 1616, what would be paid by the last employer, NPC, would be gratuity benefits, and GSIS would merely refund the retirement premiums consisting of personal contributions of the employee plus interest, and the employers share without interest. Under C.A. No. 186, as amended, it is the GSIS who would pay the qualified employees their retirement benefits. Indeed, with several amendments to C.A. No. 186, 68 the Court finds it necessary to clarify Herrera and categorically declare that it affected only those seeking benefits under R.A. No. 1616.69 It could not have meant to affect those employees who retired, and who will retire, under the different amendatory laws of C.A. No. 186 like R.A. No. 660,70 P.D. No. 114671 and R.A. No. 8291.72 At any rate, entitlement of qualified employees to receive separation pay and retirement benefits is not proscribed by the 1987 Constitution. Section 8 of Article IX (B) of the 1987 Constitution reads: SEC. 8. No elective or appointive public officer or employee shall receive additional, double or indirect compensation, unless specifically authorized by law, nor accept without the consent of the Congress, any present, emolument, office, or title of any kind from any foreign government. Pensions or gratuities shall not be considered as additional, double, or indirect compensation.73 Moreover, retirement benefits under C.A. No. 186 are not even considered as compensation. Section 2 (e) of C.A. No. 186 categorically states that Benefits granted by this Act by virtue of such life or retirement insurance shall not be considered as compensation or emolument.74 Under the GSIS law, the retired employees earned their vested right under their contract of insurance after they religiously paid premiums to GSIS. Under the contract, GSIS is bound to pay the retirement benefits as it received the premiums from the employees and NPC. In Marasigan v. Cruz,75 this Court ratiocinated that:

SEN. OSMENA (J). Separation benefits, okay. THE CHAIRMAN (REP. BADELLES). All right.67 Thus, it is clear that a separation pay at the time of the reorganization of the NPC and retirement benefits at the appropriate future time are two separate and distinct entitlements. Stated otherwise, a retirement plan is a different program from a separation package. There is a whale of a difference between R.A. No. 1616 and C.A. No. 186, together with its amendatory laws. They have different legal bases, different sources of funds and different intents. A retirement law such as C.A. 186 and amendatory laws is in the nature of a contract between the government and its employees. When an employee joins the government service, he has a right to expect that after rendering the required length of service and fulfilled the conditions stated in the laws on retirement, he would be able to enjoy the benefits provided in said laws. He regularly pays the dues prescribed therefore. It would be cruel to deny him the benefits he had been expecting at the end of his service by imposing conditions for his retirement, which are not found in the law. It is believed to be a legal duty as well as a moral obligation on the part of the government to honor its commitments to its 97

employees when as in this case, they have met all the conditions prescribed by law and are therefore entitled to receive their retirement benefits.76 Thus, where the employee retires and meets the eligibility requirements, he acquires a vested right to benefits that is protected by the due process clause. Retirees enjoy a protected property interest whenever they acquire a right to immediate payment under preexisting law. Thus, a pensioner acquires a vested right to benefits that have become due as provided under the terms of the public employees pension statute. No law can deprive such person of his pension rights without due process of law, that is, without notice and opportunity to be heard.77Verily, when an employee has complied with the statutory requirements to be entitled to receive his retirement benefits, his right to retire and receive what is due him by virtue thereof becomes vested and may not thereafter be revoked or impaired.
1avvphi1

Mechanics Association (NPC DAMA) v. National Power Corporation (NPC) 79 and by the above disquisitions. In Conclusion While we commend petitioner's attempt to argue against the privatization of the NPC, it is not the proper subject of herein petition. Petitioner belabored on alleging facts to prove his point which, however, go into policy decisions which this Court must not delve into less we violate separation of powers. The wisdom of the privatization of the NPC cannot be looked into by this Court as it would certainly violate this guarded principle. The wisdom and propriety of legislation is not for this Court to pass upon. 80 Every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative or argumentative.81 As in National Power Corporation Employees Consolidated Union (NECU) v. National Power Corporation (NPC),82this Court held: Whether the States policy of privatizing the electric power industry is wise, just, or expedient is not for this Court to decide. The formulation of State policy is a legislative concern. Hence, the primary judge of the necessity, adequacy, wisdom, reasonableness and expediency of any law is primarily the function of the legislature.83 WHEREFORE, premises considered and subject to the above disquisitions, the Petition for Certiorari and the Supplemental Petition for Mandamus are Dismissed for lack of merit. SO ORDERED.

Moreover, Section 63 of the EPIRA law, if misinterpreted as proscribing payment of retirement benefits under the GSIS law, would be unconstitutional as it would be violative of Section 10, Article III of the 1987 Constitution 78 or the provision on non-impairment of contracts. In view of the fact that separation pay and retirement benefits are different entitlements, as they have different legal bases, different sources of funds, and different intents, the "exclusiveness of benefits" rule provided under R.A. No. 8291 is not applicable. Section 55 of R.A. No. 8291 states: "Whenever other laws provide similar benefits for the same contingencies covered by this Act, the member who qualifies to the benefits shall have the option to choose which benefits will be paid to him." Accordingly, the Court declares that separated, displaced, retiring, and retired employees of NPC are legally entitled to the retirement benefits pursuant to the intent of Congress and as guaranteed by the GSIS laws. Thus, the Court reiterates: 1] that the dispositive portion in Herrera holding that separated and retired employees "are not entitled to receive retirement benefits under Commonwealth Act No. 186," referred only to the gratuity benefits under R.A. No. 1616, which was to be paid by NPC, being the last employer; 2] that it did not proscribe the payment of the retirement benefits to qualified retirees under R.A. No. 660, P.D. No. 1146, R.A. No. 8291, and other GSIS and social security laws; and

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 185535 January 31, 2011

3] that separated, rehired, retiring, and retired employees should receive, and continue to receive, the retirement benefits to which they are legally entitled. Petition for Mandamus As for petitioner's prayer that he be reinstated, suffice it to state that the issue has been rendered moot by the Decision and Resolutions of this Court in the case of NPC Drivers and

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs. REYNALDO (REYMUNDO1 ) AVILA, CALIXTO AGUIRRE, and SPS. ROLANDO and ANGELITA QUILANG,Respondents. DECISION

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MENDOZA, J.: This is a petition for review on certiorari under Rule 45 filed by the Manila International Airport Authority (MIAA) seeking to reverse and set aside the June 16, 2008 Decision 2 of the Court of Appeals (CA) in CA-G.R. SP No. 97536 which annulled the August 7, 2006 3 and the November 13, 20064 Resolutions of the Regional Trial Court of Pasay City, Branch 117 (RTC), in Civil Case No. 05-0399-CFM. From the records, it appears that in June 1968, the late Tereso Tarrosa (Tarrosa) leased a 4,618 square meter parcel of land located along the MIAA Road in Pasay City from its owner, MIAA. Before the expiration of the lease sometime in 1993, Tarrosa filed a case against MIAA to allow him to exercise his pre-emptive right to renew the lease contract. Finding that Tarrosa violated certain provisions of its contract with MIAA, the trial court dismissed the case. Tarrosa appealed before the CA but to no avail. When Tarrosa passed away, he was substituted by his estate represented by his heirs attorney-in-fact, Annie Balilo (Balilo). On June 9, 1998, the CA decision became final and executory.5 Thereafter, MIAA sent letters of demand to the heirs asking them to vacate the subject land. Unheeded, MIAA instituted an ejectment suit against the Estate of Tarrosa (Estate) before the Metropolitan Trial Court of Pasay City, Branch 47 (MeTC), docketed as Civil Case No. 64-04-CFM. On February 18, 2005, the MeTC rendered its decision6 ordering the Estate and all persons claiming rights under it to vacate the premises, peacefully return possession thereof to MIAA and pay rentals, attorneys fees and costs of suit. The Estate, through Balilo, appealed the case to the RTC, where it was docketed as Civil Case No. 05-0399-CFM. In its July 22, 2005 Decision, 7 the RTC gave due course to the appeal and affirmed the MeTC decision in toto. The Estate then filed a motion for reconsideration while MIAA sought the correction of a clerical error in the MeTC decision as well as the issuance of a writ of execution. On September 20, 2005, the RTC issued an omnibus order8 denying the Estates motion for reconsideration, granting MIAAs motion to correct a clerical error and granting the motion for the issuance of a writ of execution. On the strength of the writ of execution issued by the RTC, a notice to vacate was served on the occupants of the subject premises. The RTC Sheriff partially succeeded in evicting the Estate, Balilo and some other occupants. Still, others remained in the premises. 9 Among the remaining occupants were respondents Calixto E. Aguirre (Aguirre), Reymundo Avila (Avila), and spouses Rolando and Angelita Quilang (Quilangs), who filed separate special appearances with motions to quash the writ of execution. 10 In essence, all of them interposed that they were not covered by the writ of execution because they did not derive their rights from the Estate since they entered the subject premises only after the expiration of the lease contract between MIAA and Tarrosa. They further stated that the subject premises had already been set aside as a government housing project by virtue of Presidential Proclamation No. 595 (Proclamation No. 595).11

On May 5, 2006, the RTC granted the motion to quash filed by the remaining occupants, including Avila and the Quilangs. On August 4, 2006, the RTC denied the motion to quash filed by Aguirre. In its August 4, 2006 Resolution,12 the RTC stated: It is important to emphasize at this juncture that during the ocular inspection conducted by this court (Thru Presiding Judge, Henrick F. Gingoyon), records reveal that the area occupied by Mr. Calixto Aguirre, as he claimed, is more or less 1,000 square meters. Thus, citing the provision of the law pertaining to qualified occupants or beneficiaries who can avail of the privilege, the area alone possessed by Mr. Calixto Aguirre will not qualify as beneficiary under Republic Act 7279. Moreover, the result of the ocular inspection revealed that the area is used by Mr. Calixto Aguirre as business establishment and in fact some of them were even subject for lease. Therefore, from the very nature of the utilization of the property the same is beyond doubt not covered and the same is contrary to the letter and spirit of the aforementioned Presidential Proclamation No. 595. WHEREFORE, premises considered, the instant Motion to Quash Writ of Execution and Set Aside Judgment filed by Mr. Calixto Aguirre is hereby DENIED for lack of merit. SO ORDERED. (underscoring supplied)13 On August 7, 2006, a similar finding was made with regard to Avila and the Quilangs when the RTC resolved MIAAs motion for reconsideration. In its August 7, 2006 Resolution, the RTC likewise wrote: Unfortunately, however, the result of the ocular inspection revealed that some of the 28 Oppositors, namely: Mr. REYMUNDO AVILA; SPS. ROLANDO QUILANG AND ANGELITA QUILANG; ROMEO CAGAS; JEANETTE LOPEZ, are using the property subject to this case not as family dwelling but rather utilized as business establishments.Thus, the said occupancy is not covered under Republic Act 7279 in order to be considered qualified beneficiaries. Relatedly, therefore that the Writ of Execution cannot be implemented against the afore-named persons on the ground that they are qualified beneficiaries under Presidential Proclamation No. 595 in relation to the provision of Republic Act 7279 is unwarranted under the circumstances. It is important to emphasize at this juncture that during the ocular inspection conducted by this court (Thru Presiding Judge, Henrick F. Gingoyon), records reveal that the area occupied by Mr. REYNALDO (REYMUNDO) AVILA, is occupying more or less 500 square meters and the same is actually use[d] as an apartment for lease/ rent; Sps. ROLANDO AND ANGELITA QUILANG; is occupying the premises by virtue of the rights vested by their father, Calixto Aguirre, and also utilizing the property for rent; ROMEO CAGAS AND JEANNETE LOPEZ are tenants of Calixto Aguirre.

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Thus, citing the provision of the law pertaining to qualified occupants or beneficiaries who can avail of the privilege, the area alone possessed by Mr. Reynaldo (Reymundo) Avila; Sps. Rolando and Angelita Quilang will not qualify as beneficiaries under Republic Act 7279. Moreover, the area as shown in the result of the ocular inspection is used by them as business establishment and in fact some of them were even subject for lease. Therefore, from the very nature of the utilization of the property the same is beyond doubt not covered and the same is contrary to the letter and spirit of the aforementioned Presidential Proclamation No. 595 in relation to Republic Act 7279. WHEREFORE, premises considered, the Order dated May 5, 2006 is hereby MODIFIED in so far as Oppositors REYNALDO (REYMUNDO) AVILA; Sps. ROLANDO QUILANG and ANGELITA QUILANG; ROMEO CAGAS AND JEANETTE LOPEZ are concerned. Let the corresponding Writ of Execution against the afore-mentioned persons be issued. SO ORDERED. (underscoring supplied)14 The above findings were reiterated in the assailed RTCs Joint Resolution dated November 13, 2006 which denied the separate motions for reconsideration of the respondents. On account of this, Aguirre, Avila and the Quilangs went to the CA on certiorari questioning the propriety of the RTCs disposition, more particularly, its finding that they were not qualified beneficiaries under Proclamation No. 595. On June 16, 2008, the CA rendered the subject decision annulling the RTC resolutions dated August 7, 2006 and November 13, 2006. According to the CA, there was a grave abuse of discretion on the part of the RTC in ruling that respondents could not invoke Proclamation No. 595 because the mandate to determine the same rested with the National Housing Authority (NHA). Thus: X x x. As provided in said Proclamation No. 595, the National Housing Authority (NHA), under the supervision of the Housing and Urban Development Coordinating Council (HUDCC) and in coordination with the MIAA, shall be the agency primarily responsible for the administration and disposition of the lots subject thereof in favor of the bona fide occupants therein, pursuant to the provisions of Sections 8, 9 and 12 of Republic Act 7279 and other pertinent laws.15 In a related case, MIAA also went to the CA on certiorari questioning the RTCs grant of another motion to quash its writ of execution filed by other remaining occupants. Said occupants are not parties in this case. The case was docketed as CA-G.R. SP No. 96477.16 In said case, taking note that the occupants themselves admitted that they had entered the subject premises without the permission of either the MIAA or the Estate, the CA ruled that the said occupants were mere trespassers or squatters who had no right to possess the same. Accordingly, the writ of execution issued in the ejectment case could be enforced against them even though they were not named parties in the ejectment suit. Some of the occupants/aggrieved parties therein, namely, Alejandro Aguirre (son of Calixto Aguirre) and Norberto Aguirre (brother of Calixto Aguirre), came to this Court via a petition for review but it was summarily denied for having been filed out of time and for their failure to

show any reversible error on the part of the CA. The denial became final and executory on July 23, 2009.17 Going back to the June 16, 2008 CA Decision, MIAA comes now to this Court questioning its annulment of the RTC resolutions by raising the following: ISSUES: WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT PUBLIC RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN HE ARROGATED UPON HIMSELF THE DETERMINATION THAT PRIVATE RESPONDENTS ARE NOT QUALIFIED BENEFICIARIES UNDER PROCLAMATION NO. 595 WHETHER OR NOT A NAKED CLAIM OF POTENTIAL QUALIFIED BENEFICIARIES OF A SOCIALIZED HOUSING PROGRAM PREVAIL OVER THE RIGHTS OF THE PERSON WITH PRIOR PHYSICAL POSSESSION AND A BETTER RIGHT OVER THE DISPUTED REAL PROPERTY18 The Court finds the petition meritorious. As mentioned earlier, the controversy stemmed from an ejectment suit filed by MIAA against the Estate represented by Balilo wherein the MeTC ordered the eviction of the Estate, Balilo and all those claiming rights under them. The MeTC decision was affirmed by the RTC. Eventually, the Estate, Balilo and some occupants were evicted.19Respondents Aguirre, Avila and the Quilangs, together with some other remaining occupants, filed their separate special appearances and sought to quash the RTCs writ of execution. They claimed that they did not derive their right to occupy the premises from the Estate or from Balilo but rather from Proclamation No. 595 as they were potential beneficiaries of the same. In its opposition, the MIAA submitted documents prepared and signed by Balilo showing that the respondents were tenants of Tarrosa or Balilo.20 The RTC, through its then Presiding Judge, the late Henrick F. Gingoyon (Judge Gingoyon), conducted an ocular inspection on the premises. Judge Jesus B. Mupas, who took over from Judge Gingoyon, reproduced the findings of the latter in his August 4, 2006 Resolution.21 The same finding was reached with respect to Avila and the Quilangs in the August 7, 2006 Resolution of the RTC22 and reiterated in its Joint Resolution dated November 13, 2006 which dismissed the separate motions for reconsideration of the respondents. Going over the RTCs findings and disposition, the Court is of the considered view that it acted well within its jurisdiction. It is settled in ejectment suits that a defendants claim of ownership over a disputed property will not divest the first level courts of their summary jurisdiction. Thus, even if the pleadings raise the issue of ownership, the court may still pass on the same although only for the purpose of determining the question of possession. Any adjudication with regard to the issue of ownership is only provisional and will not bar another 100

action between the same parties which may involve the title to the land. This doctrine is but a necessary consequence of the nature of ejectment cases where the only issue up for adjudication is the physical or material possession over the real property.23 Granting that their occupation of the subject premises was not derived from either Tarrosa or Balilo, the postulation of the respondents makes them mere trespassers or squatters acquiring no vested right whatsoever to the subject property. 24 Thus, to thwart the decision of the court, they claim that they were potential beneficiaries of Proclamation No. 595. Certainly, this bare anticipation on their part should not be permitted to defeat the right of possession by the owner, MIAA. Juxtaposed against the evidence adduced by the MIAA showing that respondents were once tenants of either Tarrosa or Balilo, respondents bare claim that they could be beneficiaries of Proclamation No. 595 cannot be given any consideration. At any rate, as earlier stated, the ruling on the inapplicability of Proclamation No. 595 is only provisional and will certainly not bar the NHA or any other agency of the government tasked to implement Proclamation No. 595, from making a determination of respondents qualifications as beneficiaries,25 in another action. In Pajuyo v. CA,26 the very case relied upon by the respondents and later cited by the CA in its assailed decision, the Court reiterated that the determination of the rights of claimants to public lands is distinct from the determination of who has better right of physical possession. While it was held therein that the CA erred in making a premature determination of the rights of the parties under Proclamation No. 137, it was emphasized that the courts should expeditiously resolve the issue of physical possession to prevent disorder and breaches of peace. WHEREFORE, the petition is GRANTED. The June 16, 2008 Decision of the CA in CA-G.R. SP No. 97536 is hereby REVERSED and SET ASIDE and another judgment entered reinstating the August 7, 2006 and the November 13, 2006 Resolutions of the Regional Trial Court of Pasay City, Branch 117, in Civil Case No. 05-0399-CFM. SO ORDERED.

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